Commentary

The Government Tab

By Peter J. Ferrara
This commentary appreared in the Washington Times on June 22, 1999
June 22, is Cost of Government Day. That is, today is the day, starting from Jan. 1, that the average worker will have finished earning the share of his or her annual income that will be consumed by the total cost of government.

Cost of Government Day is different than Tax Freedom Day. The latter measures when the average worker finishes earning the share of his or her yearly income that will be consumed by total taxes, federal, state and local. But the total cost of government is not measured solely by taxes. As an economic matter, the total cost of government is measured at a minimum by the total costs of government spending and regulation.

At Americans for Tax Reform, we have calculated that total government spending, Federal, state and local, plus a very conservative estimate of the total cost of government regulation, will consume about 47 percent of net national product this year. As a result, the average worker will have to work almost half the year just to pay the cost of government this year, until June 22. This is one day later than last year, as the cost of government continues to grow.

Our calculation by no means includes all costs imposed on the people by our government. It does not include the economic inefficiency and loss of economic growth caused by taxes and the costs of regulation. A thorough and sophisticated study by Richard Vedder at the Center for the Study of American Business at Washington University in St. Louis estimates that federal regulations alone reduce economic output by $1.3 trillion each year.

Moreover, no one is able to estimate the cost of all federal, state and local regulations. Most state and local regulations were not even included in our study.

Even so, we conservatively estimated that government regulation now costs the country more than $1 trillion per year ($1,064 billion). Total federal, state and local spending is now more than $2.6 trillion ($2,658 billion), for a total government cost of $3.7 trillion ($3,722 billion). This total cost of government is oppressive, depriving the American people of economic freedom and control over their own lives. At a minimum, the government is cutting your income and prosperity in half. What the government does with that money does not seem to be nearly worth this enormous cost. So much of what the government does can in fact be done far better outside its system of taxes, spending and regulation. For example, workers today can get a far better deal out of personal savings, investment and insurance accounts than through Social Security, a huge component of the federal government in itself. Such personal savings and insurance accounts also are the best solution for the collapsing Medicare program. Private sector employment is still far better for the poor than our still huge welfare system.

And not all regulations are critical to the public health and safety. Federal Express was introduced to a round of unnecessary and counterproductive costs when federal regulators insisted its policy of refusing to hire delivery truck drivers with sight in only one eye was discriminatory. In Kansas City, regulators ordered a bank to install a Braille keyboard on a drive through ATM, on the driver’s side. The bank still does not get much business from blind drivers.

Regulators forced San Bernardino County to relocate its new hospital and spend $4.5 million to provide 10 acres of protected habitat, for a nest of eight flies. The federal government now even regulates the amount of water allowed for new toilets!

A sharp reduction in the size, scope and burden of government in America at all levels would greatly increase the freedom and prosperity of the American people, while still serving all essential humanitarian and social goals.

Peter Ferrara, an associate policy analyst at the Cato Institute, is general counsel and chief economist at Americans for Tax Reform.