How Big Can Government Get?

Posted: Jul 23, 2008 12:01 AM
How Big Can Government Get?

Much attention has been paid in recent months to the mortgage crisis and the difficulty many Americans face because they bought or built a home they cannot afford.

But Americans must soon face a greater crisis: We have a built a government we cannot afford.

Three studies published this year put some perspective on just how big our government has grown, and how much bigger it could grow in the near future.

Every year, the Tax Foundation puts out a report on Tax Freedom Day, the day Americans stop working for the government and start working for themselves. The foundation has a simple formula for figuring when this occurs: It determines what percentage of the total national income is consumed by local, state and federal government in taxes. It then calculates how many days equal the same percentage of a 365-day year.

In 2008, government will tax away 30.8 percent of the national income. An equal percentage of the year is 113 days. That means Americans were compelled to work from Jan. 1 to April 23 of this year just to pay taxes.

That is more than six times as long as Americans worked a century ago to pay taxes.

In 1909, according to the Tax Foundation, total taxes absorbed 4.9 percent of national income. That meant Americans only had to work until Jan. 19 to cover the combined levies of government. They worked almost all year for themselves.

By 1940, on the eve of World War II, government had more than tripled. That year taxes equaled 17 percent of national income. Tax Freedom Day came on March 7.

By 1945, when World War II ended, government was taking 24.2 percent of national income. Tax Freedom Day did not come until March 30.

This trend of government taxing away an ever-larger share of the national income did not stop after the war. The postwar era saw some ups and downs in the trend, but the long-range trajectory was up.

Government, the Tax Foundation notes, is now the most expensive thing in our lives. "Americans will work longer to pay for government (113 days) than they will for food, clothing and housing combined," says the Tax-Freedom-Day report. "In fact, Americans will work longer to afford federal taxes alone (74 days) than they will to afford housing."

Federal government is a heavily mortgaged McMansion burdening us all.

In fact, because it is based only on tax revenue and does not include deficit spending or the cost of regulation, the Tax Freedom Day calculation does not even reflect the entire cost of government.

This month, Americans for Tax Reform released its own report on the "Cost of Government Day" that attempts to do so.

By ATR's calculation, Americans will need to work 21 days this year to cover the costs of complying with local and state regulation, 42 days to cover the costs of federal regulation, 50 days to cover the cost of local and state spending, and 84 days to cover the cost of federal spending.

That puts "Cost of Government Day" on July 16, more than halfway through the year.

How much deeper into the year can Tax Freedom Day and Cost of Government Day go? How big can government get?

In a report submitted to the Senate in January, the Government Accountability Office estimated that given the promises the government has made in the form of Social Security, Medicare and other entitlement benefits, the annual budget deficit could reach about 20 percent of Gross Domestic Product by 2040.

The national debt (the collective mortgage we have taken out on government) stood at $9 trillion at the beginning of this fiscal year. But GAO says we already face a shortfall of $53 trillion between what the government has promised in entitlement benefits and what the current tax structure is likely to take in.

"Imagine we decided to put aside and invest today enough to cover these promises tomorrow," then-Comptroller General David Walker told the Senate in January. "It would take approximately $455,000 per American household -- or $175,000 for every man, woman and child in the United States."

We are taking out an unsustainable mortgage to build a middle-class welfare state. If we don't stop construction soon, the balloon payments will bankrupt our kids.

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