Americans for Tax Reform (ATR) has released its annual report on the cost of operating all levels of government and paying for regulations. The report, released Wednesday, notes that Americans must now work until today, July 11, to earn enough to pay the bills of government.
ATR, based in Washington, calls this day “Cost of Government Day” (COGD), and it arrives 4.5 days later this year than in 2002. Individual states have different COGDs. Connecticut has the latest COGD, which falls on August 3. Michigan’s COGD was July 9.
Government does provide valued services to people and plays a vital role in national defense, and it often operates to secure property rights and other rights and to enforce contracts — crucial aspects of American individual liberty. But it is worthwhile to examine at what cost these and other services are provided, whether they should be provided at lower cost, or at all.
Cost of Government Day draws attention to government spending and sparks debate over the appropriate size and role of government, as well as the amount of taxes required to support it.
The Cost of Government Day report for 2003 finds, among other things:
Federal spending is responsible for a whopping 45 percent of the costs associated with operating government;
Americans, on average, must work 10 days longer in 2003 than just three years prior to pay for the new spending;
The COGD move from July 6 in 2002 to July 11 in 2003 was primarily the result of four factors: war in Iraq, state spending increases, business regulations, and the cost of tax compliance;
The state of Michigan ranked 33rd in its COGD relative to the 50 states; and
State and local spending comprises 43 of the 193 days Americans must work annually to support their government. This is the 5th straight year that state and local spending have increased. Americans need an additional 4 days of work to pay for state and local spending.
Next year the trend in federal spending growth is not expected to improve. Recent Congressional approval of a Medicare prescription drug entitlement is expected to cost taxpayers $400 billion over the next 10 years. This is a dark and portentous policy cloud that may explode into a thunderstorm of new federal spending. After all, government social programs do not have a history of costing less than advertised.
There is some hope on the horizon, though. President Bush has proposed competitive contracting for about half of federal activities defined as being commercial in nature — writing software, mowing lawns, and other routine activities. Bush Administration officials aren’t calling it privatization, but that is exactly what it is and it could save taxpayers billions of dollars.
State spending reductions in coming years may offset expected increases in federal spending because states must balance their budgets by law, and some, such as Michigan, have at least proposed reducing outlays. The word “may” is emphasized in the previous sentence because evidence suggests that some states are using federal revenues given to them by Congress to address their current year state deficits by increasing spending. This would work to offset the savings that might otherwise move COGD earlier in the year.
In Michigan, the Mackinac Center for Public Policy has recommended more than $2 billion in General Fund budget savings in its study, Recommendations to Strengthen Civil Society and Balance Michigan’s State Budget. Implementing those recommendations would go a long way toward rolling back this year’s July 9 COGD for Michigan.
Responsible officials in every state should consider privatization as a tool for reducing the cost of government. Done right, it can lower costs and improve services. While controversial government cost-cutting ideas are debated in distant capitals, Michigan officials are putting outsourcing ideas into action.
Indeed, according to the Lansing State Journal, just last week the Michigan Department of Natural Resources was scheduled to collect proposals from private, for-profit firms to manage the “Porkies,” an Upper Peninsula ski resort owned and operated by the state. This follows a recommendation in Michigan Privatization Report, a Mackinac Center journal.
As Michigan legislators look the state’s $1.5 billion deficit in the eye, they would do well to remember that Americans already pay more than 40 percent of national income to all levels of government. Legislators should ask themselves, “how much is enough?” Should we take 50 percent? Sixty percent? Do we want it all?
Hopefully, the answer will be a resounding “no,” and legislators in our nation’s capital, and every state capital will cut spending and taxes to help Cost of Government day come earlier instead of later.
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Michael LaFaive is director of fiscal policy and senior managing editor of Michigan Privatization Report for the Mackinac Center for Public Policy.