Thursday, September 18, 2008

You Owe the Federal Government $175,000

Despite promises by both major party presidential candidates to cut government waste — a promise that has frequently been repeated by politicians over the years — economist Richard Ebling explains in this Washington Times article that the system is stacked against them. He says that “much like the Energizer bunny, government just keeps growing and growing.”

Ebling’s numbers are quite sobering.
“In the current fiscal year, Washington will spend $2.93 trillion - more than 4 times the amount it spent in 1965 when President Lyndon Johnson's Great Society programs and the Vietnam War helped boost spending to $627.6 billion.

“Meanwhile, the government will take in an estimated $2.5 trillion in taxes in the current fiscal year, roughly $22,100 per household.

“Contrary to popular belief - and campaign rhetoric - the explosive growth of government has occurred under Democratic and Republican administrations alike.”
That’s a $430 billion shortfall this year alone. And Ebling is just talking about the federal government. The numbers jump significantly when you include state and local government spending and taxes.

The truth of the matter is that whenever government controls resources, there is a seemingly endless supply of parties that want some of those resources to benefit them. That is why neither a President Obama nor a President McCain will be able to eliminate the lobbying they suggest they will kill off. Ebling writes:
“In 2007 alone, more than 15,600 registered lobbyists spent more than $2.8 billion to influence federal legislation and tax and spending policy. According to the Center for Responsive Politics, organized labor alone spent more than $44.3 million on lobbying last year; business interests spent nearly double that amount, an estimated $87.2 million.”
(By the way, you can check out the CRP’s site to find out who is lobbying whom, including the federal politicians that represent you.)

GMU economist Don Boudreaux explains the disconnect between government revenue and spending in this blog post. He writes:
“Elected officials make government-spending decisions overwhelmingly in response to political pressures -- the clamoring of this group, the self-serving pleas of that group. It's not terribly difficult for politicians to vote to lavish money on interest groups because, in doing so, no politician spends his or her own money; the money spent comes from faceless others.

“Of course, many of those faceless others do vote, and they generally prefer to pay less in taxes. So passing the bill to future generations is even better politics: mollify interest-groups today and pass the bill to people not yet born.”
Boudreaux’s colleague Walter Williams has said that the concept of passing on debt to future generations isn’t how government overspending really works. He contends that our national debt is only an accounting device that exists on paper. It is actually immediately reflected in the economy, partially via inflation and partially via opportunity loss.

We all pay for government overspending, but the taxation method is obfuscated. We don’t see it, but we pay it in the increased price of every good or service we purchase. We pay it in economic stifling that curtails development of goods and services that never develop or that come to market much later than would otherwise have been the case. None of these costs are included in the $22,100 per household annual federal tax load. Hidden taxation is a politician’s dream.

The Peter G. Peterson Foundation notes that your individual share of the federal burden amounts to $175,000. (Hat tip: David Miller) Multiply that by the number of people in your household to figure out how much your household owes. Do you really receive that level of value from the governmental services you receive? Ebling provides a quote from the late Col. E.C. Harwood. “It follows that if there are men in society who are able to get something for nothing, other men must be getting nothing for something.”

The Peterson Foundation offers this guide that goes a long way toward explaining the actual state of the US Government’s finances. It’s pretty somber stuff. The foundation also offers some suggestions about what we can do to get matters under control. They offer no magic bullet or feel-good solutions. It’s just a series of no-nonsense actions that amount to pretty strong medicine.

The foundation realizes that none of this stuff is going to be politically popular right off the bat, so they plan to spend a billion (private) dollars on a campaign to educate Americans. Their goal is to get citizens to develop the will to demand real fiscal responsibility. That’s a tall order, but one I would like to see succeed.

Today we have two political parties that are bent on expanding government spending at the greatest possible rate. Both claim fiscal responsibility (one perhaps more so than the other) but neither has demonstrated any ability to deliver such. We have developed a political system that works against limited government, and politicians from both parties function well within that system.

The answer is to reduce the amount of resources under government control. But we are going the other direction at such breakneck speed that it seems unlikely that the ship of state will turn around any time soon. Still, that’s the kind of change I would like to see.


Frank Staheli said...

The most critical point, I think, of your article, is that this has happened on the watches of both Democrats and Republicans. Millions of people, having become disillusioned with both major parties, now sit on the sidelines when it comes time to vote. I think, rather, that they should vote for someone who will actually try to make a difference--someone from a third party.

Charles D said...

Yes, both parties are to blame because both parties have fallen for the ridiculous idea that the "free market" can solve everything without regulation or oversight and that the government should take a hands-off approach. Build an economic system that is driven by human greed and then retain the conceit that those greedy humans will act responsibly and ethically - how dumb can you be?

Now the "free market" Republicans (with Democratic assent) have engineered the largest nationalization in human history and created the largest socialist bank ever. Now the people who were always warning of the "moral hazard" of bailing out homeowners who thought that their mortgage was prudent because their banker told them so, are bailing out the bankers for making those bad loans - no moral hazard there?

Neither party, as currently constituted, is likely to find a way out of this morass and since both parties are funded by the same class of people that have been bailed out this week, they are unlikely to change. And for that same reason, a 3rd party is not going to get anywhere either.

Until the American people vote these free-market bozos out of office and put people in there who are willing to put America first, not American corporations first, we will stumble along from one crisis to the next.

Cameron said...


You seem to be criticizing both a free market approach and a socialized one. Please expand on what type of fiscal policy we should be following.

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