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.
