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Opinion

Cost of Government Continues to Grow and Shows No Sign of Stopping

Every year, Americans for Tax Reform Foundation calculates how many days the average American must work to earn enough income to pay off the regulatory and spending burdens at the local, state and federal levels of government. The findings, released in the Cost of Government Day report, have become more disheartening with each passing year of the Obama Administration. In 2011, Americans must work until August 12 to pay off the full costs of government. While most taxpayers may consider their government debt paid when they file taxes each April, the true costs of government extract a far greater toll from the working public.

Federal spending plays a huge role in the Cost of Government Day (COGD), with Americans toiling 104 days this year just to pay for federal outlays. The creeping regulatory burden, however, presents a much more larger threat to American prosperity and portends a much later COGD . While the costs to sustain the regulatory regime continue to grow, just as perilous is the economic damage caused by an onerous and capricious regulatory state.

Obamacare and the Dodd-Frank financial regulatory bill, hallmarks of the administration’s first few years, will have explosive costs, the impacts of which cannot even be quantified in the bills’ initial stages. This is because in both of the bills Congress punted most of the details to be sorted out by bureaucrats; Obamacare requires over 40 different rulemakings before it will be fully fleshed out while Dodd-Frank needs 500 different clarifications before it can be implemented in its entirety. This, combined with the economic uncertainty spurred by such ambiguous lawmaking, augurs little hope for the economic “recovery” the Administration assures us is forthcoming.

The ability to project the full weight of regulatory impact is imperfect. The deadweight loss of goods, jobs and income foregone due to heavy regulation is unquantifiable in many cases. However, the government spending done on regulations does provide a fair barometer of regulators’ activity.

One estimate shows that a five percent reduction in regulator budgets would increase GDP by $376 billion and expand employment by 6.2 million jobs over five years. Conversely, for the 2011 $2.95 billon regulator budget increase, the economy loses 6.2 million jobs over five years. This suggests the regulatory burden plays a much larger role in economic productivity than is normally assumed, especially when a quick look-back shows that regulators’ budgets have grown by 72.5 percent over the past decade.

Growth in the regulatory burden presents an even more harrowing picture when measured against a shrinking economy. Indeed, unable to recognize the chokehold its big government agenda has on the economy, the government finds itself in the uncomfortable position of continually lowering its estimated economic growth for previous quarters. This summer, the first quarter estimate of 1.3 percent growth was retrospectively dropped to a meager .4 percent.

Nonetheless, the President’s budget relies on extremely unrealistic expectations for growth. His spending blueprint, which permanently increases spending to two percent higher than the historical average, is premised on a rate of growth averaging 4.71 percent over the next decade. Assuming more realistic growth constrained by historical averages (which is still far below recent levels), spending would actually rise to nearly 28 percent of GDP.

To put this in perspective for 2011, the COGD estimate is based on the optimistic calendar year projection of 3.7 percent growth. The lackluster economic growth witnessed in the first half of the year means that in reality, a much larger portion of the year is consumed by government than the report is able to grasp without major extrapolations.

Economic growth will continue to stagnate as long as the looming regulatory threats remain, both in the form of coming rulemakings for incomplete legislation and aggressive executive overreach that has become commonplace in the Obama Administration. The economic growth foregone will only be one bite of this sour apple; businesses will not expand while the uncertain regulatory threat exists. Employers will not hire, consumers will be paralyzed and the stalled economic recovery will become the new normal. With the growing regulatory regime, later Cost of Government Days will be unavoidable absent serious and long-lasting reform.

Mattie Duppler Corrao is Government Affairs Manager for Americans for Tax Reform and the Executive Director of its Center for Fiscal Accountability.