With the Democrat takeover of the Senate, perhaps – just perhaps – we will have an open discussion on the size of our government. This year, we will reach a new milestone: For the first time in our history, total U.S. government spending will go over the $3 trillion dollar mark. Philosophically, Democrats think government should be larger; Republicans think it should be smaller. But how big is too big?
In a pre-release copy of a study for the Institute for Policy Innovation in Lewisville, Texas, economist Stephen Moore says that today, government in the United States is larger than the entire gross domestic products of all but five nations.
In 1913, when the 16th Amendment to our Constitution was passed and the individual income tax became permanent, the rates ranged from 1 to 7 percent. In 1944, during World War II the top rate reached 94 percent. However, by 1950, the top rate remained at 91 percent.
In 1981, when Ronald Reagan came to power, he reminded us that government is the problem, not the solution. He took a mandate from the people and successfully rolled back the top tax rate to 28 percent. Over the years, the top marginal rate inched back up to 39 percent – and look at what happened to the growth of government!
In “The Most Expensive Government in World History,” Moore states: “In the 20 years since the Reagan revolution began, the federal budget has almost quadrupled. Even adjusting for inflation, the federal enterprise is twice as large as it was in 1980.”
To put this in perspective, Moore points out that, over the next five years, the federal government is expected to spend more money than was spent on World Wars I and II, the Civil War and the Revolutionary War, even after adjusting for inflation.
The climb in federal spending has produced a parallel climb in the size of the government workforce. In 1992, for the first time ever, the United States had more civilian public sector employees than manufacturing employees. Today, approximately one million more Americans work for the government than for manufacturers – and the government doesn’t produce anything!
It is not surprising to discover that government workers receive 30 to 40 percent higher total compensation than do comparably skilled workers in the private sector. Why? The government doesn’t have to worry about market trends, balance sheets and bottom lines. When it comes to government, there is no bottom line. There always is more money available from the American taxpayers, as long as you and I don’t stop to do the math and count the costs.
When our Founding Fathers set up our government, they envisioned a national government with limited power and responsibility. Those responsibilities were outlined in Article I, Section 8 of our Constitution: national defense, a court system, roads, post office and the ability to repay debt that might occur due to war.
National defense is by far the most important function of our federal government. In 1800, defense constituted more than half of total federal outlays. Today the defense of this country receives barely one-sixth of federal outlays, while social welfare transfer payments soak up almost 40 percent.
America is a rich country and the argument has been made that our bloated government has not had a negative effect on prosperity. If fact, many believe it may have contributed to the nation’s rapid economic growth. Moore debunks those arguments and offers proof that periods of government expansion produced periods of slow or negative economic growth.
With our progressive tax system, the burden falls increasingly on the wealthy. However, Moore correctly points out that the tax system camouflages from voters at all economic levels the real burden of paying for our government.
During times of economic growth, the tax burden rises at a faster rate than income because of bracket creep. As more of us move into the 28, 31 and 36 percent tax brackets our incomes are taxed at a higher marginal tax rate than our average tax rates. As a result, between 1995 and 2000, taxes rose from 18 to 21.5 percent of GDP.
More Americans are working harder and longer than ever before in an attempt to keep up their standard of living and pay their tax bills. In 1998, for the first time, the Census Bureau reported that families with children, in which both the husband and wife work, became the majority of all married-couple families. Furthermore, Scott Hodge of the Tax Foundation reports that 55 percent of these dual income couples had annual incomes of $50,000 and over.
While the perception is that only the super rich pay for the cost of government, the truth is there aren’t enough of them to make a real difference. Hodge points out that a married couple consisting of an average-paid kindergarten teacher and an entry-level firefighter would easily find themselves within the top 25 percent of taxpayers, who pay about 83 percent of all income taxes.
Nevertheless, this perception leaves many Americans feeling taxes aren’t that excessive. Moore says, “If we relieve an even larger share of Americans from the burden of paying at least some share of the cost of government, they doubtless will demand more and more of this ‘free good.'”
Although Republicans sign on to the principle that a smaller government is the best government, as congressional leaders their record has not matched their rhetoric. It is interesting that the budget President George W. Bush just proposed did not attempt to shrink government, it only asked Congress to hold the growth to 4 percent.
It is time this nation has a frank and open discussion about the size and cost of government before we reach the point of no return.
A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising them the most benefits from the public treasury, with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.
— Prof. Alexander Tyler (on the history of Ancient Greece) 1770