Anti-tax guru Grover Norquist is still at it. His organization Americans for Tax Reform is famous for making candidates take the “no tax pledge”. Today, they are promoting another one of their gambits, the annual “Cost of Government Day”,
“This year Americans have worked until today, July 16, to pay for the total costs of federal, state and local government. This is 197 days of the year consuming 53.9 percent of national income.”
The implication is that government spending is a pure cost. There is no benefit whatever. It doesn’t matter if the money goes for the military, education, highways, whatever. The only relevant figure is cost. It’s like talking about “Cost of Going to the Supermarket Day”. It’s nonsensical to talk about the cost of something without any reference to what’s being bought. But of course Norquist’s plan isn’t to analyze government spending, his plan is to demagogue the issue. That’s easy enough. It doesn’t take a genius to complain about paying taxes. Who wants to pay for anything, for that matter?
So I guess the best thing to do is to try to ignore the Norquists of the world, but one thing about Cost of Government Day caught my eye. That 53.9% sounds really high. Looking at the national income tables at the BEA we can see that government consumption expenditures (federal, state, and local) are about 23% of national income. What gives with the 53.9%?
For one thing Norquist adds 17% for the effect of government regulation. OK, there’s clearly a cost associated with government regulation, but where he gets that number we can only wonder. And by the way, most economists I’m reading these days say that the housing bubble and related financial fiascoes we are currently experiencing could have been prevented by more regulation of financial markets. In Norquist-world any governmental expenditure to prevent that fiasco would be a waste, even if it would have prevented a trillion dollar market meltdown.
In any event, Norquist’s 17% regulatory add-on only gets us to 40%. How does he get to 53.9%?
Looking, looking, looking…finally find Grover’s methodology at the ATR site. Its seems that he’s counting Social Security taxes as a cost of government. Hmmmm…. well I guess it is a tax, but it’s really just a transfer payment. One person’s cost is another person income. Grover ignores the income side of Social Security just a he ignores all the benefits of government expenditures. But in this case it’s transparent nonsense.
By the same reasoning Grover could just as easily have launched movement advocating”more new government spending”. After all, if we can be asked to ignore the benefit side, why not ignore the tax side?