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From: Americans for Tax Reform

I. Definition:

Cost of Government Day (COGD), is the date of the calendar year on which the average American worker has earned enough in gross income to pay off federal, state, and local government-imposed financial obligations -- total spending plus the cost of regulation.

II. Methodology:

The cost of government is determined by adding the figures for government spending (all federal, state, and local outlays) and an estimate of the cost of government regulations. A 1992 report prepared for the Regulatory Information Service Center by Rochester Institute of Technology Professor Thomas D. Hopkins provided the framework for determining the cost of regulations. His figures were updated to include the cost of new regulations by information provided by economist Dr. Robert Genetski, as well as estimates by this document's author, Alan Philp. State workers' compensation and tort costs were included in the COGD figure as well, from information provided in a report produced by the Tillinghast Company.

III. What COGD Does/Does Not Include:

* All federal, state, and local outlays (taxes + borrowing) are included in COGD.
* Most federal regulations are incorporated. Exceptions include costs associated with civil rights legislation, minimum wage laws, and anti-trust laws.
* At the state level, only workers' compensation and tort costs are incorporated. Costs associated with state and local environmental protection, worker safety, and consumer protection are not included. These costs, which are not included because the measurements cannot readily be quantified and broken out, are substantial. For instance, regulations imposed by the South Coast Air Quality Management District (SCAQMD) in the four counties of the Los Angeles Basin have been estimated at a whopping $13 billion.
* Indirect costs of regulation-resources diverted from other activities (e.g. decreased time with families, less leisure time) are not included. Compliance costs, paperwork costs, and transfer costs are included.

Facts About The Cost of Government

I. History:

The 1993 cost of government was the highest in the history of the United States. COGD measurements can be divided into four periods:

1. 1977-79 Decline: The cost of government declined in the 1970's, as expensive economic regulations such as airline and trucking regulations were gradually abandoned,
2. 1980-82 Explosion: In the early 80's, higher government spending combined with a recession to drive up the cost of government. Cost of Government Day, which bottomed out at June 25, 1979, jumped to July 13 by 1982.
3. 1983-89 Stability: During this period, the cost of government at first declined, then gradually leveled off. By 1989, COGD had fallen to June 29, which is comparable to COGD in the 1978-79 period.
4. 1990-94 Growth: A slew of new environmental and social regulations, combined with higher government spending at the federal level, drove the cost of government to new heights, The 1994 Cost of Government Day dropped off slightly due to a sharp reduction in real dollar defense spending and a post-recession improvement of the economy.

II. Characteristics of the Cost of Government:

Both the 1970's and the 1990's have been characterized by high regulatory burdens. In the 1970's, the Nixon Administration teamed up with Congress to enact a number of economic regulations (e.g., wage and price controls). The cost of government soared during this period. The late 1970's and 1980's brought a gradual abandonment of those regulations, reducing the cost of government.

The 1990's have been characterized by a tremendous growth in environmental and offer social regulation. Examples include the 1990 amendments to the Clean Air Act and the Americans with Disabilities Act. Costs associated with an increase in the minimum wage and the Civil Rights Act of l991 added further to the burden an the economy, but are not included in the Cost of Government Day figure.

III. Future:

President Clinton's health care plan would increase the cost of government dramatically. COGD will be put off by an astounding 31 days if the President's plan is enacted.

IV. Relationship with Economic Growth:

The cost of government is inversely related to economic growth. When the cost is high and rising, as it was in the early 1980's, the economy tends to slow. When the cost of government is low and declining (or at least stable), the economy tends to grow.
copyright (c), 1995 Americans for Tax Reform
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