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Cost of Government Day 1977 – 2006

Cost of Government Day: Components

Spending continues to be the main driver in the Cost of Government index. In 2006, the average American worker will need to work an additional 9.5 days out of the year to pay for spending at all levels of government than was required in 2000. At the federal level, the average American will work an additional 8 days this year than was required in 2000, while that same person will work 1.5 days more out of the year to pay for state and local spending.

For 2006, federal spending as a percentage of national income will increase as new spending for the Medicare prescription drug benefit and Hurricane Katrina aid payments begin to be paid. State and local spending as a percentage of income will increase in 2006 as well. Flush with new revenues from a strong economy state and local governments have substantially increased spending this year and will increase the cost of government by 0.3 days. Taken altogether, the average American will work 131.05 days this year to pay off the cost of federal, state, and local spending and increase of 1.5 days above 2005 levels.

Regulations as a percentage of national income will remain unchanged in 2006 at 16.9 percent. This is the third year the index has remained at this level. Based on revised data on regulatory costs, however, previous COGD reports were underestimating the cost of regulations, particularly in 2001 and 2002. New regulations stemming from the War on Terrorism and corporate scandals dramatically increased the regulatory burden in 2001 and 2002. At the same time the cost of tax compliance has substantially increased. In 2006, the average American will work 61 days out of the year to pay for regulatory costs, 2.3 more days than was required in the 2000.

National income is growing quite significantly by historical standards and the fact that COGD Index continues to increase in the face of strong economic growth demonstrates without better fiscal restraint, particularly at the federal level, the COGD index has the potential to increase in future years. In fact, many economists are forecasting a slowdown in economic growth over the next year and without changes in spending and regulations we would expect the Index to jump back to levels not experienced since the early 1990’s recession.

 

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