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In the current fiscal year, it is planned that the U.S. Federal government will spend about $2.93 trillion. With a population approaching 305 million Americans, this means that Uncle Sam’s expenditures will represent a per capita federal burden on every man, woman and child of over $9,500. With an estimated 112.4 million households in the U.S., each household will bear a burden, on average, of about $26,700 (not counting the cost of state and local government).
Many of these expenses are due to the growth in government functions and responsibilities since the New Deal days of the 1930s and the Great Society programs introduced or expanded in the 1960s.
One way of understanding this growth in “big government” is to compare it with the duties of the Federal government, say, 140 years ago in 1868. That year The World Almanac was published for the first time. The entire federal government fit on just one page of the Almanac that year. There were only seven cabinet-level departments listed – Treasury, State, War, Navy, Interior, Attorney General, and Post Master General – with the rest of that page listing U.S ambassadors to foreign governments.
Suppose that today the federal government was limited to its size in that post-Civil War period of the 19th century. How much would Washington be spending and what would be its burden on the American people?
The total Federal government budget would be less than $1.5 trillion dollars, or only slightly more than 50 percent of what is actually planned as federal spending in the current 2008 fiscal year. The per capita fiscal burden on the American people would be only $4,750, and the average American household would have a government spending burden only of around $13,350. Additionally, federal spending will make up about 20 percent of expected Gross Domestic Product (GDP) in 2008. If government expenditures were limited to 1868 federal responsiibilities, Washington would be only absorbing about 10.3 percent of GDP, leaving that many more goods and services in the hands of consumers and private investors.
Included in the total of the hypothetical budget are the government’s planned net interest payments on the existing federal debt. If the government had not run the year-after-year annual budget deficits that have accumulated this debt, the fiscal burden on the American people would be almost a quarter of a trillion dollars less.
What makes up most of the difference between actual federal planned spending in 2008 and the hypothetical budget if the government was still more closely limited to its original constitutional functions and responsibilities, as reflected in the size of government in 1868?
The answer, of course, is the modern welfare state. Even with America’s significant military and related commitments around the world, it has been the growth in redistributive and entitlement programs that today costs the American taxpayer so much of their hard-earned money.
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To reply, if I may, to at least one point. It is difficult to have a benchmark for "efficient government at minimum cost to the taxpayer." Unlike the private market sector there is no revenue and expenditure balance sheet to determine whether the taxpayer/customers actually value what the government supplies greater than its cost. Why? Because the government gets its revenues through compusory taxation, and not voluntary trades in the market place. So how do we know if or by how much individuals may value what the government supplies (both quantity and quality)over what the government is spending to provide it?
In addition, since individuals cannot choose what their tax dollars will be spent on once the dollars have been taxed away and is in the hands of the government, there is no way to know whether they would prefer more hospitals or more low-income welfare housing or more defense, or. . .
And, finally, since the government cannot lose customers the same way private sector suppliers can if their customers do not like the quality or cost of the goods and services they, respectively, offer on the market, there is no similar incentive for the government to rein in costs and devise ways to make what they supply less expensive to provide over time.
This, inherently, will always make government a less efficient and less adaptive supplier of goods and services than producers and suppliers on the private competitive market. Even if there are things that we want government to do, this will remain an inescapable shortcoming in government's ability to "deliver" anything.
Dr. Richard Ebeling