Sometimes it is important to take a step back and look at the big picture. It is also good to help others do the same. We get bogged down in these debates about tax rates, deficits, and specific programs, and part of this is due to the media and the politicians. But let’s take a broad look at where we are today in nice round numbers.
The federal government (this doesn’t include state and local spending, unless it was money that came directly from the federal government) spent almost $3.8 trillion in fiscal year 2012. It likely won’t be any lower in 2013. There are approximately 315 million people living in the United States. This means that each individual’s share of government is approximately $12,000 per year. Of course, this is for each person, which includes 90-year old people in nursing homes and little babies. Again, remember that this doesn’t even include state and local government.
If you are a family of four, then your share is $48,000. That is every year. Of course, it is not distributed equally. Your share may be higher or lower than $48,000. A guy who is unemployed and homeless is not paying $12,000, although he is probably paying some share in some way.
If you go by the number of households, the numbers just look worse. There are approximately 115 million households in the U.S. This is an estimate. That would make the average household’s share of government spending at the federal level about $33,000 per year. Would you be willing to give up your favorite federal programs for an additional $33,000 per year?
You could ask a proponent of big government how much the average family should spend to fund government each year and I’m guessing at least 9 out of 10 would not answer anything higher than what it actually is. That is why this is such an important statistic.
Most people make the mistake of just looking at their income tax. Perhaps they might also look at their payroll taxes too. But we pay in some fashion for every dollar that the government spends. Taxes that employers pay lower our wages. Corporate taxes lower wages, make prices higher, and also hurt investors. There are a lot of hidden sales taxes and excise taxes that we pay. And of course there is the hidden tax of inflation that devalues our money over time.
That is why it is so critical to look at overall government spending and not just taxes. Total government spending gives us a better picture of how much the government is consuming in the way of resources. Most government spending, even if it isn’t completely wasteful or harmful, is still a misallocation of resources. This makes us poorer than we would otherwise be.
Even if state and local government stayed about the same and the federal budget were cut in half, that would mean an extra $16,500 for the average household. That is every year. What would you do with an extra $16,500 every year?
I’ll bet that would make a huge difference in a lot of lives. It would probably mean a lot less stress for millions of people who struggle to pay their bills. It would allow most people to live better. You could save more, give more to charity, pay off debt, get a bigger house, send your kids to private school, help out a loved one, start a new business, take a family vacation, and the list goes on. But it would be your choice. It is your money that you earned. It doesn’t belong to the government. We should not be shy in pointing this out.