The Porkbusters initiative led me to wonder:
- How much of the $200 billion hurricane relief goal can be carved from the porky-pig?
- How much does pork contribute to the total economic drag of federal and state government?
After some patient Googling, I have a tentative answer to question #1, and a growing conviction that the answer to question #2 is that pork is an important, but relatively small part of the big problem, which is compliance costs and similar major inefficiencies. Even the broader “wasteful spending” category may be a small portion of the total “waste heat” and friction imposed on the US economy by oversized government.
Did you know that the US economy has to absorb $840 billion/year in compliance costs imposed by the Federal Regulatory State? Here is some background from the Cato Institute:
Health, safety and environmental regulations cost up to $229 billion annually, according to OMB. An outside estimate by professors Thomas Hopkins of the Rochester Institute of Technology and Mark Crain of George Mason University that also includes economic regulations and paperwork costs pegs regulatory costs at about $840 billion.
Hmm… 2004 US GDP was $11.75 trillion, so that means about 7% of GDP was converted from light into heat by regulatory compliance costs. Add to the $840 billion the estimated $200 billion per annum for legal, accounting and administrative costs for complying with the nine million words of the US federal income tax code, or 1.7% of GDP (2004 data). Add the cost of US tort liability, estimated at $233 billion per annum, or 2.23% of GDP (2002 data). Add the waste heat generated by the excess costs of the US public school system, estimated at $158 billion per annum, or about 1.6% of GDP (2000 data). The grand total of these four categories is about $1.4 trillion.
So these four waste heat categories alone amount to roughly 12% of GDP consumed in friction. What are the corresponding figures for global competitors such as China, South Korea, or India?
Yes, some of these flows circulate back into the economy as wages and rents, so it is not strictly correct to characterize the total as “waste heat”. Nevertheless, the competitive drag is quite serious, and does directly reduce relative US productivity growth and GDP growth. Consider the failing competitiveness of “Old Europe”.
Back to political pork. Citizens Against Government Waste is an omnibus source on wasteful federal spending. On the pork issue, their “2005 Pig Book” is a revealing read. At the end of the Pig Book Summary you’ll find a pork trend-line: which estimates $27.3 billion for 2005 (compare to Porkbusters similar $21 billion estimate).
Tentative conclusion: we cannot achieve the goal of funding $200 billion of Katrina relief by redirecting a similar total of “wasteful spending”. The total CAGW summary for fiscal 2006 of federal wasteful spending is about $232 billion. See here for a breakdown for each Department/Agency. The entire Prime Cuts database of 600 recommended cuts is here.
After you study the Prime Cuts breakdown of $232 billion, do you believe it is politically feasible to whack $200 billion from the fiscal 2006 budget?
Regardless - the Porkbusters initiative and its kinfolk will surely better focus taxpayers attention on the benefits received for the costs of big government. Hopefully that focus will lead to scrutiny of the factors that are the most damaging to economic and productivity growth - the costs of inefficient regulations, and inefficient institutions such as public schooling.
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