The Insane Cost of Government …

Larry Edelson

The American’s for Tax Reform Foundation’s Cost of Government Day Report is a mindbender. Amongst the data it crunches, it finds that …

  The Cost of Government Day (COGD), the day of the calendar year on which the average American worker has earned enough gross income to pay off his or her share of the spending and regulatory burdens imposed by government on the federal, state, and local levels, is now August 19, the latest date ever recorded.

In simple language, it means that the average American must work 230 days, or 63% of the year, to pay for the full cost of government.

That’s pretty darn amazing. And frightening. It essentially means that 63% of your labor output belongs not to you and the loved ones you care for, but to Washington.

It's going to take consumers to get the economy rolling.

Here’s how it breaks down:

 Federal spending: The average American worker has to labor for 104 days just to pay for federal spending, which consumes 28.6% of national income.

That compares to 90 days in 2008, a 15.5% increase. The chief increase in costs were the bailouts of the financial crisis. The bailouts cost the average American 14 days of worth of work to pay for them.

 State and local spending: This is also costing us all, big time. In 2010 the average American had to work 52 days just to pay for state and local government expenditures.

That’s up from 42.5 days in 1999. A whopping 22.3% increase in costs.

 The regulatory costs of the federal government: Another shocker ― the average American worker must labor 48 days just to cover the costs of federal regulations.

And then there’s …

  Another 26 days you must toil to pay the costs of state and local regulations.


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I don’t know about you, but the cost of government is insane. 63 out of every 100 hours you work is to pay for government?

You get to keep only 37% of your labor?

It’s high time we got rid of big government. That ratio needs to be inverted, at a minimum. We should keep at least 75% of our labor.

Government should cost far less, way less. Less than one-quarter of our labor output, in my opinion.

I’m hoping and praying the current budget battles in Washington will get us all somewhere. I wouldn’t even mind if they didn’t raise the debt ceiling and Washington started to live within its means. Yes, it would be painful. But we have to start somewhere, no?

Unfortunately, I don’t think anyone in Washington has the guts to do anything but agree on more smoke and mirrors. Which is precisely why right now …

There’s a Fog Over the Markets …

I’d say that better than 80% of the time I have a pretty darn good feel for what’s going on below the surface in the markets; skills I honed in the more than 32 years I’ve been trading them.

The other 20% of the time, there’s a fog over the markets so thick that it’s nearly impossible to figure out where they’re headed, short term that is.

Your indicators tell you there should be some signposts ahead, and you know roughly where they are. But you have to grope to find them.

Right now, the U.S. markets are in one of their worst fogs in a long time.

  Economic data suggest sharply weakening economies in the U.S.

  Technical and cyclical indicators suggest weakness in the U.S. (and European equity markets).

  Summer seasonal influences suggest weakness in precious metals.

And yet, what we’re seeing is almost exactly the opposite: Explosive moves higher in U.S. equity markets; and another rally in gold and silver, commodities in general.

So what’s really going on? From past experience with market fogs, I can tell you this …

First, markets always give clues about their intermediate- and long-term trends, even when the short-term is very foggy.

Right now, I believe what the markets are telling us is that the long-term trends I’ve been forecasting are right on the money.

  Gold’s reluctance to decline is a sign of its incredible longer-term bull market. Ditto for silver, copper and other metals like platinum and palladium.

  Ditto again for agriculturals, and oil and energy prices. Their inability to decline as they should be right now is simply a symptom that long term they are headed MUCH higher.

  And ditto for the stock markets. As far as I can tell, I’m one of the only analysts forecasting a long-term bull market in stocks, with the Dow Industrials more than doubling over the next five or so years.

The strength in stocks that we’re seeing now — in defiance of short-term bearish indications — is telling you the same thing: That as ugly as the fundamental underpinnings of the markets may be, they are a heck of a lot stronger than most would like to believe.

Second, markets always seek to inflict the most pain on the most investors.


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One way they do that is by setting up foggy, sideways trading ranges.

Another way they do it is by doing pretty much doing the opposite of what most think they will do. By getting the majority of investors bearish, for instance, just before exploding to the upside.

Or, by getting the majority bullish, just before tanking to the downside.

Right now, I believe the markets are taking the latter course. Sucking in lots of investors, trapping them in a bullishly-biased fog if you will.

Meanwhile, they have not fulfilled their short-term downside destiny. Gold has not tested long-term support levels. Neither has silver. Neither has oil, the Dow Industrials, or the S&P 500.

Don’t get me wrong. I am long-term bullish on all of them. But with the exception of Asian markets, which I believe are bottoming …

I won’t be getting aggressively long any of the above markets until they either test important support levels, or, they truly breakout to the upside in new up trends.

One more thing about short-term market fogs like we’re seeing now …

Third, there’s almost always something very serious afoot when markets are caught in a fog.

Typically, most investors think that markets like we have right now are choppy trading affairs, and that the markets can’t make up their minds, so they just bounce around.

But in my experience, nothing could be further from the truth. Markets like we have right now are almost always a sign that something serious is afoot.

Something that’s brewing beneath the surface, something that will seemingly spring out of nowhere down the road, and shock nearly everyone.

So what could the markets be telling us right now?

I’ll take it full circle now: I believe they’re telling us the cost of government is going to continue to soar. That’s why they’re showing subtle signs of their long-term underlying strength.

Simply put, at least in the markets you have a chance to protect and grow your wealth.

The government, on the other hand, simply consumes your wealth.

Keep that in mind going forward. It’s going to become a hot topic, and drive lots of markets.

Best wishes, as always …


P.S. With my Real Wealth Report you can get ALL of my timing signals, recommendations, risk reduction strategies, insights into the markets, and more. It’s a freaking bargain. Join now by clicking here.

Your thoughts on “The Insane Cost of Government …”

  1. What you say about govt waste and inefficiency is true, but the majority of Americans believe that govt is good and out to help, while companies are self serving and greedy.The fact that so many top management of companies have grossly overpaid themselves,reduced jobs in the U.S.,while investing overseas sure hasn’t helped the cause of free enterprise in this country.Now we have this massive divide in the country.Don’t know if this is going to have a good outcome.

    1. Are you more interested in parroting political rhetoric or investing? Larry’s news letter is about investing, and frankly I think he has a firm grasp on the fundamental political trends that will affect your money. Try to keep up.

  2. Your statistics on the cost of government seem to imply that what we give to the government is money thrown away. It would be more honest to acknowledge that we are getting back roads, education, health care, medical research, national defense, consumer protection, environmental protection, police and fire protection, judiciary protection, and many other benefits too numerous to mention.

    1. I think the idea of stating the cost of government in terms of days of labor of each individual is totally unreflective of each person’s individual share and nothing but a progandistic argument for the super wealthy who don’t think they get benefit from government programs and will do anything to reduce their share of the cost of government they will be required to provide. It is an outrage that the banks and large corporations are sitting on excessive levels of cash after many of them were bailed out by the government. Hopefully Bernanke will force them to start lending to small businesses and start hiring many more employees to kick start the economy thus increasing government revenues and putting this ridiculous charade behind us.

      The very people who wouldn’t increase taxes to pay for the outrageous adventure in Iraq now scream about excessive government deficit spending. Dick Cheney for one more than once pooh poohed the adverse effects of huge government deficits. The right wing is dead wrong on this one.

    2. My property taxes have gone up 70% in 10 years mainly because of the skyrocketing cost of the public school system. The costs have gone up 70% but the quality is the same or worse. The trend is in every other bankrupt state in this union (and there are many).

      Now do my statistics tell you that I think that the money I pay in taxes is wasted? Not 100% a waste, but perhaps 70% a waste. Repeat this logic for nearly every other government subsidized program or entitlement and you can decide if you think you’re getting your money’s worth or not. As for me, I think I’m getting fleeced at gun point.

      1. P.S. – My point is not to make a political statement, but to validate what Larry is saying and to point out that what this means to your wealth is that more and more of it will be confiscated for less and less return. If you don’t take action, your wealth will disappear.

  3. Hello Larry,

    Thanks for your update!

    Do you have any thoughts on how the new Pan-Asia Exchange will affect prices. seems be to a lot of opinion that this new competitor to the comex will take metals to the next leg up…


  5. Bullish market?
    If a value of the company stays approximately the same and its stock is in dollars and the dollar is falling in exchange to other currencies, then naturally the stock price in dollars will go up and the crowd will declare a “bull market”.

    1. I never thought of stocks in that way until I started to read Larry’s subscription letter. He changed the way I think about investing. His insights seem nutty at first, but the more I research and the more I watch with new eyes, the more I realize that he’s well ahead of the heard with regard to political and monetary trends that will kil your wealth if you don’t take action.


    1. You seem a short sighted newbe. Larry didn’t tell anyone to dump their gold holdings and if you’re looking for short-term timing and quick wins, that’s not the kind of investment column Larry contributes.

      I’ve expressed similar frustrations when I first started with Larry’s subscription service. It’s a little tough for anyone new to precious metals (as I can attest). Some of the investments sank immediately after I bought them and I crapped my pants, but stuck with the investments because I agree with Larry’s assessment of the fundamentals driving gold and other commodities (both geopolitical and monetary drivers). Most of those investments have recovered and I’m in the green now.

      I held off on other recommendations by Larry that I thought were very solid, but over-bought. I wait for big pull-backs to enter these trades. If you’re over-anxious about the entry point, this is an optional approach, but in the long run it will make little difference (other than psychological).

      If you’re ranting and not a subscriber yet, then you’re really clueless, frankly, because you haven’t any idea what Larry is recommending. His most recent subscription letter introduces some new investments in Asia, for example, which appear nowhere in this column above.

  7. @ Bill,

    I understand your frustration. Larry is a conservative investor who places his faith in the charts. Is his defense, he continually has stated that he’s long silver/gold, but in the short time the markets are unpredictable. Pat’s advice/comments have been spot on in regards to short term market movements, you might find his comments useful in find a profit. I have. Good luck to you.

  8. Larry,

    I’m wondering if you have a loss aversion bias due to some of your past losers. Your recommendations on SWC and SCCO stopped out pretty quickly after you recommended them, but they are both moving higher recently in correlation with mining stock in general. If these were solid enough once to recommend, what changed fundamentally with these stocks? Nothing, I suspect.

    For example, I added half of your recommended shares for SCCO initially and held the stock instead of allowing the recommended stop-loss to exercise. I’ve doubled up a couple of weeks ago to equal your original recommended shares. The combo is now well in the green. Meanwhile, I’m getting paid 5.4% to sit on a solid stock with excellent cash flow. I did something similar with the SWC which is also in the green. Both were solid picks but you were just a month or so early (as usual).

    I was surprised not to see these stock picks back in your most recent stock letter and thus my question about loss aversion bias.


      1. P.S.S. – I think your Yuan recommendation on 12/20/10 has turned out to be a dog that pays no dividend and doesn’t track the Yuan at all. Good call on the Yuan appreciation, bad execution. I’m happy to see your new recommendations (in your subscription letter) for direct debt investment in Asia. Consider dropping that other dog that relies on derivatives rather than getting a true exposure to the Asian currency market. That moeny could be put to better use, in my opinion.

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