The U.S. government is a monstrosity. With its four million employees and annual budget approaching $7 trillion, there is no other way to describe it.
The federal government contains a myriad of agencies, bureaus, corporations, offices, commissions, administrations, authorities, and boards, most of which are organized under 15 cabinet-level, executive-branch departments headed by a secretary: for example, Health and Human Services, Housing and Urban Development, Homeland Security, Agriculture, and Education. The Executive Office of the President (EOP) contains agencies that support the work of the president: for example, the National Security Council (NSC), the Council of Economic Advisors (CEA), the Office of Management and Budget (OMB), the Office of National Drug Control Policy (ONDCP), and the Office of the United States Trade Representative (USTR).
And then there are the many independent executive and regulatory agencies of the federal government: for example, the Social Security Administration (SSA), the Environmental Protection Agency (EPA), the Equal Employment Opportunity Commission (EEOC), the National Aeronautics and Space Administration (NASA), the National Endowment for the Arts (NEA), the Federal Communications Commission (FCC), the Small Business Administration (SBA), the National Security Agency (NSA), and the Central Intelligence Agency (CIA).
The number of federal programs and regulations are incalculable.
One result of all of this is a vast welfare state, as pointed out by the late Walter Williams, professor of economics for many years at George Mason University:
Tragically, two-thirds to three-quarters of the federal budget can be described as Congress taking the rightful earnings of one American to give to another American — using one American to serve another. Such acts include farm subsidies, business bailouts, Social Security, Medicare, Medicaid, food stamps, welfare, and many other programs.
But with the Constitution in focus, things are even worse than that. Writing recently at the American Thinker, J. B. Shurk pulls no punches:
The plain meaning of the U.S. Constitution and the Founding Fathers’ copious essays and personal correspondence all attest to their intention to keep the federal government small, limited in authority, and deferential to the states. Instead, we have today the largest, most expensive, most powerful central government that has ever existed on Planet Earth. No detail of an American’s life is too small for the federal government not to regulate;… If we were still abiding by the Constitution, then 99 percent of today’s federal government would be chucked to the bottom of the Potomac.
What, then, can be done about this?
Conservatives think they have the answer. And they think that if they recite their mantra of the Constitution, limited government, individual freedom, private property, and free enterprise enough times, people will take their proposals seriously. Nevertheless, it is reform and replace that is their cry, not repeal. But what is really unfortunate is that some libertarians have adopted the same approach. They confuse making the welfare state more effective and efficient with advancing liberty and libertarianism.
A recent article (“Reforming the EITC to Reduce Single Parenthood and Ease Work-Family Balance”) by American Enterprise Institute (AEI) senior fellow Scott Winship, originally published by the Institute for Family Studies (IFS), is a typical example of a conservative reform proposal. Winship is the director of AEI’s Center on Opportunity and Social Mobility. At AEI, he “researches social mobility and the causes and effects of poverty” and “focuses on economic insecurity and inequality, among other poverty issues.”
The Earned Income Tax Credit (EITC or EIC) was instituted by Congress in 1975 and has grown by leaps and bounds ever since — with the help of conservative Republicans. According to the Internal Revenue Service (IRS): “The EIC is a tax credit for certain people who work and have earned income under $59,187. A tax credit usually means more money in your pocket. It reduces the amount of tax you owe. The EIC may also give you a refund.” The IRS reports that “nationwide as of December 2022, about 31 million eligible workers and families received about $64 billion in EITC” and that “The average amount of EITC received nationwide was about $2,043.”
The EITC is a refundable tax credit. A regular tax credit is a dollar-for-dollar reduction of the amount of income tax owed. Tax credits may reduce the tax owed to zero, but if there is no taxable income to begin with, then no credit can be taken. A refundable tax credit, on the other hand, is treated as a payment from the taxpayer like federal income tax withheld or estimated tax payments. If the tax credit “payment” is more than the tax owed after the regular tax credits are applied, then the “taxpayer” receives a “refund” of money he never actually paid in. One’s income and family size determine eligibility for the EITC and the amount of the credit received. For the most recent tax year (2022), the maximum credit amounts are $560 for someone with no qualifying children, $3,733 for someone with one qualifying child, $6,164 for someone with two qualifying children, and $6,935 for someone with three or more qualifying children. And then to sweeten the deal, the IRS says that “any refund you receive because of the EIC can’t be counted as income when determining whether you or anyone else is eligible for benefits or assistance, or how much you or anyone else can receive, under any federal program or under any state or local program financed in whole or in part with federal funds.”
Winship is concerned that the EITC gives unmarried couples with children an incentive to remain unmarried. He therefore proposes:
To encourage marriage and marital childrearing and to provide working- and middle-class families with more options in combining work and parenting, EITC eligibility should be tied to individual earnings rather than the earnings of the tax unit. This change would not affect single beneficiaries, but it would markedly alter the benefits available to married couples.
At the most basic level, this would allow any couple to marry who would do so but for the loss of EITC benefits. But not only would this marriage penalty be eliminated; there would also be a sizable marriage bonus. That should affect the behavior of a larger group of couples.
For families already headed by a married couple, the reformed EITC would, at a minimum, serve as an effective tax cut, increasing their ability to afford necessities, pay bills, or invest in their children.
Reducing the number of children being raised without one of their biological parents should be at the top of the nation’s priorities, and it is time to throw everything at the problem. Reforming the EITC along the lines described here should be part of that effort. It would help already-married working- and middle-class families while leaving the safety net undiminished for single-parent families, even as it clearly rewards marriage.
So, how much would an expanded EITC cost the taxpayers? Winship’s colleague at AEI, Bodi Yang, “estimated the cost of his proposal at $395 billion over 10 years.” The cost of Winship’s reforms would be even higher except that “the new EITC would be restricted to people in tax units with under $100,000 in combined income.” An earlier proposal of Winship (“Reforming Tax Credits to Promote Child Opportunity and Aid Working Families”) would add a “marriage bonus” to the EITC. It would cost the taxpayers $767 billion over 10 years.
Is marriage a good thing? Of course. Is a traditional two-parent family the best way to raise children? Certainly. Should there be a marriage penalty in the tax code? Of course not. Okay, then should the government encourage or reward marriage? Certainly not. It is not the job of the government to encourage marriage or reward marriage any more than it is the job of the government to discourage marriage or penalize marriage. It is neither constitutional nor the proper role of government to set social policy goals. But this is the least of the problems with Winship’s EITC reform proposal.
The EITC is not just the crown jewel of refundable tax credits, it is a major component of the welfare state. The government has no money of its own. Every dime the government gives to someone must be first taken from someone else. The EITC is a vast income-transfer program and wealth-redistribution scheme. It is effectively a universal basic income. Calling for the expansion of the EITC is calling for the expansion of the welfare state. Because it is immoral for the government to take money from those who pay income taxes and give it to those who don’t, the EITC should be repealed.
From a libertarian perspective, although it is not ideal, the only meaningfully way to reform the EITC that would actually advance liberty would be to increase eligibility requirements, reduce the benefit amount, or eliminate the refundable nature of the credit. Yet, these things are never included in any EITC reform proposals. Instead of calling for the limitation, reduction, or elimination of the EITC, some libertarians waste their time and energy complaining about tax deductions and credits that are nonrefundable; that is, they allow Americans to keep more of their money out of the hands of Uncle Sam. Even worse, some libertarians have promoted an actual universal basic income because it would be “better” and “cheaper” than our current welfare system.
Another area where conservatives are proposing reforms is higher education. Another AEI senior fellow, Beth Akers, who “focuses on the economics of higher education,” is ecstatic that Senate Republicans introduced a package of legislation to reform the financing of higher education. The bills in question, which she describes in “Senate Republicans Step Up to the Plate on Higher Ed,” would require additional consumer information at the time student loans are taken out, standardize financial aid offers, simplify the student loan repayment process, constrain borrowing for graduate school, and hold colleges and universities accountable by denying their students federal student loans in cases where half of previous graduates have been unable to earn more than the median level of earnings among high school graduates.
Akers has the audacity to say that “these proposals are constitutional.” But if there is anything that is unconstitutional, it is federal financing of higher education via grants and loans. According to the most recent student loan debt statistics as published by Forbes, there is outstanding $1.75 trillion in total student loan debt, 92 percent of which is federal student loan debt owed by about 43 million borrowers. But again, the government has no money of its own. Every dime the government gives to someone must be first taken from someone else. The fact that the income transfer is for a “good” cause (education) doesn’t make it constitutional or legitimate. It is not the job of the government to make student loans any more than it is the job of the government to make car loans. It is neither constitutional nor the proper role of government to finance anyone’s education.
In addition to being consummate reformers, conservatives often propose replacing one government program with another instead of repealing the legislation that created the original program. This is why Republicans in Congress could never repeal Obamacare. President Trump remarked in a speech about Obamacare, “It was terrible and very, very expensive. Hurt a lot of people. Premiums were too high. Deductibles were a disaster. Patients had no choice. You couldn’t keep your doctor. But, by far, the worst part of Obamacare was this thing called the ‘individual mandate.’” Then, instead of demanding its repeal, he claimed to “manage it properly” with “tremendous people working on it” to make it a “better” plan. He boasted that his plan “expands affordable insurance options, reduces the cost of prescription drugs, will end surprise medical billing, increases fairness through price transparency, streamlines bureaucracy, accelerates innovation, strongly protects Medicare, and always protects patients with preexisting conditions.” In other words, Trumpcare in place of Obamacare. But since it is neither constitutional nor legitimate for the federal government to have anything to do with health care, Obamacare should be repealed and replaced with nothing.
Most troubling are the three areas where conservatives are sometimes joined by libertarians in advocating the replacement of one government program with another: (1) replacing Social Security with personal retirement accounts, (2) replacing the income tax with a national sales tax, and (3) replacing public schools with vouchers for private schools.
Social Security is currently funded by a 12.4 percent payroll tax (split equally between employers and employees) on the first $160,200 of income. Tax receipts are pooled from current workers and used to pay benefits to current retirees. Thus, there is no connection between what one pays in Social Security taxes and the benefits one receives. The main problem with replacing Social Security with personal retirement accounts is that “contributions” to the accounts would be mandatory just like the “contributions” currently taken from employees’ paychecks. The federal government has no authority to operate or mandate a retirement program. Social Security should be repealed and replaced with nothing.
The current income tax brackets are 10, 12, 22, 24, 32, 35, and 37 percent. The income tax is highly progressive and punishes success. It is extremely complex and imposes heavy compliance costs. Replacing the income tax with a national sales tax may simplify the tax code, but the new tax would still be progressive — thanks to a built-in monthly “rebate” given to lower income families, it would still have an IRS — under a new name — to enforce tax collection, and — because it would be revenue neutral — it would still fund the federal leviathan’s vast welfare state. The income tax should be eliminated and replaced with nothing.
Public schools are dangerous places that have failed to properly educate students. Even worse, they are the chief means of indoctrinating the nation’s young people with socialism, environmentalism, and political correctness. They only exist because of taxation. Yet, many conservatives and libertarians want to keep the taxation and give the money directly to parents to send their children to the school of their “choice.” But this is a choice that Americans already have right now on the free market. The fact that they don’t want to pay for it out of their own pocket doesn’t justify government vouchers for education. Thus, under a private school voucher system, most Americans would still be forced to pay for the education of the children of some Americans. It is not only the government provision of education that should be ended; the government financing of education should be ended as well.
The only real way to reform an unconstitutional, illegitimate, and immoral government program is to repeal it — not to make it more effective and efficient or replace it with a “better” or “improved” program. No American should be given money, food, or subsidies, or provided with medical, housing, or educational services, courtesy of taxes taken from other Americans. No tax credits should be refundable. Health care, education, and retirement should be completely separated from the state. All health care, educational, and retirement services could and should be privately provided and privately funded. All charity should be private and voluntary. Instead of passing legislation to create new programs or reform existing ones, old legislation establishing federal agencies and programs should be repealed lock, stock, and barrel.
It is bad enough when conservatives propose reform and replacement measures, but it is unconscionable for libertarians to do so. Just because libertarians are the ones advocating a reform or replacement measure doesn’t mean that the measure is advancing liberty or libertarianism. And being a disgruntled conservative doesn’t mean that one is a libertarian and therefore puts forth libertarian ideas. Principled libertarians should be at the forefront of those calling for the repeal of all welfare state legislation, not their reform or replacement.
This article was originally published in the November 2023 edition of Future of Freedom.