Ending the Welfare State in Wyoming, Part 1

The most important – and most challenging – part of public policy research is to create convincing pathways toward more economic freedom. Compared to the efforts going toward criticizing "big government", the reform issue receives only minor attention.

That is not to say there are no proposals out there. On the contrary, in some policy areas it is easy to find workable solutions: tax reform is one example, reforms to our health care system another.

However, there is one area where reform proposals are few and far between: the welfare state.

Also known as "entitlements", this behemoth of government spending has become the elephant in the legislative hallways that nobody really wants to do anything about. Yet the welfare state represents somewhere between two-thirds and three quarters percent of government spending, depending on what definition is applied.

The Wyoming state government is no exception. A narrow definition of the welfare state applied to the 2013-14 biennium state budget shows that about two thirds of total state spending went to core welfare-state program areas: education, health, and human services. Of federal funds, more than three quarters of every dollar went toward these three areas.

Welfare state spending not only dominates government spending – and thereby growth in said spending – but as mentioned it is also the most under-researched when it comes to reforms. Yet with a revenue stagnation looming on the horizon, our state lawmakers and our governor are in more need than perhaps ever of good ideas on how to reform the welfare state in Wyoming.

Put bluntly: without substantial reforms to Wyoming's welfare state, our state is bound for an urgent fiscal crisis in 4-5 years.

To reform the welfare state, one must first understand its nature. While it will not allow itself to be perfectly described in this short blog format, the essence of the welfare state can be stated in two short principles:

1. The moral principle that individuals have an inherent right to have their needs satisfied (purposely stated in passive voice); and
2. The economic principle that the proceeds of a person's work are not inherently his property.

The first point lays the foundation for entitlements. Jack needs food, shelter, clothes and a host of other things; morally, Jack has the right to all the resources necessary to satisfy his needs. Since Jack has the inherent right to have his needs satisfied, he is not obliged to work to provide for himself. On the contrary: his effort toward self sufficiency is irrelevant for his right.

He is, in short, entitled to food, shelter, clothes and whatever else is on the welfare-state list of moral rights.

The second point stipulates where the resources toward Jack's needs should come from. Joe the Plumber works to provide for himself. However, because – according to the second principle – his proceeds are not automatically his, Jack can now get a cut of Joe's earnings.

And all of a sudden we have the taxes we need to pay for Jack's entitlements.

In order to reform away the welfare state, one must begin with refuting the two principles upon which it is built. This must be done both in terms of the policy principles that lawmakers commit to, as well as in legislative form. The former is a simpler matter than the latter: anyone could subscribe to a statement that says, for example, that everyone has a moral obligation to provide for himself and that if he cannot do so he shall rely on the voluntarily expressed compassion of his fellow citizens.

In legislative form, the refutation of the two principles of the welfare state needs to come in such a form that it provides an unrelenting foundation for reforms to end the welfare state. The best way to accomplish this is to amend the state constitution with a solid measure that denies morally based arguments for entitlements and safeguards every man's proceeds from work as his unabridged property.

In short: the best start of a reform process to eliminate the welfare state is to add an economic freedom amendment to the Wyoming state constitution. It would not have to be very complicated – all it would have to say is that (economically):

1. The freedom to pursue gains of trade shall not be infringed;
2. The gains from trade are in their entirety the property of the participating parties; and
3. Government shall not forcefully redistribute income, property or consumption among citizens.

The first part of this amendment would prohibit regulations on entry and exit from markets. It would also prohibit price regulations, as price caps would infringe on the gains from trade.

The second part would secure that we can keep all of our earnings from work, exchange of property or from savings and investments.

The third part would prevent government from loop-holing itself around the first two parts. As the federal government has so well demonstrated for so many years now, you can fund government spending with borrowed money. If government did that, it could provide cash or in-kind entitlements to a select group of citizens. By banning government from redistributing income, the in-kind entitlement is no longer on the table; by banning redistribution of consumption, the amendment would prevent government from providing in-kind entitlements (such as education and health care).

An economic-freedom amendment would lay the foundation for reforms to do away with the welfare state in Wyoming. It would, however, not be a sufficient measure. Even if it passed "tomorrow" we would still have big, multi-billion dollar entitlement programs operated by the state government. We cannot simply turn off those programs "tomorrow" – we need to provide entitled citizens with a pathway to a free, private market in all the instances where they today receive an entitlement.

The next blog will discuss the practical steps we can take to get such reforms done.