How Can Wyoming Survive A Growing Federal Government?

by Wyoming Liberty Group Staff

This year is a great time to discuss the future of Wyoming, especially in terms of what role government should play in our state's economy. On February 22 I proposed a list of topics for this conversation, ranging from comprehensive transparency and efficiency reforms to school choice and free-market reforms in health care. The list was meant not as a programmatic declaration, but as an inspiration to us all to bring forward ideas that will help us build a better, stronger and more prosperous Wyoming.

We do need this conversation – and we need it to yield results. Our fiscal clock is ticking; the point is rapidly approaching where our legislators will be back up against the wall, left with only one option.

Greek-style austerity panic.

Thanks to the fact that this legislature did not raise taxes, we still have some time to formulate and implement good spending reforms. However, it would be irresponsible to waste that time; the type of reforms we need will take time for formulate and implement. They cannot be haphazard, but must be beneficial to Wyoming businesses and families, they must be predictable and – not to forget - fiscally sustainable.

The need for these reforms is, first and foremost, inherent to our state. However, we have growing reasons to be worried about the cost of the federal government. We as a state cannot do anything about federal entitlements and taxes, but we can make sure that our state and local governments are limited.

It is important not to under-estimate what Congress has in mind for us. Ideas for how to expand government pop up right and left. Literally.

On the right, there is growing support for paid family leave, an entitlement reform that will eat the last chunk of solvency out of the federal government. Republican support for this idea stretch from the White House to Capitol Hill, and is backed by both conservative think tanks and commentators.

In its full-blown European form, paid family leave will cost American taxpayers $370-$500 billion per year. Over the years, as this program grows your personal income tax bill could go up by as much as 20 percent.

With that in mind, it would be highly irresponsible to raise taxes here in Wyoming. On the contrary, the more we do to reduce the size of our government, and the more we do to keep our own taxes low, the better we will be able to survive under a bigger federal government.

That said, as bad an idea that paid family leave is, it is dwarfed by the Democrat Medicare-for-all plans.

Rep. Pramila Jayapa (D-Wash.) and Rep. Debbie Dingell (D-Mich.) recently introduced the federal "Medicare for All Act of 2019," along with 107 co-sponsors. The legislation would overhaul the current healthcare system and replace it with one that empowers the federal government to act as the only healthcare provider. The Jayapa-Dingell plan is even more aggressive than the one proposed by Sen. Bernie Sanders (D-Vt.) during the 115th Congress. Under this proposal, all private and employer health insurance, and Medicare and Medicaid recipients would be funneled onto a federal insurance plan within two years. Private health insurance would no longer be an option.

To even begin to deliver what socialized-health proponents want, this plan would require a net increase in federal taxes by at least $1.5 trillion. Today, individuals and corporations pay just north of $3.4 trillion in annual federal taxes.

Somewhat ironically, this bill would do less damage to Wyoming on the health-care side than on the tax side. Our health care system is already on a path to crawling socialization. For example, in 1990 (the earliest year for which Bureau of Labor Statistics produces disaggregated state employment data), less than 62 percent of Wyoming hospital employees worked in government hospitals. Today, that share has risen north of 72 percent.

While hospitals are not the only facilities providing health care, this trend indicates that Wyoming is not too far away from a socialized system for providing health care. Therefore, the fallout of a Medicare-for-all system would not be as dramatic here as it would be in states with a higher degree of health care freedom.

The problem, of course, would show up on the tax side. A family in Wyoming with two working parents and $50,000 in annual taxable income could have to pay $3,000 more in taxes, just to help fund the Medicare-for-all system.

In total, adjusted for existing Medicare and Medicaid funding, a Medicare-for-all plan could drain the Wyoming economy of $1 billion in new taxes. Some of that would be compensated for by the termination of premiums for no-longer-legal private insurance plans, but the balance is highly uncertain. Furthermore, experience shows that calculations accompanying new entitlement programs invariably under-estimate the real cost.

Again, we cannot do anything in Wyoming about what Congress does in terms of new entitlements. What we can do, however, is to get our state in good enough fiscal and macroeconomic shape so that it can mitigate the blow from a growing federal welfare state.

The first step toward doing that is to have a conversation about thoughtful spending reforms.