Government Policy From Before the Cradle to Beyond the Grave
I forgot to post this earlier! This is the longer piece that will appear in the IPR journal (vs. shorter op-ed versions that appeared in newspapers throughout Indiana back in February).
is supposed to help individuals with life, liberty, and the pursuit of
happiness. Using this metric, let's see how our government often struggles and
how people are damaged as a result, especially the most vulnerable in society.
We’ll look at a host of economic and social policies, chronologically—from
before the cradle to beyond the grave.
cradle, we start with abortion, where life is snuffed out before it reaches the
cradle. Archaic knowledge of science and certain metaphysical views can lead
one to believe that life does not begin in the womb. But if one has any doubts,
we should obviously err on the side of life, rather than risking fatal errors.
(We must go "beyond a reasonable doubt" to put the most serious
criminals to death. Why not the same "reasonable" standard here?)
society should protect the vulnerable. But abortion has a disproportionate
impact on the poor and "disadvantaged" minorities. According to the
Alan Guttmacher Institute, 42% of abortions are for women below the poverty
line; 30% are Black; 25% are Hispanic. At present, there is a great focus
on African-Americans and the police. But hundreds more are killed by citizens
and thousands more are killed by abortion.
Once out of
the womb, we offer “welfare” policies to poorer parents and children—redistribution
of wealth based on income and family structure. As a society, we want to help
those with fewer resources in more vulnerable family structures—most notably,
single-parent households. The problem is that when you provide big resources for
those in state X, you inevitably encourage people to enter and remain in state
X. As such, our policies have encouraged the poor and lower middle class to
bear and raise children in single-parent households. The resulting family
instability has caused a range of serious, long-term problems for these children.
Murray ably describes this in Coming
Apart. In the middle and upper income classes, marriage and two-parent
households have faded a bit over the last 40 years, but have generally remained
strong. But in the lower income classes, the vast majority of children are born
and raised in single-parent households—the new norm.
we have our government's education system. In pre-K, government offers Head
Start for poor children. Unfortunately, research has shown that it’s quite
expensive ($8,000 per student) and generally ineffective.
For K-12, parents
are usually offered a free education at the government-run school in their
neighborhood. The education is free, but the school is assigned. Poorer people,
as a captive audience, are prone to abuse by the monopoly power of the local
school. Where can they go? Of course, there are profound challenges in teaching
within poorer areas. They have a far higher concentration of the social
pathologies that generally follow from the single-parent households subsidized
by the government. Still, one would not expect a government-run entity with
tremendous monopoly power to be the height of efficiency or effectiveness.
Our War on
Drugs naturally leads to Prohibition-style violence and gangs, especially in
inner cities. The artificially high profits are a temptation for teens to work in
that sector. Sentencing guidelines allow children to engage in crimes with the
promise that their records will be expunged when they become adults. Combined
with poverty, the prevalence of single-parent households, and less-than-optimal
education, the current drug policy provides a wide road from school to
If one tries
to get a legal job, we have many laws that make it more expensive to hire
workers. In particular, when productivity is low, artificial increases in
compensation can make it prohibitively expensive to hire less-skilled workers.
From workers' compensation to the Affordable Care Act, the flip side of trying
to help workers is making them more expensive and less employable.
famous of these interventions is the minimum wage—where we try to help heads of
households who need a "living wage" by making millions of workers
more expensive to hire. Even with the policy’s benefits, the costs are
troubling and the policy is clearly not well-targeted.
serve to lock out workers directly. For example, taxicab medallions erect
artificial barriers to entry into a profession that would be ideal for many
low-skilled workers. (Uber and Lyft are now rapidly eroding this monopoly
power.) Occupational licensing makes it more difficult to get into dozens of
professions—for example, hair braiding and working on nails.
fortunate enough to get a job, many of the working poor get to pay local and state
income taxes. In 2013, the National Center for Children in Poverty reports that
16 states impose income taxes on workers at and below the poverty line. In
2011, the Center for Budget and Policy Priorities reported that 24 states
imposed income taxes on workers within 125% of the poverty line.
government won't make you pay income taxes if you're poor (unless you're a
one-person household). But they'll nail you with payroll (FICA) taxes on income
to finance entitlement programs for retirees: 15.3% of every dollar earned—no
deductions, no exemptions, no credits. If you're at the poverty line, you lose
about $3,000 per year to FICA.
redistribution is often used to "reverse Robin Hood"—taking money
from those with less income to redistribute to those with more income. Two huge
examples: First, the federal government subsidizes the purchase of health
insurance through employers. This policy causes the bulk of our problems in
health insurance and health care, but that's a topic for another day. Here, the
problem is that the subsidy is pricey (more than $250 billion per year—$3,250
from the average family of four) and regressive (it disproportionately helps
those with more income). Second, the home mortgage interest deduction is also
regressive and pricey (another $130 billion—$1,700 per family).
What about spending
your legal take-home pay? Unfortunately, there are a range of policies that
drive up the price of food (farm policy), clothing (trade protectionism),
shelter (regulations in housing), and health care (dozens of policies).
When you retire,
you’ll hopefully receive Social Security and Medicare from people who are then
paying their FICA taxes. Well, Medicare is ok, but they're reducing it now—and
will cut it much more in the future. And the rate of return on Social Security
now averages 0%—and is less for the poor and disadvantaged minorities (since
they die earlier than average).
the grave, estate taxes are famous for taxing the same money for a second or
third time at death. But for more marginal people, Social Security is their
nest egg. In addition to its anemic low rate-of-return, Social Security is only
a stream of income, not an asset that can be passed along to descendants—quite
a death tax on those with lower incomes!
From before the cradle to beyond the grave, government imposes huge costs on
people, even the most marginal in our society.