March 3, 2007
By Michael Franc
"Welfare," it has been said, "is mistrusted by those who pay for
it and held in contempt by those who receive it." This may be true
for those who deplore the loss of dignity and the self-destructive
behavior that accompanies welfare dependency. But, sadly, it
doesn't ring true for another form of welfare dependency, one that
has undermined the dignity of state governments and prompted them
to behave in self-destructive ways.
The Founders' notion that the states would be the government
closest to the people has been eviscerated by the more than $450
billion that Washington bureaucrats send the states each year to
finance such traditionally local responsibilities as education,
health care, law enforcement, fire fighting, and even home heating
To the nation's governors, however, even $450 billion of
dependency isn't enough. No program better captures this trend than
the State Children's Health Insurance Program (SCHIP) enacted in
1997. Congress intended SCHIP to complement Medicaid by expanding
health coverage to children in families with incomes up to twice
the poverty level. But one decade and $40 billion later, profligate
states have morphed SCHIP into a far more expensive and expansive
program that now covers children in families with annual incomes as
high as $72,000, their parents, and even some childless adults.
Seven states now permit families with incomes as high as $60,000
to claim this welfare-style benefit. New Jersey leads the pack,
having moved its eligibility limit up to $72,000. In January,
Maryland Gov. Martin O'Malley (D.) went even further, proposing to
cover families with incomes four times the poverty level -- $82,600
Not surprisingly, these expansions have depleted SCHIP's coffers
and prompted the governors of more than a dozen overextended states
to petition Washington for a $13-billion bailout to "fully meet
each state's healthcare coverage objectives for SCHIP."
Translation: The cocktail waitress in Nebraska should happily
subsidize the health costs of families in New Jersey or Maryland
with three or four times her income.
In an Orwellian twist, lawmakers have used federalist logic to
argue for a federal takeover. "These policies are necessary," Rep.
Frank Pallone (D.-N.J.) explained, because "the cost of living is
significantly higher in New Jersey than in other parts of the
country, and so we must extend our eligibility above other
With a bipartisan group of lawmakers calling on Congress to
guarantee coverage to every uninsured child in America by pouring
an additional $60 billion into SCHIP over the next five years, the
momentum behind an enormous expansion of the federal role in health
care may be insurmountable.
But before lawmakers lure middle-class families into the welfare
system, they should contemplate the absurdity at work here. Most of
these families pay at least some federal tax. The IRS even
considers some of them "rich."
That's right. In 2004, approximately 40,000 households earning
$75,000 or less in the states with the most generous SCHIP coverage
paid the odious Alternative Minimum Tax (an out-of-control
provision enacted in 1969 to require 155 millionaires to pay at
least some federal tax, but that now shakes down some three million
taxpayers). The $66.6 million in AMT payments these taxpayers have
forked over to Uncle Sam could have gone toward private health
coverage for their children.
Repeal the AMT
Some of these AMT victims undoubtedly enroll their children in
SCHIP. This certainly gives new meaning to the phrase "poor little
The solution? Repeal the AMT. After all, Congress never intended
it to generate so much revenue or ensnare so many taxpayers. The
resulting tax relief (about $13 billion), moreover, would permit
these hyperventilating governors to propose their own tax increases
and dedicate the resulting revenue to their grandiose schemes. In
California, AMT repeal would return $2.9 billion to Gov.
Schwarzenegger's constituents. In New York, the relief would exceed
$2.1 billion. In New Jersey, $842 million. In Maryland, $360
million. And so on.
If a massive expansion of the government's role is such a good
idea, the governors should stop their pathetic bended-knee appeals
to Washington for more cash and assert their prerogatives under our
federalist system. Let them propose to increase taxes on their own
constituents. Of course, Washington can help by cutting taxes and
allowing their constituents to keep more of their hard-earned
If this provokes taxpayers to rebel, fine. These governors would
then be motivated to seek out more targeted and cheaper solutions
to an admittedly serious policy concern. But that's how our
federalist system is supposed to work.
Michael Franc who
has held a number of positions on Capitol Hill, is vice president
of Government Relations.
First appeared in Human Events
"Welfare," it has been said, "is mistrusted by those who pay for it and held in contempt by those who receive it." This may be true for those who deplore the loss of dignity and the self-destructive behavior that accompanies welfare dependency. But, sadly, it doesn’t ring true for another form of welfare dependency, one that has undermined the dignity of state governments and prompted them to behave in self-destructive ways.
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