The Case For An Economic Freedom Amendment

Those of you (very few I suspect…) who heard me guest hosting Across America on Saturday, on KGAB AM650 or at kgab.com, heard me say that I do not believe that our constitution protects economic freedom to the level we need. I did this based on my analysis of the Supreme Court’s Obamacare decision, where I said that:

a) The Supreme Court, being the highest authority on the constitutionality of law, did its job;

b) Our constitution, as brilliant a document as it is, does not adequately protect us against the welfare state.

Obamacare is part of the expansion of the welfare state in America. The welfare state, in turn, is one big, organized and ideologically driven invasion of our economic freedom. Our Founding Fathers did not see the welfare state coming, for a very simple and obvious reason: the welfare state was not invented until about a century after the constitution was written. It was impossible for the Founding Fathers to conceptualize it, let alone understand it to the level where they could put a protection against it into the constitution.

Fortunately, we can correct this. The Founding Fathers were intelligent enough to realize their own shortcomings: they knew that as smart as they were, they could not design an absolutely perfect constitution. Therefore, they gave us the opportunity to amend it.

Which we may have to do now, to protect our economic freedom.

I am no big fan of amending the constitution, and I know it is not an easy thing to do. That’s good – the fact that we have only made 27 amendments so far is a tribute to the respect we show the constitution as a founding document of our republic. But we should also recognize that there is a strong, and still growing, dissatisfaction among the American people over how government continues to grow out of control – and how there does not seem to be any constitutional barrier in the way of that growing government. The expectations were high that the Supreme Court would stop the growth of the federal government with Obamacare – and the constitution failed to live up to those expectations.

Hence the idea of an economic freedom amendment.

Obviously, there is a lot of work to be done to shape this amendment in a way that is legally workable, but even more importantly so economically workable. To make the latter happen we need to make sure that the definition of economic freedom that goes in to the amendment is a scholarly sound and economically solid one. There are examples of attempts at amending state constitutions to protect some aspect of economic freedom, but they all tend to fall short in one critical aspect: they rely on very narrow, sometimes outright misconstrued definitions of economic freedom.

It is difficult to explain all aspects of a scholarly definition of economic freedom in one blog article. (See this paper for an example of such a definition.) However, there are two basic features that we can use as starting points for a discussion about how to design an economic freedom amendment:

1. Economic and individual freedom. A free individual engages in economic activity by exchanging voluntarily with other free individuals; whatever we gain from voluntary exchange is gained under economic freedom. Therefore, economic freedom is as sacrosanct to a free society as individual freedom.

2. Property and justice. A society is morally just when its individual members – private citizens – have the full and unabridged right to their own property. Property, in turn, is what we have acquired through voluntary exchange with other free individuals.

It follows from these two features of economic freedom that a private citizen has the right to every penny he makes by selling his labor, leasing his capital (investing in the stock market, leasing property, lending money, etc) or gets in the form of gifts (inheritance, voluntary donations, charitable giving, etc). No one else can make a claim to any part of his earnings. This ban on such claims includes taxes. All taxes; even a sales tax would take a way money that we have rightfully earned.

It also follows that no one can take Jack’s money and give it to Jill. In other words, we have now effectively killed off every entitlement program ever created by government.

But we are left with a problem. If we ban taxes absolutely, down to the last penny, then it becomes difficult to fund a government that protects our lives, our liberty and our property. Without such a government it is difficult to claim that we live in a society defined by the rule of law. Thus, we need a minimal tax to pay for a minimal government.

At the same time, if we relax the ban on taxes, we once again open the same can of worms that has taxed us up to the big government we have now. So instead of a complete ban on taxes, let’s put the ban where government starts growing endlessly: economic redistribution.

What makes the welfare state so dangerous to economic freedom is that it is built on the premise of redistributing income and wealth between private citizens. This creates an ever growing cadre of government dependents who falsely believe that without getting a handout from government they would not be able to survive. This drives the continuation – and expansion – of government programs such as the welfare acronym trio SNAP-WIC-TANF, but also programs that are less often recognized as being redistributive, such as Medicaid and public education.

Once government starts redistributing income and wealth, whether in the form of cash handouts or in-kind services, there is no moral end, as far as statists are concerned, to how big government can get. That is why government keeps growing here in America.

If the constitution would ban the use of tax revenues for the purposes of redistribution between private citizens, then it would make government programs such as the Affordable Care Act  unconstitutional. It would also, over night, make unconstitutional virtually every other non-defense and non-law enforcement program that the federal government has. (It is a bit unclear if Social Security would survive.)

Since redistribution of economic resources is the very essence of the welfare state, a constitutional ban on tax-paid economic redistribution would permanently shield us from the welfare state. By making the welfare state unconstitutional, this economic freedom amendment would also guarantee that government taxation would be limited to the small spending needed to maintain the rule of law and the safety and security of the United States from foreign threats. By a ballpark, this would limit all taxes – federal, state and local – to approximately four percent of our GDP.

There are a lot of other questions pertaining to an economic freedom amendment that I have not addressed here. Consider this a conversation starter, though – a lot more to come!