Welfare by Any Other Name Is Still Welfare
In William Shakespeare’s tragic romance “Romeo and Juliet,” about two young Italian lovers from feuding families in Verona, Juliet utters the famous line: “What’s in a name? That which we call a rose by any other name would smell as sweet.” Juliet, from the House of Capulet, expresses her love for Romeo even though he is from the House of Montague.
Since President Donald Trump’s second inauguration, his administration has begun giving things new names. On his first day back in office, Trump signed executive order 14172, titled “Restoring Names That Honor American Greatness.” The first thing it did was change the name of Mount Denali in Alaska — the highest mountain in North America — back to Mount McKinley. Trump has a special fondness for President McKinley: “Under his leadership, the United States enjoyed rapid economic growth and prosperity, including an expansion of territorial gains for the Nation. President McKinley championed tariffs to protect U.S. manufacturing, boost domestic production, and drive U.S. industrialization and global reach to new heights.”
Trump’s executive order also changed the name of the Gulf of Mexico to the Gulf of America. And not only that, Trump later announced that February 9 would be celebrated annually with “appropriate programs, ceremonies, and activities” as “Gulf of America Day.” Trump’s secretary of defense — Pete Hegseth — signed a memorandum changing the name of Fort Liberty in North Carolina back to Fort Bragg. The name was changed in 2022 by then-secretary of defense Lloyd Austin because it was named after a Confederate general. The satirical website The Babylon Bee joked that Trump would rename USB ports to USA ports and would require New Mexico to call itself West Texas. These things are, unfortunately, not farfetched. Most recently, Trump expressed a desire to rename the Persian Gulf the Arabian Gulf.
The U.S. government is constantly reorganizing and renaming its agencies. Under the new Constitution adopted in 1789, the federal government began with just three departments — State, Treasury, and War — and the office of Attorney General (there was no Justice Department until 1870). The Departments of the Navy and the Post Office were instituted a few years later. The Department of Labor was originally a bureau under the Department of the Interior. It became an independent agency in 1888, was incorporated into the Department of Commerce and Labor in 1903, and became the Department of Labor in 1913.
Other federal departments have also had very significant name changes. The Department of Defense was formed in 1945 by combining the War Department and the Navy Department and adding the Air Force, formerly the Army Air Forces. This is probably the most misnamed department in the federal government. A more appropriate name for the Department of Defense would be the Department of Offense since it does everything but actually defend the country. In 1979, the Department of Health, Education, and Welfare (HEW) split into the Department of Health and Human Services and the Department of Education, completely dropping the pejorative term welfare.
Welfare
Welfare is the common term for government relief and assistance programs for low-income Americans, although the word itself has largely been displaced from government documents. The two terms generally in vogue now are income security and entitlement programs. These are programs that provide benefits to any American citizen who qualifies. The programs are open-ended. Instead of spending levels being set every year by congressional appropriation bills, the federal government must spend as much money as necessary to provide benefits to everyone who qualifies for them.
There are in the United States about 80 means-tested welfare programs that limit benefits or payments on the basis of the beneficiary’s income or assets. The most well-known of these programs are Medicaid; the Supplemental Nutrition Assistance Program (SNAP [formerly known as food stamps]); Women, Infants, and Children (WIC); Temporary Assistance to Needy Families (TANF); the Children’s Health Insurance Program (CHIP); Section 8 housing vouchers; Pell grants; farm subsidies; subsidized student loans; Head Start; Healthy Start; Supplemental Security Income (SSI); school breakfast and lunch programs; and the Low Income Home Energy Assistance Program (LIHEAP).
The most egregious of these programs are the TANF and the SSI programs because they provide cash payments to low-income families with children, people with disabilities, and older adults.
And then there are the welfare programs that few Americans have ever heard of unless they or their family receive benefits from them. The Special Milk Program (SMP) provides milk to children in schools and childcare institutions who do not participate in other federal meal service programs by reimbursing schools for the milk they serve. The Commodity Supplemental Food Program (CSFP) supplements the diets of low-income individuals over 60 with nutritious USDA Foods by distributing food and funds to participating states to operate the program. The Child and Adult Care Food Program (CACFP) provides reimbursements for nutritious meals and snacks to eligible children and adults enrolled at participating child care centers, day care homes, and adult day care centers. The Senior Farmers’ Market Nutrition Program (SFMNP) provides vouchers for fresh fruits and vegetables to low-income seniors for use at eligible farmers markets, roadside stands, and community farms. And these aren’t even all of the food-related programs. Then there is the Title X Family Planning Program. It encourages adults not to have children to take care of them in their old age by awarding grants to nonprofit health and community-based clinics to provide FDA-approved contraceptive products and family planning services.
The total cost at all levels of government for all of the means-tested welfare programs is more than $1 trillion annually. Some welfare programs don’t have means tests and are therefore usually not viewed as welfare programs, although they certainly are. When these are included, as stated by the late economist Walter Williams, “Two-thirds to three-quarters of the federal budget can be described as Congress taking the rightful earnings of one American to give to another American — using one American to serve another.” President Trump wants to call things by what he considers to be their proper names. But absent from any of his renaming sprees are any references to non-means-tested welfare programs like unemployment compensation, Social Security, Medicare, and refundable tax credits. These programs are just as much welfare programs as any of the means-tested welfare programs and should be called as such, for welfare by any other name is still welfare.
Thy name is welfare
Unemployment compensation, thy name is welfare. The federal government imposed an unemployment program on the states by means of the Social Security Act of 1935 and the Federal Unemployment Tax Act of 1939 (FUTA). The Department of Labor oversees the program and sets broad guidelines for coverage and eligibility, but the program is administered and mostly funded by the states. The program is compulsory for all employers if they paid wages of $1,500 or more to employees in any calendar quarter or had one or more employees for at least some part of a day in 20 or more weeks during the calendar year.
Unlike payroll taxes for Social Security and Medicare, which are borne equally by employers and employees, unemployment taxes are paid solely by employers (except in a few states that also levy unemployment taxes on employees). A federal unemployment tax of 6 percent is imposed on employers on the first $7,000 of taxable wages paid to each employee during a calendar year. Each state likewise assesses employers an unemployment tax, less a credit against their federal tax liability as high as 5.4 percent for payment of state unemployment taxes. However, in many states, the rate is higher than 5.4 percent, and the taxable wage base is higher than $7,000.
Employees not “terminated for cause” are eligible for unemployment benefits for as long as 26 weeks as long as various eligibility requirements are met — like being ready, willing, and able to work. The amount of compensation received by an unemployed worker has no relation to the amount of tax paid by his employer. An unemployed worker’s assets and net worth are irrelevant in determining his eligibility for benefits, which range from a low of under $300 a week in seven states to a high of over $800 a week in Massachusetts and Washington.
Unemployment compensation is welfare because the government pays people for not working. It results in a perverse disincentive to not work and simply collect benefits until they run out. The Constitution nowhere authorizes the federal government to have an unemployment compensation program or mandate that the states have one. There is nothing wrong with private unemployment insurance that pays out benefits if one loses a job, but how much the insurance costs, how much the benefits are, how long the benefits are paid, and what the eligibility requirements are is a matter between the insurance company and the policyholder and not the concern of government.
Social Security, thy name is welfare. Social Security is the federal Old-Age, Survivors, and Disability Insurance (OASDI) program that provides monthly benefits for retirement, disability, survivorship, and death to about 68 million Americans, including survivors and dependents. One must pay Social Security taxes for a minimum of 40 quarters (10 years) to be eligible for benefits.
Social Security is funded by a 12.4 percent payroll tax (split equally between employers and employees) on the first $176,100 of employee income. Self-employed persons pay the full 12.4 percent tax but receive both a reduction in their net earnings from self-employment and a tax deduction equal to 50 percent of the amount of the Social Security tax they paid.
The vast majority of Americans believe that retirees are entitled to Social Security benefits because they “paid into the system” their entire working lives. But from the very beginning, there has been no connection between the taxes one pays into the Social Security system and the benefits that one receives from Social Security. Benefits are based on one’s Primary Insurance Amount (PIA): the average of a worker’s 35 highest years of earnings (up to a particular year’s wage base), adjusted for inflation. This is an arbitrary formula, loosely based on one earnings, that Congress can change at any time. Congress can also reduce benefits at any time regardless of how much a retiree has paid into the program, increase the tax rate without raising benefits, raise the retirement age, and raise or eliminate the contribution and benefit base. And the Supreme Court has even ruled that there is no contractual right to receive benefits. The conclusion is inescapable: Social Security is an intergenerational, income-transfer, wealth-redistribution welfare program that takes money from those who work and gives it to those who don’t.
Medicare, thy name is welfare. Medicare is a government health-insurance program for people age 65 or older, people under age 65 with certain disabilities, people of all ages with end-stage renal disease (permanent kidney failure requiring dialysis or a kidney transplant), and people with ALS (Lou Gehrig’s disease). About 25 percent of the adult population is enrolled in Medicare. Enrollment is open to all U.S. citizens or those who have been permanent legal residents for five continuous years and who have paid Medicare taxes for a minimum of 40 quarters (10 years).
Medicare is funded by a 2.9 percent payroll tax (split equally between employers and employees) on every dollar of employee income. Employees (but not employers) pay an additional 0.9 percent Medicare tax on wages over $200,000 ($250,000 for joint filers). Self-employed persons pay the full 2.9 percent Medicare tax but receive a tax deduction equal to 50 percent of the amount of payroll taxes they paid. They are also subject to the additional 0.9 percent Medicare tax, if applicable.
Like Social Security, the vast majority of Americans believe that retirees are entitled to Medicare benefits because they “paid into the system” their entire working lives. But again, there is no connection between the taxes one pays into the Medicare program and the benefits that one receives from Medicare. Congress can at any time raise the Medicare eligibility age, eliminate coverage for certain procedures, increase deductibles and/or copayments, reduce the amount of benefits, raise the Medicare tax rate, increase Medicare Part B and/or Part D premiums, institute a means-test or asset test for eligibility, or institute a yearly or lifetime limit on benefits. This means that Medicare is ultimately an income transfer program just like TANF and SSI.
Refundable tax credits, thy name is welfare. Tax deductions, exemptions, and exclusions reduce one’s taxable income and therefore the amount of taxes owed to the federal government. Tax credits reduce the amount of tax that one owes. The greater the number, and the greater the amount, of tax deductions and credits that one qualifies for means the less one will pay in taxes. Tax deductions and credits are not loopholes that need to be closed or subsidies that the government provides unless one believes that the government is entitled to 100 percent of one’s income and that allowing people to keep more of it constitutes a loophole or subsidy.
Tax deductions and credits are always a good thing because they allow Americans to keep more of their money out of the hands of Uncle Sam. They don’t cost the government money. Refundable tax credits, on the other hand, don’t just allow Americans to hang on to more of their money, they allow some Americans to receive extra money taken from other Americans. A refundable tax credit is treated as a payment to the government from the taxpayer like federal income tax withheld. If the tax credit “payment” is more than the tax owed after the regular tax credits are applied, then the taxpayer receives a refund of money he never actually paid in.
There are three major refundable tax credits: the American Opportunity Tax Credit (AOTC), the Additional Child Tax Credit (ACTC), and the Earned Income Tax Credit (EITC).
The AOTC is a credit for qualified education expenses paid by or for an eligible student for the first four years of higher education. The AOTC is 100 percent of the first $2,000 plus 25 percent of the next $2,000 in qualified tuition and related educational expenses. The maximum credit is therefore $2,500. No credit can be taken if the taxpayer’s modified adjusted gross (MAGI) income exceeds $90,000 ($180,000 for joint filers). Forty percent (up to $1,000 per student) of the AOTC is refundable.
The Child Tax Credit (CTC) is a partially refundable tax credit. It provides households with up to $2,000 per qualifying child. However, the maximum refundable amount is $1,700. This is the Additional Child Tax Credit (ACTC). No credit can be taken if one’s adjusted gross income (AGI) is over $200,000 ($400,000 for joint filers).
The EITC is a fully refundable tax credit for low-to-moderate working individuals and couples, particularly those with children. In fact, the actual amount of EITC credit depends on a recipient’s income and number of children. The lower the income and the greater the number of children, the higher the credit. For tax year 2024, the maximum amount of the EITC is $7,830 with three or more qualifying children, $6,960 with two qualifying children, $4,213 with one qualifying child, and $632 with no qualifying children. And according to the IRS:
Any refund you receive because of the EIC can’t be counted as income when determining whether you or anyone else is eligible for benefits or assistance, or how much you or anyone else can receive, under any federal program or under any state or local program financed in whole or in part with federal funds.
Refundable tax credits are the ultimate form of welfare because they are payments made in cash like the TANF or SSI programs instead of payments made to a third party, like Medicaid, or deposited on an Electronic Benefit Card (EBC), as with SNAP benefits.
Conclusion
Federal spending on welfare — whether it be Social Security, health care (Medicare, Medicaid, CHIP), or income security (food stamps, SSI, TANF, housing assistance, school breakfast and lunch programs, refundable tax credits) — dwarfs all other federal spending. Yet, the Constitution does not authorize the federal government to have welfare programs (whatever name they are called by) or give the states block grants to operate welfare programs. It is also not the proper role of government to “help” people, maintain a “safety net,” offer job training, assist the disabled, fight poverty, rectify income inequality, subsidize the wages of low-income workers, provide a universal basic income, dispense welfare, transfer income, or offer insurance. And it is never right for government at any level to take money from anyone — even if he can “afford” it — and transfer it to anyone else — no matter how badly he “needs” it.
No one is entitled to receive government welfare benefits no matter what his health or financial situation is. Charity should always be private and voluntary. Welfare in all of its forms should be eliminated — not reformed, not made more efficient, and not made less costly. Just don’t look for Trump and the Republicans to do it. Trump has even repeatedly said that Republicans should not vote to cut “a single penny” from Social Security or Medicare — the two most costly federal programs.
This article was originally published in the August 2025 issue of Future of Freedom
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