How Big Is the Welfare State?
In Europe, governments offer health care directly. In the U.S., we give employers a gigantic tax exemption to do the same thing. European governments offer public childcare. In the U.S., we have child tax credits… These tax expenditures are hidden but huge… If you had included those preferences as government spending, then the federal government would have actually been one-fifth larger than it appeared…
When you include both direct spending and tax expenditures, the U.S. has one of the biggest welfare states in the world. We rank behind Sweden and ahead of Italy, Austria, the Netherlands, Denmark, Finland and Canada. Social spending in the U.S. is far above the organization’s average.
Full article on the U.S. vs. the European welfare state by David Brooks in The New York Times.
The closer we get to the European model, the worse off we will be down the road.
“…When you include both direct spending and tax expenditures….”
Include tax expenditures? As in the government is spending when it decides not to take some of my money?
Please.
I imagine the only difference is on the periphery. Babies and seniors are heavily subsidized. Food and shelter is subsidized — as is education. The only people who cannot get a free ride are probably those able-bodied adults who would prefer to sit on their duff, while still enjoying a middle-class lifestyle. With the exception of those, every other conceivable deprived group is subsidized and sheltered any and all harm that may befall them.
This is an eye opener.
Does Brooks mean $ per capita or % of GDP? In $s, the US would be ahead; % is a different matter. Google OECD social expenditures — it looks like some countries are 3x % of GDP of the US.
I’d have to disagree philosophically that a tax break isn’t the same as a spending program.
1) Philosophically, it’s a matter of compulsion
2) There’s a signicant difference in deciding WHO spends the money. Government provided child care is far different from telling someone they don’t have to pay as many taxes so they can make a choice about child care (be that daycare, babysitter, church group, etc.).
@Joe Barnett: Brooks’ analysis is taking into account what are called “tax expenditures”, money that, instead of being spent directly through government spending, is spent backdoor through a “tax refund” for those individuals who do a certain thing.
@Carolyn: There is a difference between a general tax cut and government spending in general, but there is no substantive difference, except in how the accountants measure them, between tax expenditures (the specific type of tax cuts Brooks talks about) and government subsidies (when government pays people money just for having done something, not for selling the gov. something). Neither tax expenditures nor government subsidies involve compulsion; no one needs to do the thing, the government is just offering to pay you if you do it. Nor is there a difference in who decides how the money is spent. With tax expenditures, you simply claim a $1,000 tax break for child care, for government subsidies, the government gives you $1,000 dollars to spend on child care. Either way, you can only spend it on child care, but you can spend it on any child care you want.