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Our Giant Welfare State

Posted on November 26, 2014

By Robert J. Samuelson

We Americans pride ourselves on not having a “welfare state.” We’re not like Europeans. We’re more individualistic and self-reliant, and although we may have a “social safety net” to protect people against unpredictable personal and societal tragedies, we explicitly repudiate a comprehensive welfare state as inherently un-American.

Dream on.

Call it a massive case of national self-deception. Indeed, judged by how much of their national income countries devote to social spending, we have the world’s second-largest welfare state — just behind France.

This is not just conjecture. The Organization for Economic Cooperation and Development (OECD) — a group of wealthy nations — has recently published new figures on government social spending. Covered is unemployment insurance, disability payments, old-age assistance, government-provided health care, family allowances and the like. By this measure alone, the United States is hardly a leader. It ranks 23rd in the world with social spending of roughly 19 percent of gross domestic product (GDP). This is slightly below the OECD average of 22 percent. France is the champ at nearly 32 percent. (The data are generally the latest available, including some estimates for 2014.)

But wait. Direct government spending isn’t the only way that societies provide social services. They also channel payments through private companies, encouraged, regulated and subsidized by government. This is what the United States does, notably with employer-provided health insurance (which is subsidized by government by not counting employer contributions as taxable income) and tax-favored retirement savings accounts.

When these are added to government’s direct payments, rankings shift. France remains at the top, but the United States vaults into second position with roughly 30 percent of its GDP spent on social services, including health care. We have a hybrid welfare state, partly run by the government and partly outsourced to private markets.

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