Why Conservatives Should Embrace the Welfare State

Bruce Bartlett argues the current right-wing campaign against Social Security, Medicare, and Medicaid is a fool’s errand. He begins with showing how European conservatives, like Bismark and Churchill, used the welfare state to preserve capitalism in the face of encroaching communist sentiment. Because communism failed to establish itself as a major political force in America, this fact was lost on our conservatives:

American conservatives, being far more libertarian than their continental counterparts, reject the welfare state for both moral and efficiency reasons. It creates unhappiness, they believe, and inevitably becomes bloated, undermining incentives and economic growth.

One problem with this conservative view is its lack of an empirical foundation. Research by Peter H. Lindert of the University of California, Davis, shows clearly that the welfare state is not incompatible with growth while providing a superior quality of life to many of those left to sink or swim in America…

…Americans believe that their health system is the best in the world, but in fact it is not. According to the Commonwealth Fund, many countries achieve superior health quality at much lower cost than paid by Americans. A detailed study of the United States and England in the American Journal of Epidemiology in 2011 found that over a lifetime the English have better health than Americans at a fraction of the cost.

The one area where the United States tops all other countries in terms of health is cost. According to the Organization for Economic Cooperation and Development, the United States spent more than any other country – 17.4 percent of gross domestic product on health in 2009, 8.3 percent through government programs such as Medicare and 9.1 percent privately. By contrast, Britain spent only 9.8 percent of G.D.P. on health, 8.2 percent publicly and 1.6 privately.

Thus, for no more than the United States already spends through government, we could have a national health-insurance system equal to that in Britain. The 7.6 percent of G.D.P. difference between American and British total health spending is about equal to the revenue raised by the Social Security tax. So, in effect, having a single-payer health system like Britain’s could theoretically give Americans 7.6 percent of G.D.P. to spend on something else – equivalent to abolishing the payroll tax.

This is a powerful conservative argument for national health insurance. There are many other ways, as well, in which what the conservatives call bloated European welfare states are actually very efficient. This fact is disguised in commonly cited data for spending as a share of G.D.P. because so much social spending in the United States takes the form of tax expenditures, which are de facto spending.

The O.E.C.D. recently calculated net social spending in its member countries, taking account of tax expenditures and outlays that individuals are forced to make to compensate for the lack of commonly available public programs. On a gross basis, the United States ranks 23rd of 27 countries in the study, with social spending at 17.4 percent of G.D.P. versus an average of 22.4 percent. But based on adjusted data that accounts for tax expenditures, United States social spending rises to 27.5 percent of G.D.P., putting us in fifth place, well above the average of 22.2 percent.

American conservatives routinely assert that the people of Europe live in virtual destitution because of their swollen welfare states. But according to a commonly accepted index of life satisfaction, many heavily taxed European countries rank well above the United States, including the Netherlands (where total taxes were 38.7 percent of G.D.P. in 2010 compared with 24.8 percent in the United States), Norway (42.9 percent), Sweden (45.5 percent) and Denmark (47.6 percent).

The main benefit of the welfare state is simply that it makes capitalism better. It provides a baseline lifestyle for the populations of rich countries, ensuring that anti-rich populist movements have no teeth. In my opinion, this can partly explain the failure of Occupy to become a real political force in America. We have income inequality similar to the Guilded Age, but now average people enjoy lifestyles that would have been unimaginable back then, even to the rich.

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One Response to Why Conservatives Should Embrace the Welfare State

  1. Pingback: Reagan’s Economic Advisor, “GOP is full of crazy, ignorant Tea Partiers.” | Reason and Politics

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