The US Welfare State in Comparison

by Henry on June 8, 2010

Price Fishback’s paper suggesting that the US welfare state is bigger than Sweden’s and Denmark’s got a lot of attention a few weeks back on the right side of the blogosphere. Since I outsource most of my thinking on statistical comparisons of the welfare state to Lane Kenworthy, I’ve been waiting for him to assess the argument. He finally has.

This looks like good news for the poor in the United States. Is it? Unfortunately, no. These adjustments change the story with respect to the aggregate quantity of resources spent on social protection in the three countries, but they have limited bearing on redistribution and on the living standards of the poor. … Begin with tax breaks. … . In the United States these disproportionately go to the affluent and the middle class. … Public transfer programs in Denmark and Sweden tend to be “universal” in design … To make them more affordable, the government claws back some of the benefit by taxing it as though it were regular income. All countries do this, including the United States, but the Nordic countries do it more extensively. So how well-off are the poor in the United States, with its “hidden welfare state,” compared to social-democratic Denmark and Sweden? One measure is average posttransfer-posttax (“disposable”) income among households in the bottom decile of the income distribution. Here are my calculations using the best available comparative data, from the Luxembourg Income Study (LIS). (The numbers are adjusted for household size. They refer to a household with a single adult. For a family of four, multiply by two.)

Government services — medical care, child care, housing, transportation, and so on — reduce material hardship directly. They also free up income to be spent on other needs. The comparative data, though by no means perfect, are consistent with the hypothesis that public services help the poor more in the Nordic countries than in the United States.

Helping the poor is not, of course, the only thing we want from social spending. But it surely is one thing.

{ 40 comments }

1

Martin 06.08.10 at 4:39 pm

It seems to me that the material you quote from Kenworthy does not specifically address the question of the relative size of the US welfare state. I think in most uses, the term “welfare state” refers specifically to government benefits. The material you quote, if I am reading it correctly, appears to measure the welfare of poor persons taking into account both private sector outcomes and government transfers and provisions of services. This may be a more important measure than just looking at government transfers and services (and, no doubt, there are issues in distinguishing government programs and “private sector” outcomes, since regulation, tax policy, etc. strongly influence the private sector). Nevertheless, to address the issue raised by Fishback, it would be useful to have a refined analysis specifically of government “welfare state” programs, even if it would be imperfect.

2

y81 06.08.10 at 4:48 pm

Will Wilkinson expressly noted that the bottom decile receives more benefits under the Scandinavian model. But the bottom decile is pretty low. Much of the blogospheric and journalistic commentary in the U.S. seems to suggest that people at the economic level of a typical academic or journalist would be better off with a Nordic welfare system, which may not be true.

3

Evan Harper 06.08.10 at 4:55 pm

The Luxembourg Income Study actually produces an index of fiscal redistribution which attempts to aggregate the total effects of all taxation and transfers. The U.S. is rated doing about half as much redistrubtion as Sweden or Finland.

It is interesting to note that the Northern European countries tend to have less progressive taxation and more direct redistribution through transfers. This is probably related to the tax-obsessed political culture of the United States. Perhaps U.S. progressives should work on expanding the various tax credits such as the EITC, which are equivalent to direct transfers but can be sold politically as “tax cuts.” But on the other hand, the “50% of Americans don’t even pay taxes!” canard seems to be aimed directly at forestalling that possibility.

4

Lemuel Pitkin 06.08.10 at 5:20 pm

I agree with Martin — this is interesting but not dispositive.

It is certainly true that the poor are worse off in the US than in Europe. But it’s a legitimate — and interesting and important — question how much this is due to transfers and welfare spending broadly, and how much it is due to different outcomes in the labor market. It’s perfectly possible that the US spends as much or more on social programs than Europe does, but still not enough to outweigh the much more unequal outcomes produced in the private sector. In which case Fishback and kenworthy would both be right.

In some ares, this is certainly true. For one, the greater reliance on graduated income taxes in the US and the VAT in Europe means that the US tax system as a awhole is more progressive than that of most European countries.

For another, the US spends far more on higher education than most European countries do, both in terms of subsidies for public institutions and loans and grants to lower-income students. But this support is not enough to compensate for the much higher wage premium enjoyed by college graduates in the US.

In general, this is an area where we would all do better with fewer polemics and more critical inquiry. Note that e.g. James Galbraith is at least partially with Fishback here.

5

cripes 06.08.10 at 6:12 pm

Saying that “the US spends far more on higher education than most European countries do” may be comparable to saying we spend far more on prescription drugs. Since we pay far more than any country on earth for the same value, it doesn’t necessarily mean we get more.

In fact, there are countless examples where “assistance” for the poor/middle class actually accrues monetary benefits to the providers more than the beneficiaries. Think medicare mills, overpriced substandard housing, education (crank worthless vocational diploma mills are a multi-billion dollar business sucking the government teat of “workforce development,” but we count the dollars as going to poor students) social services generally, and more.

We need a more reliable method to value where resources go, not just the monetary expenditures. In any case: unequal income distribution =bad, flatter income distribution=good, no matter what ayn john galt rand groupies sez.

On a happy note, the country with the greatest “redistribution” to the poor also places first or second in the subjective “happiness” index. Denmark.

6

chris 06.08.10 at 6:23 pm

The US welfare state (if you define it as broadly as Fishback is) doesn’t help the poor much because it isn’t designed to. It’s designed to help the middle class.

Helping the poor is not, of course, the only thing we want from social spending.

In the US, a lot of “us” don’t want to help the *poor* at all — they’re just lazy insert-epithet-heres. “We” want to help the hardworking but struggling Real American — i.e. somewhere around the 30th percentile.

7

Lemuel Pitkin 06.08.10 at 6:26 pm

Saying that “the US spends far more on higher education than most European countries do” may be comparable to saying we spend far more on prescription drugs. Since we pay far more than any country on earth for the same value, it doesn’t necessarily mean we get more.

Quite true. Disentangling this is not easy. It is the case, tho, that a larger proportion of the population attends college in the US than in Europe, and that proportionately more Europeans attend US universities (including public universities) than vice versa. This suggests that the cost difference, tho real, does not entirely eat up the additional public funds going to higher education here.

The bigger point is that it’s really very important for those of us on the left not to reflexively assume that the European welfare state is superior to the US in every dimension. It is certainly true that European outcomes are better, but we would do well to cultivate a certain agnosticism about where those outcomes come from.

8

Marc 06.08.10 at 6:33 pm

Things like infant mortality are tough to game, and the US does very badly on things like that which can be easily quantified. It’s pretty obscene – although doubtless well-paid – to pretend that the destitute lower quarter of households in the USA are better off than the comparably quite small portion of the truly poor in western Europe.

9

Lemuel Pitkin 06.08.10 at 6:46 pm

Having now read the linked piece, it seems to me there are a number of different methodological issues here. Mixing them all up is creating unnecessary confusion.

1. Gross social spending, or net of taxes?
2. Public social spending only, or public and private?
3. Measurement relative to GDP or in PPP dollars per capita? (or nominal dollars per capita, but no one seems to want to do that.)
4. Spending on the bottom 10% only, or all social spending (or all inequality-reducing social spending)?
5. Transfers and similar only, or public services as well?
6. The results of public spending, or simply the amount of it?

There are reasonable arguments to make on both sides of all these questions. In general, Fishback prefers the first option on each of them and Kenworthy the second (except on 5, where they both agree that estimating a value of public services available to the poor is impractical.) But neither of them is consistent in this, and neither gives clear principled reasons for preferring one approach over another.

It seems to me that if you want to answer the question, “Which is bigger, the US or the European welfare state,” you want to look at the amount of net public spending relative to GDP, across the income distribution (i.e. 2-1-1-2-1-2 as I’ve laid it out above.) Unfortunately, neither paper slices the numbers this way, so neither is really dispositive on the question we’re mainly interested in.

10

Lemuel Pitkin 06.08.10 at 6:53 pm

(net public *social* spending, I mean.)

11

Laurel 06.08.10 at 6:54 pm

@Lemuel Pitkin and Martin: private sector expenditures aren’t wholly divorced from government spending, since many of them are tightly regulated or heavily subsidized via less visible means like tax expenditures. (See the tax exemption for health insurance, the home mortgage interest tax deduction, IRAs, and other work like The Divided Welfare State and The Hidden Welfare State.) There’s a real argument for including private spending in welfare state analysis.

On the other hand, as Kenworthy finds, private social expenditures disproportionately stabilize and ease the lives of the middle and upper classes. When we consider what exactly those expenditures entail (subsidies to homeownership, education spending, a widely inequitable but very expensive health care system) this isn’t particularly surprising.

12

stostosto 06.08.10 at 7:50 pm

That Price Fishback paper reminds me of this ten year old OECD paper that arrived at similar results wrt US social expenditure . The author, Willem Adema, attempted to account for differences in how social expenditure is financed, constructing what he dubbed net total social expenditure.

Here is how a number of countries compared on this as a percentage of GDP (the numbers referring to the mid-90s):

Australia : 21.6
Canada : 21.2
Denmark : 24.4
Finland : 25.7
Germany : 27.7
Ireland : 18.7
Italy : 22.3
Netherlands : 25.0
Sweden : 27.0
UK : 26.0
US : 24.5

13

engels 06.08.10 at 8:13 pm

In the US, a lot of “us” don’t want to help the poor at all—they’re just lazy insert-epithet-heres. “We” want to help the hardworking but struggling Real American—i.e. somewhere around the 30th percentile.

Indeed.

14

Akshay 06.08.10 at 8:23 pm

Kenworthy generously links to a book manuscript he is completing on economic growth, redistribution and poverty. In the manuscript’s chapter 9 “The aim is not spending per se” he deals with the above arguments in more detail. My take-home factoids:

1) Gross public social expenditures as a % of GDP are higher in the Nordic countries than in the US

2) Net public and private social expenditures per capita as measured in PPP dollars are higher in the US

3) The US poorest clearly do not profit from US expenditures. The Nordic poor do profit from their government’s expenditures.

Having established that the US welfare state does not help the poorest, it would be interesting to find out whom it does help. Would it be cynical to conclude that the US government redistributes middle class money to the middle class, upper middle class and upper class, with an enormous cut taken by Wall Street (including pension funds), HMO’s, educational institutions, the military-industrial complex and large corporations? (That is a problem with EU welfare states too, by the way. But perhaps EU lobbies are slightly better under control.) Surely cui bono analyses of the US welfare state do exist, right?

15

Jeff R. 06.08.10 at 8:39 pm

Marc@8: Infant Mortality is not only easy to game, it’s incredibly hard to avoid gaming whatever your intentions. [Whether a premature birth at an age/weight with 10% survivability with maximal effort is counted as a miscarriage or an infant mortality does a lot to the statistics. And measuring infant mortality+miscarriage rates doesn't work either since in places without legal abortion, the illegal ones get included in that statistic, generally, and you can't subtract that out since you don't know the numbers and you can't add the legal ones in because that means you aren't measuring what you want to measure anymore...]

16

James Allen 06.08.10 at 8:52 pm

Isn’t it strange that this study gets a lot of traction with the right? It seems to suggest that though the United States spends more on the Welfare State, it achieves less. That might suggest that the European success in terms of deprivation is not strictly a result of the welfare state, but also the result of the close regulatory relationship between government and private industry. Wouldn’t the right want to bury that? Or am I missing something?

I think the relationship between welfare state and deprivation is complicated for the comparative political scientist. If Japan was thrown into the mix, we would find that deprivation was relatively quite low, even though the welfare state is almost nonexistent (almost zero spending); there are various disparate relations between welfare spending and deprivation from country to country. I’m not convinced that comparing nations is the best way to judge the merits of a national redistribution system.

(also, new reader chiming in. Hi.)

17

engels 06.09.10 at 12:15 am

Further to #13, it must be noted that this idea is not confined to America.

Labour needs to regain voters’ trust – especially in the south of England – by rebuilding the welfare state around its original social insurance model so benefits are more directly linked to what a worker has contributed, John Denham, the former communities secretary and one of the few Labour MPs left in the south, proposes today.

Denham suggests “aspirational” voters rejected Labour because too many felt they were not rewarded for hard work, and too many benefits, including state benefits, were not related to the contributions individuals put in.

In a speech to the Fabian Society, Denham says: “If such a heavy dependence on means-testing inevitably fuels the resentment of those excluded we must create something different. And, however hard it may seem in the current economic climate, I believe we have no alternative but to set out on the long-term journey to create once again a system of wide social insurance, on which security and support reflect the contribution made.

18

Tom T. 06.09.10 at 1:28 am

Are Kenworthy’s calculations in this post for Denmark, Sweden, and the US adjusted for PPP? If not, it looks like doing so would cause the figures to converge significantly.

19

Ginger Yellow 06.09.10 at 1:22 pm

Japan’s welfare state (narrowly defined) is small, but it’s bigger than in the US. And it’s not that much smaller than the OECD average these days. It’s three times as big as South Korea’s.

20

b9n10nt 06.09.10 at 1:42 pm

Tom T.

see Yglesias today. The answer is “Yes”

21

chris 06.09.10 at 1:55 pm

Isn’t it strange that this study gets a lot of traction with the right? It seems to suggest that though the United States spends more on the Welfare State, it achieves less. That might suggest that the European success in terms of deprivation is not strictly a result of the welfare state, but also the result of the close regulatory relationship between government and private industry. Wouldn’t the right want to bury that? Or am I missing something?

You’re overthinking it, I think. If the US already spends a lot on the welfare state, then we obviously don’t need to spend more; and if we are getting less for what we spend, then our existing welfare state is wasteful and the waste needs to be attacked first before doing anything else. That’s sufficient to reach the right’s desired objectives and it sounds fairly plausible, so there’s no need to look for more complexity (which the right isn’t fond of anyway).

22

someguy 06.09.10 at 2:42 pm

chris ,

It seems fairly plausible because it’s true.

Medicare doesn’t provide European savings. Neither does Medicaid or anything else. The new health exchange won’t.

Even adjusting for PPP the US ranks one or two in primary education spending. Do we have the 1st or 2nd best education system?

The private sector can provision the same quality of primary education at 60% of the cost.

The US government does a very poor job efficiently provisioning goods and services.

Calling for it do more is a call to waste money.

23

Harry 06.09.10 at 2:52 pm

But engels, your (surprising, to me) quote from Denham says that because we want to help the poorest we must create mechanisms that are universal. The heavy reliance on means-testing is precisely why the UK and US systems are so relatively unhelpful to the poor. (The US, of course, has a kind of reverse means-testing for many of its benefits — dependent care subsidies, house-buying subsidies, etc). So the quote is not an illustration of what chris said. Or am I missing something?

24

Steve LaBonne 06.09.10 at 3:05 pm

@22:

The private sector can provision the same quality of primary education at 60% of the cost.

The empirical evidence from the charter school movement very much suggests otherwise.

And how conveniently free-market worshipers forget that the private sector includes plenty of incompetent companies like GM and Chrysler and criminal rackets like Enron and BP.

The truth is that US “welfare” spending is skewed toward recipients who don’t need it but are politically powerful enough to deflect the largesse their way. Another fact is that the unique inefficiency of government in the US lies NOT at the federal level but in the multiple redundant layers of government (i.e. exactly the sacred “local control” that wingers love). My county of less than 250,000 people has over a dozen police departments.

25

engels 06.09.10 at 3:13 pm

It’s possible I’m being unfair on Denham. (I haven’t read his speech). I’m also against means testing and in favour of universal entitlements. It was the stuff about rewarding ‘aspirational’ people for ‘hard work’ and linking state support to ‘what individuals put in’, that I thought illustrated Chris’ point.

26

someguy 06.09.10 at 5:40 pm

Steve Labbone,

“The empirical evidence from the charter school movement very much suggests otherwise.”

That is false.

http://www.uark.edu/ua/der/SCDP/Milwaukee_Eval/Report_06.pdf

The voucher cost about 6K and the public schools cost about 10K. Some of that difference is probaly mitigated by more special needs students in public schools. But the private sector still provisions the same education for less.

The overall data for school choice suggest that the privates schools involved provide the same or very slightly better educational results than public schools, with greatly increased parental satisfication, at less cost, and the increased competetion results in slightly better outcomes for public school students.

‘The truth is that US “welfare” spending is skewed toward recipients who don’t need it but are politically powerful enough to deflect the largesse their way. ‘

Did you read Fishback’s analysis?

“Comparisons of incomes after taxes and transfers show that Americans at the 10th percentile of the American income distribution (9 percent have less, 90 percent have more) fare about the same as Nordic people at the 10th percentile of their distribution. Americans have more opportunity to reach higher incomes because Americans in the upper half of the distribution have much higher incomes than Nordic people in the upper half of their income distributions. On the other hand, households below the 10th percentile in America fare much worse on average than the lowest group in the Nordic countries. Despite a large array of poverty programs, people in the U.S. are falling through holes in the safety net. We know that a substantial number of people eligible for a wide range of benefits in the U.S. don’t receive them, either because they don’t apply or the U.S. delivery of services is not that good.”

Do you think folks at the 12% are politically powerful enough to deflect largesse their way while folks at the 9% aren’t?

The bottom line is that “the U.S. delivery of services is not that good.”

That might be because of federalism and conservatives might like federalism. But the bottom line is that federalism is here to stay and the US does a bad job delivering the needed services.

Same thing with education and healthcare.

If as you say largesse in the US is deflected the way of the political powerful it really doesn’t make sense to increase the largesse until that bug can be fixed.

27

Harry 06.09.10 at 5:49 pm

engels — I clicked through to the actual article, and whereas the quote is ambiguous, your interpretation is pretty much unavoidable on actually reading the full piece.

28

Steve LaBonne 06.09.10 at 6:06 pm

The voucher cost about 6K and the public schools cost about 10K. Some of that difference is probaly mitigated by more special needs students in public schools.

Which invalidates your argument even in that specific case- dealing with cherrypicked students is not “the same education”. And you chose an example that is much more favorable than the overall experience with charters and vouchers nationwide. (Private charters, in particular, have largely been a disaster area.) Propertarian dogma is no substitute for analysis. By the way, the track record of privatization of other public services is also very poor.

As for your insistence on remedying inefficiency while rejecting for ideological reasons any attack on the main cause of the efficiency, that’s the typical sort of thing that makes it a waste of time to ty to engage propertarians in intelligent discussion.

29

chris 06.09.10 at 6:59 pm

As for your insistence on remedying inefficiency while rejecting for ideological reasons any attack on the main cause of the efficiency

Not to mention insistence that perfect efficiency must be achieved first before any attempt to increase the scale of the solution can even be contemplated.

30

someguy 06.09.10 at 7:35 pm

Steve LaBonne,

Students are not cherry picked and compared to the average public school student. Students are compared to a similar set of students that did not use the voucher program and they attempt to control for self selection.

The MPCP Longitudinal Educational Growth Study is generally considered on of the largest and best studies of school vouchers that is why I cited it.

“Propertarian dogma is no substitute for analysis. By the way, the track record of privatization of other public services is also very poor.”

I am not a liberterian. I don’t think markets are perfect. You haven’t read the material, at all, and you have provided no other material.

31

Harry 06.09.10 at 7:42 pm

someguy — that’s not exactly right. The students are certainly not cherry-picked, but there’s a lot of dregs-sifting. The dregs concentrate into the regular schools, with peer-effects etc. And school districts bear fixed costs which enter the per-pupil spending estimates and basically make it impossible to compare (two examples here — i) the voucher schools have no very expensive special ed students, and spending estimates for the public schools include them; ii) the superintendent of one large urban district told me exactly how much her most expensive student costs — $350k per year, which she pays by court order to a penal institution in another state, and is included in her districts per-pupil spending but not that of the charters she is competing with). Basically, we don’t really know what any of this would look like at scale. Finally, test scores and improvements in test scores don’t tell us much about relative school quality (I know that sounds like shifting the goalposts, but I actually think it strengthens your argument — my guess is that the parental satisfaction scores, which as you say favour the voucher schools, are telling us much more about the quality of the schools and their effects on the long term prospects of the kids than anything that’s happening to test scores).

32

someguy 06.09.10 at 7:45 pm

Steve LaBonne,

“As for your insistence on remedying inefficiency while rejecting for ideological reasons any attack on the main cause of the efficiency”

What is the main cause of inefficiency in the provisioning of education in the inner city? It certainly isn’t conservatives.

Chris,

“Not to mention insistence that perfect efficiency must be achieved first before any attempt to increase the scale of the solution can even be contemplated.”

I think you have it backwards. Vouchers aren’t perfect but they do well enough that I favor slowly scaling them up. What about you? Do you feel vouchers need to be perfected before we can contemplate scaling them nationally?

Not to mention insistence that perfect efficiency must be achieved first before any attempt to increase the scale of the solution can even be contemplated.”

33

someguy 06.09.10 at 7:59 pm

Harry ,

I think the The MPCP Longitudinal Educational Growth Study attempts to control for self selection. Most reviews of the study seem to indicate that it’s methodology is sound.

From the study -

“One of the most important questions surrounding school choice programs
is how they affect the students “left behind” in public schools. Do school
vouchers pressure public school systems to improve, generating a “rising
tide that lifts all boats?”25 Or, instead, do school vouchers produce two
distinct groups: choosers and losers?26 Jay Greene and Ryan Marsh apply an
innovative approach to identifying the effect of the expansion of the MPCP
on the achievement of students in the MPS. They observe that the number of
schooling options available to each student in Milwaukee varies based upon
family income, grade, and the number of private schools in operation. Using
individual student-level MPS data from 1999 to 2006, and individual fixed
effects to control for possible selection bias, Greene and Marsh estimate the change in achievement for MPS students as their number of educational options has increased due to MPCP expansion.27 They find that:

1. Competition induced by the MPCP has led to improved performance by non-choosing students who have remained in the MPS;

2. Though positive, statistically significant, and robust to different estimation models, the competitive effect of the MPCP is modest in size, as an increase of 37 choice schools (one standard deviation) is associated with a gain of about 2 Normal Curve Equivalent (NCE) points (one-tenth of a standard deviation) in
achievement for MPS students;

3. Since 124 private schools now participate in the MPCP, the total effect of the Choice program expansion on achievement in the public schools over the past twenty years has been a gain of about 6.7 NCE points. Greene and Marsh’s results support the conclusion that the Milwaukee Parental Choice Program has produced a
rising tide that has lifted all boats, but that tide has not exactly been a Tsunami.”

I am not sure how or if they did perfectly but they did seem to make an attempt to control for self selection.

I provided the numbers of 60% based on respective costs of 6K and 10K . 60% is ceratinly too low but it is a good starting ball park number.

But the study, which controls for self selection, and certainly isn’t just comparing apples and oranges, indicates a net savings of 37 million dollars for taxpayers . Not sure how that compares as % per student. 37 million / 20K students would be about 1.85K savings per student. More like 82% per student savings.

82% seems like a much better ball park number.

34

Harry 06.09.10 at 8:11 pm

Yes, I know they tried. I think their approach is interesting (and indeed innovative) but no confident conclusions can be drawn from it. I’m not accusing them of being irresponsible at all, it would just be irresponsible to think that they’ve succeeded, we really don’t know what we’re doing. I’m a (very unenthusiastic) supporter of the MPCP by the way, so I’m not trying to belittle the finding. I don’t think anyone should ever have expected major gains, and that not producing major gains is not damning. Who has that magic bullet? (I know the answer to that one — nobody).

35

chris 06.09.10 at 8:34 pm

What is the main cause of inefficiency in the provisioning of education in the inner city?

There’s lots of candidates, but given the context of a discussion of federalism, what he was probably getting at was insistence on local funding and control. Poor schools for poor people is practically a design feature of our current deliberately fragmented system.

He might also have intended to refer to the conflicting commands of different levels of government trying to control the same set of schools (a contingent, not necessary, feature of the US’s governmental system and the way it approaches education). But I shouldn’t put words in his mouth.

my guess is that the parental satisfaction scores, which as you say favour the voucher schools, are telling us much more about the quality of the schools and their effects on the long term prospects of the kids than anything that’s happening to test scores

My guess is that they’re telling us a lot about what kind of students are kept out of the voucher schools, and that is what makes the parents satisfied (i.e. troublemakers, i.e. in many cases students with mental illness or substance abuse problems or learning disabilities; it’s obvious why parents wouldn’t want their own children to go to school with them, but that’s a kind of NIMBYism that the public schools are going to have to pick up the slack for, and most likely end up with all of their other students being held back by the ones they couldn’t turn away).

Parental involvement and parental SES overwhelm anything the school could possibly ever do in determining student outcomes, and the first hypothesis should always be that they have sneaked in by some back door after you thought you had adequately controlled for them.

P.S. If you think there are substantial differences in teacher quality, there’s also the possibility of cherry-picking the teachers. Public schools have to come up with enough teachers to fill their whole staff roster and they can’t all be from the 90th percentile.

36

someguy 06.09.10 at 8:53 pm

Harry,

Test score wise there is nothing to do cartwheels about. Vouchers won’t fix educational standards. They would just be one fix among many fixes. If anything can be fixed.

But we can be pretty sure that self selection is not playing much of any part in the lower costs.

Education is just one very good example of how the US government fails to efficiently deliver goods and services. We spend the most and but we don’t get the most. In this case we could utilize vouchers and the private sector and get the same results for 80% of the cost.

We spend a decent amount on posttransfer-posttax redistribution. But below the bottom 10% we do a horrible job and those are the folks who need it most.

Our government provisioned health care is like our education expensive and does not generate enough extra in the way of results to justify extra the spending. [Well maybe consumer satisfication which is really important.]

And the solution is?

Another expensive middle class entitlement program, that no one the left has any intention of ever doing any serious cost benefit analysis on, or doing anything about the horrible results of any cost benefit analysis, except proposing -

Another expensive middle class entitlement program.

37

someguy 06.09.10 at 9:16 pm

chris,

There’s lots of candidates, but given the context of a discussion of federalism, what he was probably getting at was insistence on local funding and control. Poor schools for poor people is practically a design feature of our current deliberately fragmented system.”

We know the issue isn’t funding. We know you can get the same results for less. It certainly isn’t conservatives jimmying up the provisioning of education to inner cities. Conservatives aren’t involved in that effort.

So what is the problem? Federalism? Not enough top down control? Well that would ceratinly be an intellectually consistent ,though completely deluded ,and pointless conclusion. After all federalism isn’t going anywhere.

But in way it is perfect. We can all moan about federalism and the evil conservatives who support it, with out having to acknowledge how incrediblely difficult it is to efficiently provision the services, and how badly we are doing it.

38

Peter Whiteford 06.10.10 at 7:35 am

Fishback’s paper uses OECD net social expenditure data (google it). (As has been pointed out above this is based on the work of Willem Adema and Max Ladaique at the OECD.)

These numbers look at aggregate spending components, not the distribution of benefits.

The figures do not include public education, nor do they include charitable spending.

Social spending includes social security and welfare spending, health care spending and community services (for example, child care and nursing homes.) However, they do include private social spending as well as public spending, so private health spending in the USA gets counted as social spending.

The figures also take account of the impact of direct and indirect taxes both in reducing benefits and in substituting for benefits or subsidising benefits. For example, Nordic countries tax benefits heavily and indirect taxes are much heavier, so when you take these into account “net” spending is much less than gross spending. This does not occur anywhere to the same extent in the USA.

In addition, the US provides support for families through the tax system in the form of the EITC and child tax credits, whereas in the Nordic countries, virtually all family support is in the form of direct benefits or services.

For example, Denmark spends nearly 27% of GDP on the welfare state compared to 16% of GDP in the USA on a gross basis, but on a net basis (after subtracting taxes on benefits and adding tax expenditures), Denmark spends 20.2% of GDP and the USA spends 20.1% – almost exactly the same.

However, net private social expenditure in Denmark is only 1.3% of GDP while in the USA it is 9.4% of GDP – which is almost entirely due to the very high level of private health care spending in the United States.

So overall the USA spends much more as a society on social welfare than Denmark, mainly due to heavy taxes on benefits in the Nordic world, but also because US private health care spending is the highest in the world.

But this does not mean that the USA is more generous to the poor than Denmark. All of the Nordic countries direct more of their spending to the poor than does the USA (i.e. the Nordic welfare states are actually more targeted to the poor than the USA).

Tax expenditures in the USA tend to be less progressive than direct expenditures. And private health care spending is not a benefit to the poor.

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Peter Whiteford 06.10.10 at 7:52 am

Another point.

Harry at 23 said ” The heavy reliance on means-testing is precisely why the UK and US systems are so relatively unhelpful to the poor.”

The UK helps the poor at orders of magnitude higher than the US.

The USA is a small Bismarckian welfare state; the UK is a large Beveridgean welfare state.

Benefits for low income families in the UK are close to the highest in the OECD but in the USA they are close to the lowest in the OECD .

As I noted above all Nordic welfare states are actually more progressive than in the USA.

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chris 06.10.10 at 3:38 pm

However, they do include private social spending as well as public spending, so private health spending in the USA gets counted as social spending.

Since private health spending in the USA is (a) infamously bloated relative to other countries or to the results obtained, and (b) enjoyed primarily by the economically secure, ISTM that we didn’t really need to have the rest of the discussion. This fact alone makes the “social spending” category, as defined, nearly useless as a method of international comparison, and it certainly isn’t measuring anything that can sensibly be called a “welfare state”.

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