The US Welfare State in Comparison

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.

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.

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.

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.

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.

@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.

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.

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…]

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.“

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.

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).

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?

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.

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.

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.

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).

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.

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.

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.

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.