America's Misguided Approach to Social Welfare
Compared with other developed countries, the United States has very low taxes, little income redistribution, and an extraordinarily complex tax code. If it wanted to, the government could raise taxes without crippling growth or productivity. Tax reform is ultimately a political choice, not an economic one -- a statement about what sort of society Americans want.
Equality of opportunity has long been an American ideal, and the expansion of opportunity to women and minorities in the last half century has been a major success. But other obstacles to advancement remain, and recently, socioeconomic inequality has actually increased. The United States now has less social mobility than more other wealthy nations; it can and must catch up by following their lead.
Debates about the proper role and size of government dominated the 2012 U.S. presidential election. President Barack Obama; his Republican rival, Mitt Romney; and their surrogates relentlessly sparred over who should pay what taxes, who should get what benefits, and how Washington should manage major sectors of life, such as health care and education. What neither side made clear was how the United States stacks up against other developed countries. As other countries embraced big government and generous social policies in the middle of the twentieth century, the common wisdom goes, the United States sought a relatively small welfare state. And for partisans on both sides of the aisle, one of the key issues up for grabs on November 6 was whether such American exceptionalism would persist or fade away.
A closer look at U.S. social spending shows that it is indeed distinctive, but not in the ways that many believe. The United States does tax less and spend less on social programs than most of the rich democracies with which it is usually compared. But even so, the country has developed a large and complex system of social protection, one that involves a mix of government spending, tax-based subsidies, and private social spending. In its own way, the U.S. welfare system delivers many of the same benefits as the systems in other developed countries, including health insurance, pensions, housing support, and child care. And when added together, the amount of resources the public and private sectors commit to all these forms of welfare is massive: as a percentage of GDP, for example, spending on the health and welfare of citizens is greater in the United States than in most advanced industrial economies...
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