2012 February 25 Saturday
David Brooks: America Just As Socialized As Europe

David Brooks thinks we just hide our welfare state better.

The U.S. does not have a significantly smaller welfare state than the European nations. We’re just better at hiding it. The Europeans provide welfare provisions through direct government payments. We do it through the back door via tax breaks.

For example, in Europe, governments offer health care directly. In the U.S., we give employers a gigantic tax exemption to do the same thing. European governments offer public childcare. In the U.S., we have child tax credits. In Europe, governments subsidize favored industries. We do the same thing by providing special tax deductions and exemptions for everybody from ethanol producers to Nascar track owners.

I am skeptical of this line of argument for multiple reasons. First off, private providers do not have the same impact as public providers. For example, lots of people providing child care out of their homes do not have the same impact as government-run child care centers whose employees are recruited thru civil service tests and managed by government managers. This difference is profound in impact because the private providers compete and they serve their customers rather than serving managers higher up in agencies or elected or appointed officials. The private providers are far more flexible and serve many more specialty niches (e.g. people who work late or who work weekends or people who want a specific style of environment for the kiddies).

Room for innovation is much larger in the private sector. Also, for some forms of tax deductibility (e.g health care savings accounts paid into with pre-tax dollars that accumulate across years) the buyer using pre-tax dollars has an incentive to be frugal to hold back money for use in later years. The buyer has an incentive to find cheaper service providers and that incentive is missing when health care and other services are provided by a government.

Health care providers and other providers in America have far more incentive to provide flexible hours, short waiting times, and other conveniences and service quality differentiators. The reason is simple: individual buyers are free to take their money elsewhere. The incentives to meet the needs of individual customers are much lower in Europe. The American approach leads to services that are more customer-centric, innovative, and higher in quality.

If we must have subsidies then we should make them come in forms that create more competition and more tailoring to individual needs.

Share |      By Randall Parker at 2012 February 25 11:22 AM  Europe and America


Comments
Mike said at February 25, 2012 8:17 PM:

That was a ridiculous column by Brooks. I think the sole purpose was his idea of bridging the left right divide.

Aurelius said at February 26, 2012 9:58 AM:

"individual buyers are free to take their money elsewhere"

In other words, the purest democracy of all: a democracy of one. But the increasing centralization of power at federal and even state levels is intended to override such freedom. Recall the efforts in Colorado to force daycare providers to have multiracial dolls (they have apparently dropped that requirement).

http://abcnews.go.com/US/colorado-proposed-child-care-center-regs-include-race/story?id=14050105

And many American solutions are more efficient. Providing daycare out of a church or home means extracting more value out of a building that would otherwise sit empty for much of the time. It means fewer transportation costs for the workers and probably the parents.

HonestObserver said at February 26, 2012 1:55 PM:

Blogger John Reilly provides his thoughts to this: http://www.johnreilly.info/26Feb12.htm

When someone points to the size of the tax-subsidy budget, the observation is met with outraged rejoinders to the effect that the idea of tax deductions as a subsidy assumes that the whole of the taxpayer's income is really the state's by right, and that the state has graciously allowed the taxpayer to keep some of it. The problem with the objection, of course, is that it supposes the taxpayer actually has been allowed to keep the money. Actually, by taking the deduction, the taxpayer has agreed to do with it something that the state wants done.

The blinding ubiquity of this lunacy has made the folly invisible.

There is something to be said for the principle that people know best what to do with their own money. The point too often neglected is that this competence extends only to their own affairs. People have no particular competence about the social utility of the social-welfare activities and economic investments that tax budgets promote. The tax-budget mechanism has made every Human Resources department in the country into a little department of Health, Education and Welfare, plus a sort of Ministry of Plenty. The efficiency of welfare and economic-management functions does not benefit by multiplying the functionaries. That is why Human Resources departments have become a running gag about stupidity and malice.

The perverse genius of tax subsidies is their ability to mobilize private actors in a way untainted by market discipline. The Ministry of Buggy Whips may manufacture useless products, but the portion of the national product it can waste is at least limited by the size of its budget. No such restriction impedes the tax budget: the portion of the national product that can be diverted to the deductible activity is limited only by the number of taxpayers who decide to take the deduction. That is how the US managed to jack-up the healthcare costs for a relatively young population to almost a fifth of GDP. It's also why the housing bubbles keep inflating.

One could argue that the activities the tax budget subsidies promote should not be objects of public policy at all. The argument is false, however.

スェーデン人 said at March 18, 2012 7:00 AM:

Generalizing like that about 50 countries is pretty silly. E.g. in Sweden health care, primary and secondary education and daycare all use a voucher system, with state-run, private non-profit and private for-profit alternatives competing against each other.

McNeil said at March 18, 2012 2:27 PM:

People around here tend to generalize a lot. Difficulty in separating concepts, issues and mixing conflicting ideas is very much part of today's sloppy way of thinking in America.

We can see a lot of that in posts where people dogmatically state what political orientation all Asians have, or how low IQ all Hispanics have, how every liberal person thinks and stands for, and what a good citizen should be. What is even more interesting is that all seem to agree on the fuzzy generalizations, even though tacitly nobody seems to have a clear idea on what is an Asian, a liberal, a Hispanic, a socialist or citizen.

It's amazing.

Mthson said at March 18, 2012 7:56 PM:

McNeil,

1. Hispanics don't have comparable academic achievement to Whites and Asians. If your genetics tell you to dislike the idea of human intelligence, whenever someone says "intelligence," just think of educational ability instead. (Sources: The most informative chart you'll ever see, and Immigrants Do Not Improve Academically In Later Generations).

2. Asian Americans are generally Liberal. Asian voters in 2008: 62% supported Obama and 35% voted for McCain (Source).


When one person is arguing for data, and the other person is excitedly arguing for their personal moralism, side with the person arguing for data.


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