USA has 2nd largest social welfare state after France

by Ryan Streeter on November 27, 2014. Follow Ryan on Twitter.

When you combine direct welfare payments to individuals with indirect government subsidies provided through businesses, you find that:

France remains at the top, but the United States vaults into second position with roughly 30 percent of its GDP spent on social services, including health care. We have a hybrid welfare state, partly run by the government and partly outsourced to private markets.

These conclusions come from a recent OECD report on social welfare spending.

Robert Samuelson comments:

The OECD report brims with insights about welfare systems. Did you know, for example, that China — heir to a communist social system — has a puny welfare state compared with most wealthy nations? In 2009, its social spending equaled 7 percent of GDP. Or did you realize that, despite all the talk of “austerity,” government social spending has hardly been reduced in most countries. The OECD reports cuts in a few nations (Greece, Germany and Canada, among them) but also finds that “in most countries social spending remains at historically high levels.”

The main message that Americans can take from this report is that we need a higher level of candor. The very complexity of our hybrid system seems intended to disguise the reality that we have a welfare state. We have created a new vocabulary to validate our denial. From our “safety net,” we distribute “entitlements” that are not “handouts” and don’t qualify as “welfare” payments. We pretend (or some of us do) that our Social Security taxes have been “saved” to provide for our retiree payments, when today’s Social Security checks are mainly financed by the payroll taxes of today’s workers, just as yesterday’s checks were financed by the taxes of yesterday’s workers.