This post comes as the second part to my closer for May, this time focusing on a domestic issue rather than a foreign one. Today, I will tackle the status of America in terms of welfare, and will attempt to determine how much change is necessary to improve ourselves. I will disprove the conservative claim that we are a “nanny welfare state,” and will show why a welfare state is actually a good idea.
Moving on from that, a welfare state is a form of governance characterized by several factors depending on the model. In general, a welfare state is a concept of government in which the state plays a key role in the protection and promotion of the economic and social well-being of its citizens. This means that the government must create strong revenues, and as a result has more money to spend on social transfers which buoy the populace. Let’s start off with the assumption that the United States, while being a first-world nation with substantial national income and gross GDP, is not a welfare state, as this is mostly true. There are some things we can do to make America into a welfare state, but it is not a quick road to take. There have been two large steps taken towards this goal: the New Deal, and the Great Society.
The New Deal was a series of measures taken throughout the 1930s by then president Franklin Delano Roosevelt to keep the United States from being destroyed by the Great Depression. While largely successful in stabilizing the American economy and laying the foundations for the government we know today (http://www.fdrheritage.org/new_deal.htm), this did not fully pull the U.S. economy out of the Depression. The Great Society followed in a similar path, with former president Lyndon B. Johnson using his Congressional tactics to push through whopping amounts of legislation. Significant milestones were reached because of this, including the creation of Medicare/Medicaid, the end of immigration quotas, and other steps forward towards addressing American poverty rates (http://countrystudies.us/united-states/history-121.htm). However, the hanging shadow of the increasingly unpopular Vietnam War would lead LBJ to forgo running again in 1968. These two efforts combine to form the basis of American social spending and how government treats citizens in terms of income equality, healthcare, etc. Since then, there has been little true movement forward, although a push backward was made under Reagan. As such, a new push is necessary, and a few things need to be addressed.
I’m going to take the models of welfare states in France and Denmark as the “ideal welfare states” here, that way I have some sense of background on what we need. The first, and most obvious, necessary change is significant increases in progressive tax reforms. As the world’s single largest economy, we need revenue for our government to function more than ever due to our relentlessly high debt. The overall tax burdens in both France and Denmark are considerably high (http://economix.blogs.nytimes.com/2009/11/24/the-tax-burden-around-the-developed-world/); both nations lump together large sums which are then used to finance all sorts of government programs, from the military to public pensions. As you can see in the graph, a typical citizen in France or Denmark can expect to cough up over 40% in taxes as a percentage of GDP. Meanwhile in the U.S.A., the tax burden is almost half that of the aforementioned countries, but at the same time we spend comparatively little on our populace. Of all the OECD nations, we spend less than 17% of our gross GDP on social expenditures, whereas the other members generally spend more (except in certain cases like Ireland and Japan). This has many reverberating effects on our economy, including low union membership and strength, high health care costs, little national investment, and significant leeway for corporations. While we may be a bastion of small business, our economy is not entirely suited to foster these small businesses. Our free trade policies coupled with comparatively low burdens on transport of goods lead to a nation which cares little for its workers, and provides for them as such.
I’m going to get a little protectionist here, so be prepared. Yes, I know protectionism, especially for a huge country like ours, may sound like a poor idea, but hear me out. Two of our smaller yet highly important sectors include manufacturing and farming. Both of these sectors were hit particularly hard by the recession, with auto bailouts being used to help out manufacturing some but not as a whole. Meanwhile, agrarian interests were largely left untouched outside of some help provided by the national stimulus package. We’re a highly liberalized economy, so the duties on our export and import in both of these sectors are low. It is argued that freeing up the markets for these sectors increases competition and sales, keeping them vibrant. Unfortunately, this is no longer true. Manufacturing costs in other nations such as India and China are callously low, and our farming sector has become so small it no longer yields the capacity to fight nations that have simply become better than us on this matter. As a result, we have left manufacturing and farming to suffer under the whims of a market that no longer desires them. Therefore, should we increase duties on both sectors and develop strongly protectionist policies on them, we can keep them from falling under and allow them to recover and grow without market interference. Given time, I’m sure both of these sectors can improve and innovate enough to make it without protectionism. But until that time, we must keep these sectors under tight wraps so that we don’t lose money and jobs through some of our most vulnerable yet important economic bulwarks.
And lastly, as a nation we must commit to spending more on our citizens if we wish to establish a stable and prosperous welfare state. It may seem lazy to get several weeks of paid vacation, but that hasn’t stopped many European nations from staying in the top 10 concerning economic freedoms and performance. I believe that now more than ever we must be willing to provide more for our public sector employees. Many have not seen a raise in years, and as a percentage of the total job market our rate is quite low (http://www.reuters.com/article/2012/04/08/us-usa-states-employees-idUSBRE83706720120408), and has been dropping. Is it no surprise that large portions of the French and Danish labor forces are public sector workers? We have become so concerned that our private sector needs help, that we have forgotten the other side of a damaged economy. Should we raise the average pay rates for public sector workers and increase the availability in pensions, that would buoy quite a bit of our workforce. As a result, we would have the immediate opportunity to add jobs. We certainly have quite a bit that can get done by the public sector; there are roads to be built and local governments to run. Why not value those that do the things we seem to take for granted? We desperately need these changes, and without them we run the risk of creating an economy that is permanently frozen in a state of liberalization, where no workforce sector is truly safe from outside intervention. If we backtrack on “free market policies” now, we can ensure that our modern, mixed-market economy stays intact.
That is all for my two-part end to May, which had to extend into June due to end-of-school antics. I hope I have provided reasonable suggestions for what we should do, and I hope I have proved that we are not a welfare state (yet). Constructive criticisms and questions are more than welcome, and can be put in the comments right here. If you feel scared to do so, my email at email@example.com is always open, along with my Facebook, Twitter, and Google+. And as always I am signing off.