publication date: Jul 9, 2012
The Wall Street Journal premium edition had an
editorial by
Arthur Brooks entitled, "America Already Is Europe: In spending, debt and
progressivity of taxes, the U.S.
is as much a social-welfare state as Spain." Some readers asked me to
comment on this.
While clearly a fiscal conservative, Brooks (photo below) takes on both political
sides in his piece. He is the president of the American Enterprise Institute
and the author of the book, "The Road to Freedom: How to Win the Fight for
Free Enterprise" (Basic Books, 2012).
Here are the highlights of Brook's article followed by my
thoughts:
I'm often asked if I think America is trending toward becoming
a European-style social democracy. My answer is: "No, because we already
are a European-style social democracy." From the progressivity of our tax
code, to the percentage of GDP devoted to government, to the extent of the
regulatory burden on business, most of Europe's
got nothing on us.
In 1938-the year my organization, the American Enterprise
Institute, was founded-total government spending at all levels was about 15% of
GDP. By 2010 it was 36%. The political right can crow all it wants about how America is a "conservative country,"
unlike, say, Spain-a
country governed by the Spanish Socialist Workers Party for most of the past 30
years. But at 36%, U.S.
government spending relative to GDP is very close to Spain's. And our debt-to-GDP ratio
is 103%; Spain's
is 68%.
At first blush, these facts seem astounding. After all,
Spanish political attitudes differ dramatically from our own. How can we be
slouching down the same debt-potholed, social-democratic road as Spain? There
are three explanations, all of which point to a worrying future for America.
First, the American left is every bit as focused on growing
government and equalizing incomes as the Spanish left. Despite arguments from
liberals that tax increases on "millionaires and billionaires" are
necessary for fiscal prudence, they are little more than a way to meet the
single-minded objective of greater income equality.
President Obama's proposal to eliminate the Bush-era tax
cuts for households making over $250,000 a year would, on a static basis,
reduce the deficit by only 5% annually. That still leaves 95% of the deficit to
be paid by the middle class.
Similarly, the so-called Buffett Rule, which would apply a
minimum income tax rate of 30% on individuals making more than $1 million a
year, is supposed to help bring our budget into line but would raise annually
about $4 billion-about as much as Americans spend on Halloween and Easter
candy.
The second force leading us down the social-democratic road
is cronyism. America
possesses a full-time bipartisan political apparatus dedicated to government
growth and special deals for favored individuals and sectors. For example, the
farm bill that just passed the Senate contains around $100 billion in
subsidies, mostly for large, corporate farms that do nothing to improve
nutrition or food security. Or witness the recently reauthorized Export-Import
Bank, which doles out about $20 billion annually in corporate welfare.
Third, and most importantly, while a majority of Americans
are neither leftists nor corporate cronies, they aren't paying much attention
to the political system. We often hear that more than 85% of Americans disapprove
of the job Congress is doing. But, according to the 2000 Social Capital
Community Benchmark Survey, only 25% of American adults can correctly name both
of their U.S.
senators, and 51% can name neither. If I don't know who my senator is, I am
unlikely to know much about his bridge to nowhere.
...As the leader of a think tank dedicated to public policy, I
would love it if Americans were as obsessed with policy as I am. But let's be
realistic: Most people don't have the time or inclination to contemplate the
potential damage each government-spending predation-each tiny political sellout
of our values-could cause.
Still, according to a recent Gallup survey, 81% of Americans are
dissatisfied with the way the nation is being governed. Since Gallup started asking that question in the
early 1970s, dissatisfaction has never been higher.
And Rasmussen polls find that consistently two-thirds to
three-quarters of Americans say our country is on the "wrong track."
They may not know exactly why, but most Americans believe their government is
changing our nation for the worse.
What is the answer? We caught a glimpse of it in 2010, when
a movement of ethical populism-the tea party-mobilized millions of Americans to
read the United States Constitution and demand politics that reflect the
majority's values. And while woefully misguided in its diagnoses and policy
solutions, the Occupy Wall Street movement was at least right to protest the
malignant cronyism in our economy. That energy must re-emerge in 2012 and
become a permanent part of our political landscape.
In 1787, Benjamin Franklin was asked what sort of government
our new nation would have. His famous answer was, "A Republic, if you can
keep it." When he said this he was envisioning a monarchist alternative,
not today's noxious brew of leftism, cronyism and general inattention to public
policy. But Franklin's
maxim is still valid today.
My Thoughts
Brooks makes numerous valid points about government spending.
But, I believe that the facts suggest otherwise that the U.S. is already the social welfare state that
characterizes Europe. Perhaps Brook is
exaggerating to make a point (and wake folks up) that we're headed in that
direction and may get there faster than many folks realize.
The U.S.
doesn't have the levels of government spending and social programs that are
common in the EU countries. We don't have a value added tax, for example,
although some politicians would like to add one in the U.S.
My coverage of the Heritage Economic Freedom Index rankings
backs up my assessment that while the U.S. has fallen some in those rankings in
recent years in terms of economic freedom and government spending and
regulation, most European countries are far below the U.S. in those rankings.
But, the fact remains we are heading in the wrong direction and are no longer
in the top category.