The needless persistence of poverty

Image: A tent city of homeless people in Eugene, Oregon. I wonder if these people have all logged on to the Obamacare website to browse health insurance plans to select one with the mix of premiums and cost sharing that best fits their own unique financial situation? Or if they find they're not eligible, have they instead gathered the necessary income, asset, and citizenship verification materials for their Medicaid application? (source: "When I show friends the site of the Village, the initial reaction is that these things are more like doghouses than people’s homes.")

Note: This page is the conclusion to The Case for Social Democracy but it also serves as the "about this blog" page. This page ties together the information from The Case for Social Democracy, but it is also serves as a perfect stand alone summary of why I started writing this blog in the first place.

The Case for Social Democracy covered an extraordinary amount of disparate information, but hopefully it has convinced you that the social democratic model is the best social welfare model. Clearly, the United States has much to gain from expanding its existing social democratic programs (Social Security and Medicare) to other areas of social welfare: child care, parental leave, extended sick leave, long term care, etc.

Because there is so much information on so many topics, it is easy to lose sight of the big picture. Let's now try to tie everything together.

The social democratic model is so efficient that it costs about the same in the aggregate as the American social welfare model, yet extends far more benefits and services to all society:

The United States and the social democracies all spend about 30% of GDP on social welfare once public and private expenditures are tallied. Indeed, in 2011, aggregate spending on social welfare was actually higher in the United States than all of the social democracies. Here again is the relevant OECD graph:

(Red boxes mark the United States and the social democracies. Countries are ordered left to right by decreasing social welfare spending as a percentage of GDP, which is indicated by the orange diamonds.)

The social democratic model is truly remarkable: it extends so many high quality services and generous benefits to all society, yet is so efficient that it costs about the same as the American model.

Since our current social welfare system costs at least as much as the social democratic model, we could switch from our current model to the social democratic model without spending any more money. Such a transition couldn't occur overnight, but it could be done.

Not only would this transition cost us nothing--our new social democratic welfare state would cost just as much as our current liberal one--it would also make the vast majority of Americans better off. Though all Americans would see their taxes increase, the vast majority of Americans would be financially better off. As examined above, once we account for public and private social welfare costs, the social democratic model leaves a typical American household far better off:

Furthermore, when this analysis is repeated for richer households, we find that even American families at the 90th income percentile would be better off under social democracy. In other words, the American social welfare system is so cruel and inefficient that no less than 90% of Americans would be better off under social democracy--from the poor to the middle class to those richer than 90% of the rest of society.

Moreover--not only would the vast majority of Americans be financially better off under social democracy--the vast majority of Americans would also see the quality of their social welfare services improve. As discussed above, social welfare services universally available in the social democracies exceed the quality of services available all but the richest Americans. And the vast majority of Americans would find themselves eligible for entirely new benefits: paid parental, family, and sick leave, for example.

The data do not show any macroeconomic downside to social democracy. As seen above, the type of welfare state is uncorrelated to any economic indicator. Rather than the engines that drive our economy forward, poverty and inequality are also uncorrelated to any economic indicator. If the American welfare state, poverty, and inequality are beneficial to anything, it certainly isn't the economy. To be clear, I'm stopping well short of saying that social democracy is better for the economy; it's probably most fair to say that the welfare state has very weak--if any--effect on the economy. Rather, the economy shouldn't be our sole, overriding concern. The well-being of over 90% of society has to matter, too.

If something sounds too good to be true, perhaps your standards have been lowered too far by the American social welfare system
To conclude, it is abundantly clear that we could use the social democratic model to greatly reduce--if not outright eliminate--poverty. The social policy blueprints for eliminating poverty already exist and have proven themselves effective in the social democracies. Yet we choose poverty instead. Poverty persists not by accident or because we don't know how to fix it, but because we choose not to act.

This suffering of poverty is unconscionable not only because we know how to end it in a cost effective manner, but because doing so would dramatically improve the lives of the vast majority of non-poor Americans as well. Social democracy really is an incredible system: if we switched from our current social welfare system to social democracy, our aggregate social welfare spending would remain the same, the vast majority of non-poor people would be far better off, and we would end poverty. Yet we choose not to. We choose poverty, financial insecurity, and inequality.