Even the top tier of America's two-tiered welfare system is a really bad deal

Image: Excuse me, taxpayers--do you get a better deal living in the United States or in a social democracy? (source)
 

One of the most common arguments against social democratic programs is that the taxes needed to finance them are simply too high. But citizens in social democracies get loads of benefits in return for those high taxes. Is it worth it to pay those extra taxes? Let's find out.

This isn't a straightforward question. Many of the services all citizens of social democracies get from the government are available in the American private market--like health insurance, day care, retirement plans, etc. In other words, the United States government doesn't provide (most) people with day care services, but that doesn't mean you can't have them--you just have to pay for them in the private market. Essentially, we're asking: Who gets a better deal? A typical Dane, who gets X, Y, and Z services from the Danish government? Or a typical American, who gets X from the government but purchases Y and Z from the private market?

To start, we'll compare the costs of both systems: How much a typical Finn pays in federal and social security taxes--versus how much a typical Americans pays in federal and social security taxes, plus the cost of social welfare services purchased through the private market (ie, employer-sponsored health insurance, day care, 401(k) contributions, etc). We'll then compare what services are obtained through those investments (whether taxes or private spending), and hopefully be able to see who gets a better deal.

Excited? I hope so. Let's start with what the typical American has to pay for social welfare services.

Obamacare and why we have a two-tiered welfare state

Image: The illustration from Suzanne Mettler's article on the "submerged state," a key aspect of America's two-tiered welfare system.

A little background: In 2009, as Congress debated the corporate sell-out known as Obamacare, Iowa Republican Senator Chuck Grassley proposed an amendment that would force every member of Congress to use the Obamacare exchanges.  Grassley clearly thought that the Democrats secretly expected the exchanges to crash and burn, and would thus be unwilling to rely on them.  Fearing for their health, the Democrats would vote the amendment down, thus exposing their own hypocrisy.

Grassley miscalculated, however.  The Democrats, apparently confident in the principle of the health insurance exchanges, called Grassley's bluff and his amendment became law.  So, starting in 2014, all members of Congress are legally required to purchase health insurance from the exchanges.

This makes no sense, however, because the exchanges are meant for individuals who are not offered insurance through their employer, and the law does not permit employers to make a contribution to insurance their employees purchase over the exchanges.  Members of Congress do get health insurance through their  employer--the federal government--but are somehow expected to use the exchanges.

This creates an odd paradox wherein members of Congress are both expected to utilize their employer-sponsored health insurance, yet legally required not to.  This paradox was ironed out earlier this year, when it was determined that members of Congress would purchase their insurance on the exchanges with the help of the federal government; the federal government will pay the current employer contribution towards Congress' health insurance, and each member of Congress will have to pay the rest of the bill for whatever plan they purchase on the exchanges.

For those making up to 400% of the poverty line, subsidies are available on a sliding scale to help purchase insurance.  Obviously, members of Congress are making more than 400% of the poverty line, and thus would not be eligible for this subsidy.

Ok, done with the background.  This entire fiasco has led to one of the most amazing works of cognitive dissonance I have ever encountered:

Sequestration's Latest Victim: The Constitution

Image: Beneficiaries of the bottom tier of the American welfare system (source)

Updates--see below

I previously wrote about a Wonkblog round-up of media accounts of programs getting axed by the sequester, and how the sequester persists only because these cuts are focused on the bottom tier of the American welfare state.  Contrast the harm the sequester inflicts on the poor with the fact that any sequester cuts that inconvenience the rich were quickly rolled back: few things could more effectively express who our government works for.

Jared Bernstein has been running a "Sequester Watch" on his always excellent blog, and I'm embarrassed to say I haven't been keeping up.  In installment #14, he rounds up accounts of specific programs being cut: various Head Start programs, inner city schools, mental health services for Native Americans, low income housing, Meals on Wheels, federal public defenders, and others.  This is poverty sustainment; not giving poor children the educational opportunities they need to succeed is an endorsement of their poverty.

Here's another link describing the effect on federal public defenders:

Federal defenders already were facing a 5 percent budget reduction when $85 billion in spending cuts began coursing through federal agencies in March, lopping another 5 percent from the budget this fiscal year. Some courts have limited the hours they hear criminal matters. Defenders across the country are taking up to 15 days without pay, forcing postponements in many criminal proceedings...

The court system’s alternative is to hire private, court-appointed attorneys to represent indigent clients, since by law they must get a lawyer. They are paid from the same pool of money as public defenders. But they cost more, and according to some studies, are less experienced and less effective.

Nachnanoff told lawmakers that public defenders are expecting another hit to their budget of more than 20 percent in the fiscal year that starts Oct. 1, which would almost surely result in layoffs.

In a letter to the Judiciary Committee, a group of 40 former judges and prosecutors urged Congress to fully fund the defender program.

“These ill-conceived measures undermine not only the Federal Defender system, but the entire federal judiciary, without achieving any real cost savings,” they wrote of the sequestration cuts.

All American citizens have a Constitutional right to a trial and legal representation.  There can be little doubt this right was being trampled before sequestration; there can be zero doubt now that this is now occurring.

But a closer look reveals the cynicism of the sequester: because public defenders are being furloughed, the federal government is actually paying more money for worse representation for poor criminals.  Can there be any question that this is a feature, and not a bug?  Does the American ruling class really find this a convincing argument:

Poor people accused of federal crimes are more likely to go to prison because of the sequester, and we need to help them get adequate legal representation.

or would they rather that poor people suffer from incompetent representation?  That legislators are willing to pay money to ensure worse representation shows that worsening public representation is a pleasant surprise of sequestration, and not an unfortunate casualty.  Constitutional rights are to be protected, but only for the rich.  Remember, we imprison people at a higher rate than the world's autocratic dictatorships:

Sequestration persists because it only affects the bottom tier of American welfare

Image: Beneficiaries of the bottom tier of the American welfare system (source)

Updated below

Over at Wonkblog, Brad Plumer has a very instructive round-up of Americans starting to wake up and notice the sequester.  According to survey data, an increasing minority of Americans are feeling the sequester's impact.  Some are even feeling a "major impact."

While his round-up is based on media reports and should not be considered a complete summary of everyone affected by the sequester, the examples he has unearthed are extremely telling.  Watch how, in every case he cites, the sequester only affects a small group of politically underrepresented Americans--that is, it only affects the bottom tier of America's two-tiered welfare system.  That is why the sequester will persist--not because its effects aren't bad, but because it only affects groups lacking in political influence.  If anyone doubts that fact, note that Plumer starts by pointing out that cuts to air traffic controllers were quickly reversed.  Obviously, a cut that inconveniences air travelers is a cut that affects the rich but not the poor.  Obviously, our political system cannot permit such a cut, and it was quickly reversed.  At the end, he also notes that cuts to meat inspections have been reversed; any cut that could potentially kill rich people (or at least give them diarrhea) can obviously not be permitted, either.  That it also benefits poor people is incidental to it helping the rich.

Here are the examples cited: