How does the U.S. stack up?
The past week has seen countless memes mocking the inadequacy of the federal government’s COVID relief efforts, insisting that the stimulus bill currently under consideration is “only $600.” As many others have pointed out, the $600 in direct payments to most Americans represents $166 billion of the $900 billion stimulus, or less than one-fifth of the total. At the same time, Congress is in the process of passing a (separate) $1.4 trillion omnibus spending bill, which will include many forms of COVID-related assistance.
Among a variety of other spending provisions, these bills include $120 billion in additional unemployment assistance; $325 billion in loans to small businesses; a 15 percent increase in SNAP benefits; $25 billion in additional rental assistance; $20 billion in vaccine purchases; and $22 billion to assist states with COVID testing. This will bring the total federal response to the pandemic to around $4 trillion.
That’s a massive number. In fact, as Felix Salmon explains, if the $900 billion COVID relief bill that’s on the table gets enacted (assuming $600 checks to most households, not the $2000 that are currently being debated), we’ll have spent more per capita on COVID relief in the past nine months in inflation-adjusted dollars than the entire New Deal. (Actually, we’ll have spent around than $2,000 more per person in inflation-adjusted dollars than the entire New Deal.)
The enormity of these expenditures is likely to put us well ahead of many other industrialized countries in terms of our total public social expenditures. But how do we compare to other countries during “normal” times? As a friend recently put it:
I’d be interested to see how much money was provided to citizens in European countries, via various methods of Welfare etc, that wouldn’t be included in COVID 19 spending. Bearing in mind that most European nations already have in place significant welfare support.
To answer this question, we can draw on OECD data on social expenditures. Although some data exist for 2018 and 2019, the most recent complete year for many countries is 2017, so we’ll use on that.
As the OECD defines it, a social expenditure is:
[Any] cash benefits, direct in-kind provision of goods and services, and tax breaks with social purposes. Benefits may be targeted at low-income households, the elderly, disabled, sick, unemployed, or young persons. To be considered “social”, programmes have to involve either redistribution of resources across households or compulsory participation. Social benefits are classified as public when general government (that is central, state, and local governments, including social security funds) controls the relevant financial flows. All social benefits not provided by general government are considered private. Private transfers between households are not considered as “social” and not included.
. . . [T]he three biggest categories of social transfers are pensions (on average 8% of GDP), health (6%) and income transfers to the working-age population (5%).
Based on this broad definition of social expenditures, the U.S. spends less than many other industrialized countries in terms of public social expenditures, but not by as much as some expect. When considering the public social expenditure across all categories (or “branches”)— including family, health, housing, retirement, unemployment, and other social policies — the U.S. ultimately spends more as a percentage of GDP than Australia, Canada, Ireland, and several other major industrialized countries.
Moreover, if we look at the total social expenditure — not just the public portion — the U.S. is toward the top of the pack in relation to other industrialized countries.
In the U.S., this is largely the result of private spending on health insurance, much of it driven by “mandatory private social expenditures” as a result of the Affordable Care Act’s insurance mandate.
So, how do we ultimately stack up? It’s hard to give a definite answer, but in short: Probably a lot better than most progressives believe. There are enormous gaps in our social welfare system. But much of that could be fixed by loosening eligibility criteria and making enrollment into various social welfare programs automatic, based on income and other criteria.
That will be the subject of my next post.
