Wednesday, March 08, 2006

Euro "compassion" v. American "greed"

Fascinating article in the highly recommended Brussels Journal. The article originally appeared Sunday's Washington Times. The article claims that government spending per citizen in the US is actually about the same as in some of Europe's more notorious welfare states:

Last year the governments of the United States, Germany, France and Italy each spent a little less than $15,000 for each of their citizens (as measured on the basis of current-dollar purchasing-power parity). Each country financed government spending through a combination of taxes, fees and borrowing. (The deficits as a percent of gross domestic product (GDP) were: France 3.2, Germany 3.9, Italy 4.3, and the U.S. at 3.7.)

The article notes, however, that our spending is much less as a percentage of the US economy than is the spending of the German, French and Italian governments as a percentage of their economies. As the share of gross domestic product devoted to the government in these countries has increased, growth has diminished and each has become progressively less wealthy than the US:

Up to the early 1980s, European countries were growing faster than the U.S., but as expected their economic growth slowed sharply as taxes increased. In 1980, citizens of France, Germany and Italy had about 80 percent of the real purchasing power of their American cousins, but that has now fallen to about 70 percent. If present trends continue, with the American economy growing on average 2 percent faster per year than France, Germany and Italy, the average American will have twice the real purchasing power of his or her counterpart in France, Germany, and Italy in 20 years.

Paradoxically, over time the supposedly stronger commitment of these nations to social justice will result in less ability of their governments to provide for social needs:

Assuming the European governments continue to spend 51 percent of their GDP and grow at the same rate as they have for the last few years, in 2025, they will spend approximately $22,000 per citizen (in today’s dollars).

If the American economy continues growing 2 percent faster yearly than the Europeans, and if the U.S. government continues spending 36 percent of gross national product, actual government expenditures would average about $31,000 per person (or double that of today).


I don't think Christian conservatives can be indifferent to the lot of the poor, but liberals who care about equality and "compassion" can't afford to ignore the real world impact of their policies.

These numbers don't conclusively resolve questions about the optimal level of taxation, but they certainly are provocative

As this article asked, would you rather have half of a one pound pie or 1/3 of a two pound pie. Do the math. If you're not on a diet, the answer is clear.

3 comments:

helmut said...

Probably the euro welfare states are unsustainable over the long run, given their demographic trends, global competition, and their inability to integrate immigrants well.

But the Shepherd would probably advise you to adopt a more chastened view of America's success. America's average per capita income (GDP ppp) conceals a much larger degree of income inequality than is the case in the advanced European economies. Their distribution of income tends to be significantly more compact. As a result, poverty hits the poor harder here than there. People in Mequon tend to forget that.

Compare, for example, infant mortality rates here and there. For such a rich country, ours is scandalous. Note, also, that the IMR is higher in the red states, land of the Christian conservatives--who talk the talk of compassion but don't walk the walk when it comes to public policy.

And some euro cases beat us in virtually every indicator, including GDP per capita. Take a look at Norway.

Rick Esenberg said...

Helmut

The point I am making is that the degree of income inequality (which I agree is less pronounced in Europe) is not the end all and the be all.

I agree that some people in Mequon do forget a lot of important things. I'm trying not to.

Dad29 said...

For the last 10 years I have said that the level of taxation, in combination with the cost of regulatory compliance in the USA, has increasingly eaten into disposable income which could/should be sent to charities.

We could agree that the 'cost of living' in the USA has also been artificially pumped up by materialism; simply compare the size of a typical 1940's bungalow closet to the size of a typical 1990's closet...

But materialism is less and less affordable, too, as the costs-with-guns-to-enforce-them (tax/reg) continue to crawl upward.