The True Levels of Government and Social Expenditures in Advanced Economies

Policy Brief
15-4
March 2015

Conventional wisdom holds that the United States lags behind many other advanced countries in its spending on social, health, and welfare programs. In this Policy Brief, Jacob Kirkegaard argues that conventional wisdom is faulty, in that it overlooks the role of tax systems and private spending in delivering social programs in different societies. Taking the full effects of tax systems and spending by private and public sources into account, Kirkegaard finds that the true level of US social expenditures is fully comparable to European spending—and yet yields worse outcomes than in Europe. High aggregate social spending in the United States has a very low impact on overall income inequality and healthcare outcomes, for example. The Policy Brief also concludes that the United States relies excessively on tax subsidization to the detriment of fiscal sustainability, transparency, and redistributive fairness.

Data disclosure: The data underlying the figures in this analysis are available here [xlsx].