The public places lots of scrutiny on the services that the government delivers to poor people: Witness the recent outrage over welfare recipients eating steak, visiting swimming pools, and driving a Mercedes while receiving public funds. But a new study argues that the real waste in the American system comes not from welfare programs like food stamps, but from widespread tax breaks that subsidize spending on things like health care and housing.
Jacob Funk Kirkegaard, a senior fellow at the non-partisan Peterson Institute for International Economics, argues in a new report that once you take these kinds of tax breaks into account, the U.S. actually devotes far more resources than many other countries to “social spending” — spending on pensions, health care, family support, unemployment, housing assistance, and similar benefits meant to help people out in hard times. And, compared with most advanced countries, the U.S. gets far less bang for its buck in terms of health outcomes and equality.
As the chart below shows, the U.S. government spends only about 19 percent of GDP on this kind of social spending, compared with around 20-31 percent for various European countries. But even when the U.S. government lets the private sector provide certain social benefits, like health insurance, it still “pays” for it in a certain sense through tax breaks, Kirkegaard argues.