Why Doesn't the US Invest in Social Spending?
Spoiler: We do
A common pessimistic narrative about the United States is that it refuses to invest in social spending for its population, instead focusing on aggressive military spending or tax cuts for the rich.
The data does not bear this criticism out.
The graph below uses data from the OECD Social Expenditure Database. As it turns out, the United States spends 43% more on public social spending per capita than the OECD average. The US also spends 36% more than the UK and 32% more than Canada.
Other countries that the US comfortably outspends include Iceland, Portugal, the Netherlands, Japan, New Zealand, and Australia. The U.S. spends similar amounts on social spending as Germany, Ireland, Sweden, Italy, and Switzerland.
Out of the five much-celebrated Nordic social democracies of Norway, Sweden, Finland, Denmark and Iceland, the US actually outspends two of them – Sweden and Iceland.
The data shown is for 2021, which is the latest data available for the US. All other countries shown reflect 2021 data or the latest available. The data shown is only for public sources of funding, although the database tracks both public and private social spending. “Social spending” is defined as benefits and financial contributions targeted at households and individuals in order to provide support during circumstances which adversely affect their welfare. These benefits include cash benefits (pensions, income support during maternity leave, social assistance payments, etc.), social services (childcare, care for the elderly or disabled), and tax breaks with a social purpose.
Finally, the data is shown on a per capita basis, which is different than the % of GDP basis that this data is typically shown on. Social spending matters in terms of absolute dollars spent, not a percentage of GDP. The US has a much larger GDP per capita than most other countries, so any % of GDP graphic would show the US performing relatively worse than they really are.
US Federal Spending
For all the talk about spending on foreign wars and special interests, it’s worth remembering that >60% of the annual US budget goes towards social spending, with most of that spend going towards Social Security, Medicare, and Medicaid. Defense spending makes up just ~13% of the US federal budget.
What the Bernie tweet at the top of the article fails to mention is that the US already covers the healthcare of more than 40% of Americans through Medicare and Medicaid, and that this spending is almost twice as much as we spend on defense.
Is This Just the Result of Covid?
One potential response is that this spending is just the result of Covid. The graph below shows that although the US did receive a relative Covid bump, the US has spent more on social spending per capita than Iceland, Canada, the UK, and the OECD average, amongst others, going back all the way to 2010. This trend is not just a result of Covid.
What Drives the Negative Narrative?
If any of this is surprising to you, you might be falling victim to negativity bias. Negative narratives about how little the US spends on its population compared to the enlightened Europeans are extremely common. These narratives aren’t correct, but due to negativity bias, they stubbornly persist.
These negative narratives typically stem from an observation about social spending outcomes. To the extent social spending outcomes aren’t as good in the US as they are in Europe, we should blame inefficient spending or any number of different cultural factors.
Blaming the federal government for refusing to spend in the first place is a baseless claim, but these types of claims fuel the populist and illiberal voices that claim the “system is rigged”. The system is not rigged, and in fact, the US system is spending more on social spending per capita than just about every other country in the world.
This is just one of countless examples of how negativity bias gives unjustified oxygen to overly pessimistic political talking points that aren’t supported by data. Stats and data can be somewhat helpful in limiting these narratives (although not that helpful), but to resist the full breadth of overly pessimistic narratives, we need a better understanding of negativity bias and the fuel that it provides for unjustified pessimism.
TL;DR
The US spends 43% more on public social spending per capita than the OECD average
The US spends 36% more on social spending per capita than the UK and 32% more than Canada
Other countries that the US comfortably outspends include Iceland, Portugal, the Netherlands, Japan, New Zealand, and Australia
The U.S. spends similar amounts on social spending as Germany, Ireland, Sweden, Italy, and Switzerland
Out of the five much-celebrated Nordic social democracies of Norway, Sweden, Finland, Denmark and Iceland, the US outspends two of them – Sweden and Iceland
Only 13% of the federal budget goes towards defense spending, compared to >60% on social spending
Negativity bias is the key enabler of pessimistic narratives about US social spending
Very nice piece Travis. This data surprises me a little, but not a lot. It does suggest that the US social spending is less efficient and perhaps, if I am not taking too large a leap, may validate my thesis here: https://www.lianeon.org/p/democracys-final-days
"Institutional rot has led to a government where functions appear increasingly detached from reality and common sense. The Pentagon, for example, is required by Congress to publish over 500 (often duplicative) reports every year. Yet, as of 2023, it has consistently failed audits and fully half of its assets cannot be accounted for. Francis Fukuyama notes that Congress has created 51 separate programs for worker retraining, 82 to improve teacher quality, and dozens of anti-poverty programs with benefits “cliffs” that perversely trap and keep its recipient’s poor."
Another amazing article! I actually had no idea that on a per capita basis we were up there with the best of them. I feel like historically Canada has gotten such a good wrap for their social programs while the US gets the quite opposite. Take that Canada!
I personally think we may overspend on some social programs and that leads me to a question: Do you think the spending is being optimized better in other countries?/Do you think its pretty equally optimized/spent in most of the democratic countries on that list.