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."
I threw out inefficient spending as a potential cause of disparate outcomes, but in my mind, that should really be an explanation of last resort. Negativity bias and different cultural factors tend to be better explainers, and even when inefficiency is the best explanation, it’s not always clear that there is more inefficiency than would be expected in as massive of an organization as the US federal government.
Even some of the most efficient private companies in the world still have massive inefficiencies just due to their sheer size and complexity. The key is that these large companies are still more efficient than the alternative - dozens of smaller companies producing the same output that the larger company does. I think the same is generally true of the federal government. There are certainly individual cases of excess, but I tend to think it’s not as systemic as most people make it out to be, and that most disparate outcomes are really a result of negativity bias, cultural factors, or other natural factors.
Great point. Just given the different size of say the US vs. France, we should expect the US to have more examples of inefficiency in general. This is natural and shouldn't be a reason for despair.
It’s healthcare. The American system spends a lot because it’s a Frankenstein monster rather then something designed on purpose after ww2 like most of the oecd.
And no, I don’t have some easy political formula to solve that. Even trying to wholesale adopt another system wouldn’t do much overnight.
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.
I think there's an inverse relationship between size and efficiency - larger states are typically going to have more inefficiencies on an absolute basis and that shouldn't be surprising. I might look around for efficiency metrics for spending, but I'd guess those are pretty subjective and politically charged. Would be interesting to see those metrics if they exist.
While I agree with the idea of negativity bias, I don’t believe it is the primary reason for a negative viewpoint on US social spending, at least not for poor people. To really understand why people believe the US doesn’t spend enough on social services, you need to actually apply for these services offered. If you are poor enough to receive assistance from the government, you will still be living BELOW poverty level. Most people who actually need assistance do not qualify for help. Talk to social workers who spend hours per person trying to find mental health placements for people in a crisis situation, many times the people are just discharged back to the street with no help. Have a conversation with a foster care parent who has seen the horrors that children go through and many times continue to go through their whole childhood being sent back and forth to abusive and neglectful homes.
Talk to ex-convicts leaving prison only to wind up homeless or to return to crime to support themselves and their families.
Talk to single and two income families who can’t afford the health insurance offered even with the assistance the government gives them. If they do choose to get the health coverage, it will not pay for anything, except some healthy preventative initiatives that were put into place, until you have met thousands of dollars deductibles.
I understand this framing but I disagree with the premise. Social spending shouldn’t be viewed in pure dollar terms since richer countries have higher costs for lager and goods. Instead, we should look at spending as a percent of GDP. There’s precedent for this too. NATO’s goal for its members’ military budget is 3% of GDP rather than an absolute dollar value.
With this metric, it’s clear that US spending was under the OECD average in 2019. There was a jump in 2020 and 2021 from 18.3% => 24% => 22.7%. But that can be attributed almost entirely to the temporary unemployment insurance and cash payments to households offered during COVID.
The 2019 level was 14.6 percent, jumping to 20% in 2020 and slightly falling to 19.6% in 2021. However, those benefits all expired in 2022, so I’ll be on the lookout for the new GDP percentage when that becomes available.
The last point is that the brunt of our social spending is shifted to the balance sheet of households. The US has the second highest private social spending outlay in the OECD as a percentage of GDP, sitting at over 400% of the OECD average, https://data.oecd.org/socialexp/social-spending.htm#indicator-chart. This data point alone suggests that the federal government could play more of a role in alleviating that burden and allocating these resources more effectively.
The public attitude over social spending is a symptom of a very real issue, not to be dismissed by attributing it to bias. And it should not be considered demagoguery to shine a light on it.
The difference in cost of goods is already accounted for in the data I show with PPP. The reason defense spending makes sense as a % of GDP is because defense is spent on a siloed industry completely separate from the number of people a country has. % of GDP makes sense then because richer countries should be able to afford more on defense. Social spending, however, is spent on real flesh and blood individuals. It makes sense then to think about social spending on a per capita basis, not as a % of GDP. If a country is richer (as the US is) then it would make sense that it would spend less of its total share of GDP on social spending, while still spending just as much or more on each individual. Since individuals are the ones receiving social spending, social spending per individual is the better metric here.
The data I showed is also only public sources of funding, so our massive private social spending is just extra. Per capita public spending is the right way to look at this issue. If it's the case that we are doing better than most, then it is in fact demagoguery preying on negativity bias to claim we need to be doing drastically more or to claim we need to overthrow the liberal democratic order that got us here.
Social spending is mostly in the form of services provided by individuals. I’m not sure GDP % is so off, though it could be for certain oddball economies (tax havens, petro states).
Adding to this after finding a the 2022/23 CBO report, our public social spending as a percentage of GDP fell in both years. From 22.7% in FY21 to 20.1% in FY22 and is sitting at 17.3% in FY23. We’ve already fallen below pre COVID spending levels
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."
I threw out inefficient spending as a potential cause of disparate outcomes, but in my mind, that should really be an explanation of last resort. Negativity bias and different cultural factors tend to be better explainers, and even when inefficiency is the best explanation, it’s not always clear that there is more inefficiency than would be expected in as massive of an organization as the US federal government.
Even some of the most efficient private companies in the world still have massive inefficiencies just due to their sheer size and complexity. The key is that these large companies are still more efficient than the alternative - dozens of smaller companies producing the same output that the larger company does. I think the same is generally true of the federal government. There are certainly individual cases of excess, but I tend to think it’s not as systemic as most people make it out to be, and that most disparate outcomes are really a result of negativity bias, cultural factors, or other natural factors.
It could also be the layer of state complexity added onto Federal. Most European countries are similar in size to American states.
Great point. Just given the different size of say the US vs. France, we should expect the US to have more examples of inefficiency in general. This is natural and shouldn't be a reason for despair.
It’s healthcare. The American system spends a lot because it’s a Frankenstein monster rather then something designed on purpose after ww2 like most of the oecd.
And no, I don’t have some easy political formula to solve that. Even trying to wholesale adopt another system wouldn’t do much overnight.
Education also has a lot of waste.
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.
I think there's an inverse relationship between size and efficiency - larger states are typically going to have more inefficiencies on an absolute basis and that shouldn't be surprising. I might look around for efficiency metrics for spending, but I'd guess those are pretty subjective and politically charged. Would be interesting to see those metrics if they exist.
While I agree with the idea of negativity bias, I don’t believe it is the primary reason for a negative viewpoint on US social spending, at least not for poor people. To really understand why people believe the US doesn’t spend enough on social services, you need to actually apply for these services offered. If you are poor enough to receive assistance from the government, you will still be living BELOW poverty level. Most people who actually need assistance do not qualify for help. Talk to social workers who spend hours per person trying to find mental health placements for people in a crisis situation, many times the people are just discharged back to the street with no help. Have a conversation with a foster care parent who has seen the horrors that children go through and many times continue to go through their whole childhood being sent back and forth to abusive and neglectful homes.
Talk to ex-convicts leaving prison only to wind up homeless or to return to crime to support themselves and their families.
Talk to single and two income families who can’t afford the health insurance offered even with the assistance the government gives them. If they do choose to get the health coverage, it will not pay for anything, except some healthy preventative initiatives that were put into place, until you have met thousands of dollars deductibles.
The list goes on and on. Poor people know.
I understand this framing but I disagree with the premise. Social spending shouldn’t be viewed in pure dollar terms since richer countries have higher costs for lager and goods. Instead, we should look at spending as a percent of GDP. There’s precedent for this too. NATO’s goal for its members’ military budget is 3% of GDP rather than an absolute dollar value.
Social Spending Per Capita: https://data.oecd.org/socialexp/social-spending.htm#indicator-chart
Social Spending % GDP: https://data.oecd.org/socialexp/social-spending.htm#indicator-chart
With this metric, it’s clear that US spending was under the OECD average in 2019. There was a jump in 2020 and 2021 from 18.3% => 24% => 22.7%. But that can be attributed almost entirely to the temporary unemployment insurance and cash payments to households offered during COVID.
Benefits to Households: https://data.oecd.org/socialexp/social-benefits-to-households.htm#indicator-chart
The 2019 level was 14.6 percent, jumping to 20% in 2020 and slightly falling to 19.6% in 2021. However, those benefits all expired in 2022, so I’ll be on the lookout for the new GDP percentage when that becomes available.
The last point is that the brunt of our social spending is shifted to the balance sheet of households. The US has the second highest private social spending outlay in the OECD as a percentage of GDP, sitting at over 400% of the OECD average, https://data.oecd.org/socialexp/social-spending.htm#indicator-chart. This data point alone suggests that the federal government could play more of a role in alleviating that burden and allocating these resources more effectively.
The public attitude over social spending is a symptom of a very real issue, not to be dismissed by attributing it to bias. And it should not be considered demagoguery to shine a light on it.
The difference in cost of goods is already accounted for in the data I show with PPP. The reason defense spending makes sense as a % of GDP is because defense is spent on a siloed industry completely separate from the number of people a country has. % of GDP makes sense then because richer countries should be able to afford more on defense. Social spending, however, is spent on real flesh and blood individuals. It makes sense then to think about social spending on a per capita basis, not as a % of GDP. If a country is richer (as the US is) then it would make sense that it would spend less of its total share of GDP on social spending, while still spending just as much or more on each individual. Since individuals are the ones receiving social spending, social spending per individual is the better metric here.
The data I showed is also only public sources of funding, so our massive private social spending is just extra. Per capita public spending is the right way to look at this issue. If it's the case that we are doing better than most, then it is in fact demagoguery preying on negativity bias to claim we need to be doing drastically more or to claim we need to overthrow the liberal democratic order that got us here.
Social spending is mostly in the form of services provided by individuals. I’m not sure GDP % is so off, though it could be for certain oddball economies (tax havens, petro states).
Adding to this after finding a the 2022/23 CBO report, our public social spending as a percentage of GDP fell in both years. From 22.7% in FY21 to 20.1% in FY22 and is sitting at 17.3% in FY23. We’ve already fallen below pre COVID spending levels
https://www.cbo.gov/publication/58888
https://www.cbo.gov/publication/59727