A far cry indeed from 'socialism'

Among developed nations, America trails the pack in taxation and redistribution of wealth

May 18, 2010|By Thomas F. Schaller

The word "socialism" has been bandied around by all sorts of critics of the current government. Whether emanating from the lips of elite politicians or grass-roots activists, the word stirs passions, even outrage.

I'm not certain how those worried about American "socialism" define the term, but it's a good guess they refer to some if not all of the following concerns: that the U.S. government is too big and becoming bigger; that the government increasingly engages in confiscatory taxation and redistributive spending; and that socialism is in general inimical to the American ideals of hard work and initiative as the keys to success.

Of course, one person's socialism is another's good government, a lesson we learned last summer when a man stood up at a town hall to warn his local congressman to keep his "government hands off my Medicare." Medicare, for the record, is the fastest-growing major federal program, with annual spending exceeding the entire budgets of all but nine countries.

But Medicare can't be the source of socialist fears. If it were, there would have been tea party rallies during the Bush era, when Medicare spending doubled from $224 billion in 2000 to $469 billion by 2008. If it were, Republican Sen. Jim DeMint, whose new book is entitled "Saving Freedom: We Can Stop America's Slide Into Socialism," wouldn't have opposed Obamacare because of its expense while also complaining, falsely, that the legislation would cut Medicare spending.

So, just how "socialist" is the U.S. government?

The answer is to some degree subjective: Some Americans surely deem any social program or any level of government social spending (that doesn't benefit them personally, that is) as "socialist." What we can measure objectively is just how big and redistributive the U.S. government is compared to other industrialized countries.

Let's start with size. In terms of taxes as a share of gross domestic product, at 28 percent America's government (state and federal) is among the smallest of the 31 first-world nations in the Organization for Economic Cooperation and Development. In fact, only Mexico, Turkey, Japan and South Korea are smaller.

Still, by dint of the size of America's economy, which accounts for more than a quarter of the world's GDP, and thus our huge budget, there must be a lot of redistribution to rob hard-working Peters to pay lazy and shiftless Pauls, right?

Not really. Ranging from zero to one, a statistical measure called the "Gini coefficient" measures the distribution of income in a society: The more evenly income is distributed across all citizens, the closer the coefficient is to zero, and vice versa.

Before government taxes and transfers, America's Gini coefficient is .46 — almost exactly the same as the average for all OECD countries (.45), and identical to that of nations as diverse as Australia, the United Kingdom and Slovakia. Portugal (.54), Italy (.56) and Poland (.57) have the least evenly distributed incomes before taxes and transfers. (As a matter of empirics I use the word "evenly" rather than "fairly," which is a normative distinction for readers to make.)

After taxes and transfers, America's Gini coefficient drops to .38, proving that our government policies are indeed redistributive. But that figure is the highest among all OECD countries, which means American policies have the least redistributive effect of any first-world country on the planet.

But whether we spend on guns or butter, Americans don't make their way by dint of government handouts anyway. They make it by hard work and pluck — or do they?

If economic success were based largely on skill and effort, there would be greater "intergenerational economic mobility," a fancy term used by economists that refers to how much a person's income can be explained by his or her parents' income. In fact, the United States features one of the lowest intergenerational mobility rates in the OECD.

In which countries are personal incomes least dependent upon parental incomes? Hold onto your cups and saucers, tea partiers, because the answer is — wait for it — those darned "socialist" countries like Denmark, Norway and Finland.

All of which helps explains why the United States is joined by Turkey and Mexico as the OECD countries with the highest poverty rates. What else would you expect from a relatively small, mildly redistributive government in a society where "who's your daddy" matters more than it does in most of the rest of the first world?

The socialism Chicken Littles should stop their squawking. In America, socialism isn't even in the neighborhood, much less lurking around the corner.

Thomas F. Schaller teaches political science at UMBC. His column appears regularly. His e-mail is schaller67@gmail.com.

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