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The Proposed Expansion of the United States Social System Won’t Increase Government

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Ben Tafoya
June 5, 2021

Several years ago, these periodic articles began with a reflection on the proper size of government. Those pieces concluded that the issue wasn’t size, but rather what society feels should be done by government, and also how government should use that to set priorities for services, spending and taxation. As we look toward a significant increase in the scope of what government finances, this issue bears re-examination. What has informed this work is the observation that one of the fundamental flaws in our political system is the vastly unequal distribution of benefits from our economy. We fail to adequately rectify these problems due to excessive reliance on the private sector for services.

On April 28th President Biden announced the proposed, “American Families Plan” which if enacted, would expand the US’s social insurance and domestic policy expenditures. Currently the United States has a significant gap between what it spends on social expenditure and that of the rest of the world’s advanced economies. According to statistics from the Organization for Economic Cooperation and Development (OECD) the United States spends less for public provision of social services as a percentage of Gross Domestic Product (GDP) than the average OECD member (18.2% versus 19.9%). Yet in the United States a high percentage of such social expenditures come through the private sector, particularly for health. Factoring in the use of private sector sources, the United States ranks quite high in the OECD for social expenditures as a percentage of GDP because of the large private sector contributions in health and pensions.

In fact, the statistics show that public expenditure on income support and non-health related social services is quite low in the United States compared to other high-income nations. Public provision of these services in the United Staes represents just 2.7% of GDP while in nations such as Germany, the United Kingdom and France the range is between 6% and 8% and in the Scandinavian countries over 10%. The OECD analysis includes the wise point that, “[M]ore social spending through private agencies and fiscal arrangements does not necessarily mean more redistribution and social solidarity.” The heavy reliance on the private sector to fund and provide social services results in serious market and government failure indicated by the high numbers of people without health insurance and the relatively low usage of social services such as childcare.

In the plan released by the Biden Administration there will be expansion of expenditures on social and education services to support the goal of growing the middle class and more equitably allocating the benefits of economic growth in the economy. Among the provisions are:

  • Expansion of early education through support for “universal” pre-school.
    • Growth in access to higher education by making community college tuition free, adding support for students attending Historically Black and Tribal Colleges and Universities and increase PELL grants to those eligible.
    • Extension and enhancement of family-oriented tax provisions such as Child Tax Credit, Earned Income Tax Credit and Child and Dependent Care Tax Credit.
    • Investment in teacher and educational leader training.
    • Higher wages for early education teachers and childcare providers.
    • A national paid family and medical leave program.

Some of these provisions build on previous proposals or extend the life of actions through the already enacted Recovery Act or the proposed American Jobs plan. Other proposals are new, but some require participation by the states to fund and enact. For example, the pre-school and community college expansions require a level of state participation that changes over time and may lead to low level of service enhancement.

Consistency with past practice provision of the services comes through the private sector or state and local government. For example, the support for childcare comes in the form of tax credits which are based on the out-of-pocket expenditures of families for care. In the United States a high percentage of childcare comes through private providers and not government employees. We do not depend on the market to allocate K-12 education but do use it for childcare and early learning.

It should be noted that with a ten-year projected cost of $1.8 trillion the plan increases social spending by less than 1% of GDP per year, keeping the United States well below the norm for other economically advanced countries. The reliance on private finance of healthcare services makes the United States the highest nation for reliance on private provision of social services among the OECD. The proposals from the Biden Administration do not include a recommendation for expansion of public provision of health insurance, though the idea has been endorsed by the President and many members of Congress.

The proposals do increase social expenditures in the United States. They will expand availability of childcare, education and income support to families of modest means, particularly in the states which rise to the challenge. While the government is assuming more of the financial responsibility for social services, this proposal does not significantly increase public employment to expand these services. That portion of structural change to the United States system is still in the future.

Author: Ben Tafoya is an adjunct faculty member at Northeastern University where he earned his doctorate. Ben is the author of a chapter on social equity and public administration in the recently published volume from Birkdale, Public Affairs Practicum. He can be reached at [email protected] or Twitter as @policyben.

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