Obama and the Welfare State: A Reality Check

On his Fox News show Thursday night, Sean Hannity interviewed Stanley Kurtz of the Ethics and Public Policy Institute on a new revelation regarding President Obama’s political history. According to Kurtz in a piece in the National Review Online, Obama joined the so called New Party in 1996. This party, which does not appear to exist anymore, was in Kurtz’s words “a leftist third party controlled in Chicago by ACORN”. Its policy agenda was focused on creating a Scandinavian welfare state in America:

The New Party’s aim was to transform the United States into a European-style welfare state, with the program of Scandinavia’s social democratic parties serving as a model. Mitt Romney has already identified this as the goal of Obama’s presidency, and the story of Obama’s New Party days lends credence to Romney’s claim. So while Romney was running Bain Capital, Obama joined a leftist third party controlled by ACORN and dedicated to turning the United States into a massive, European-style welfare state.

It is indeed important that we are once again reminded of the president’s rigidly radical beliefs in big government. It is also important that we are given yet another reason to learn about the dangers of the welfare state.

At the same time, let’s not exaggerate the practical meaning of the differences between the welfare states in Scandinavia and the American version. In both places the welfare state redistributes money and services between individuals on a permanent basis. More specifically, in both Scandinavia and America, government…

  • …is de facto the single payer for children’s education through a public school system (with a limited charter-school system in Sweden);
  • …has effectively seized monopoly on providing poverty relief, thus marginalizing and significantly reducing the importance of privately funded charity;
  • …redistributes income through a highly progressive personal income tax system, with America’s personal federal income tax being even more progressive than the Swedish and Danish counterparts;
  • …runs a tax-paid pension system that the vast majority of people rely on for their retirement.

There are differences, of course. America does not yet have a single-payer health care system, which we should be very grateful for. If the federal government continues to implement Obamacare according to the plan in the Affordable Care Act, we will eventually end up there. This should not surprise anyone, since single-payer health care is the crown jewel of the welfare state. But it is also important to recognize, again, that we still have a semi-private model and thus the opportunity to contain the damage done by the welfare state to our economy and our society.

Another difference is the lack of a general income security system in America. The Scandinavian countries have created programs where people get income replacement checks from government for being home with a newborn baby, being home with a sick child, taking care of a sick relative and being too sick to go to work. These income security programs are unknown to Americans, whose only encounter with income security – in addition to poverty relief – is the unemployment insurance system. Democrats in Congress have been trying to craete a general income security system, so far to no avail. It is interesting that even when they controlled both Congress and the White House they did not dare venture into this territory, but it is entirely possible that they will do so if Obama gets re-elected.

In fiscal terms, the American welfare state is surprisingly large compared to the Scandinavian ones. The reason is on the spending side: primarily Sweden has been cutting away at its tax-funded entitlement programs for many years now, while maintaining or even raising taxes. America on the other hand has been growing welfare-state spending within existing programs. As a result, there is a relatively big institutional gap in terms of what programs the American welfare state offers compared to its Scandinavian counterparts,but not a very big difference in terms of what government spends.

In short, the Scandinavian welfare states are stingier than the American one. There are a number of reasons for this, none of them particularly good, but they do make it seem as though America still has a long way to go before we become Scandimerica. In reality, the differences are much more moderate than they look on paper. As I explained in my book Remaking America: Welcome to the Dark Side of the Welfare State, there are enough similarities between the Scandinavian and the American welfare states to put us within striking distance of the same economic and social disaster that, e.g., Sweden and Denmark have experienced. Those two countries have had very bad episodes of austerity, where government has cut spending and raised or maintained high taxes.

A detailed explanation of the similarities between the American and Scandinavian welfare states requires a fair amount of time and space. I am hoping to deliver a paper on that later in the summer. Until then, let’s acknowledge Stanley Kurtz’s findings regarding Obama’s radical political affiliations, but let’s also keep in mind that America was already close to copying Scandinavia before Obama won in 2008. The damage he could do if re-elected would be real and painful, but most of the job has already been done by statists and compassionate conservatives over the decades since Franklin D Roosevelt came into office.