Sophia Paslaski: Hard Data About Social Programs And Inequality

| Educate!

Above Photo: Glenn Halog/Flickr

A recent column headlined “Liberalism and the Democratic Party are dying” (Monitor Opinion, Oct. 12) makes several assertions, but I’d like to address just one.

The column suggests that the poor of the U.S. are “poor because the innumerable government social programs brought by liberals have widened the gap between rich and poor. For black and white poor, laws and regulations have made life harder and more costly.” No data is provided to support this claim, which is unsurprising – there is none.

There is plenty, however, to support the assertion that increased government spending on social programs actually closes the gap between rich and poor. The studies that show this are far more “innumerable” than our government social programs; however, one needs only to look at the latest data from the Organization for Economic Cooperation and Development (OECD) to get the gist.

There are two key concepts you’ll need to know here: first, the Gini coefficient. The Gini coefficient is an index calculated to rate the level of equality (or lack thereof) in a given country. It is represented as a number between 0 and 1, with 0 reflecting complete and total equality (i.e. every citizen’s wealth and income is exactly equal), and 1, complete and total inequality (i.e. all wealth and income goes to one person only). In other words, the Gini is a sort of shorthand for the distribution of wealth and income over different groups of earners.

The second key concept is public social expenditure as a percent of Gross Domestic Product (GDP). You know GDP – in short, it’s the net monetary value of how much a country produces. Public social expenditure as a percent of GDP is a measure meant to reflect how much of that production is spent on those aforementioned “innumerable” government social programs, like Medicare and Medicaid, or Social Security.

So where does the U.S. rank? Famously, our inequality is high while our public social spending is low. The U.S. Gini coefficient, according to the latest OECD data, is 0.39, which sounds okay until you hear that nearly all of our peer OECD member countries have lower Gini coefficients than us. We are surpassed only by Turkey (0.40), Chile (0.45), and Mexico (0.46). Far below us are those Scandinavian spenders whose social programs are inexplicably terrifying to many Americans: Sweden comes in at 0.28, Norway at 0.27, and both Denmark and Finland at 0.26.

And how much do we all spend on public social programs as a percent of our GDPs? The U.S. spends 19.3 percent, placing it at the lower end of the OECD spectrum, though ahead of Turkey at 13.5 percent and Chile at 11.2 percent (Mexico is not included in this OECD report). Our Scandinavian friends in Norway spend 25.1 percent, Sweden 27.1 percent, Denmark 28.7 percent and Finland 30.8 percent.

The trend, as is well-known among social policy researchers, is that higher social spending on public social programs results in greater equality and a smaller gap between the rich and poor. If our public social programs in the U.S. are keeping the poor down (which is a valid argument, if you ask me), it is only because one must be in such dire straits to receive help that the underfunded and beleaguered help one gets is severely insufficient.

Now as with all rules, there are exceptions: Iceland, another chilly country with left-leaning social benefit trends, is among the lowest spenders on public social programs at 15.2 percent of GDP, yet also claims the lowest Gini coefficient of all OECD countries at 0.25. The possible reasons for this are many: It could be as simple as a difference in how Iceland and the OECD interpret the definition of “social spending” and what falls under that umbrella. It could also relate to Iceland’s GDP: Measures of social spending in Greece, for example, often over-imply how much is actually being spent because Greece’s GDP is still so slight in the wake of the 2008 financial crisis that any expenditure at all accounts for a large proportion of the country’s total production. And, of course, Iceland is a little country with a population just over half that of Vermont that enjoys first-world economic comfort nonetheless; it could be that, in the reverse of Greece, Iceland’s GDP is large enough that their social spending is comparatively low. Whatever the story, the general trend in the data remains.

As a final aside, it is worth nothing that the U.S. dominates all other OECD countries in private social expenditure at 11.4 percent of GDP to the next highest spender’s 7.8 percent (the Netherlands). The reason for this is no secret, even among Americans: The U.S. spends exponentially more out of our own pockets on health care than any of our peer countries thanks to our complex and extremely privatized system.

Safe to say liberals are not, as the Oct. 12, column suggests, “grasping at straws” for a reason to be angry.