The Unsustainability of the Welfare State

Nice piece in the WaPo by Robert Samuelson on the similarities between Europe's and America's financial crises. On both continents mid-Twentieth Century regimes embarked upon a vast expansion of the welfare state that, while politically popular was ultimately economically unsustainable. He writes:

The numbers — to those who don’t know them — are astonishing. In 1870, all government spending was 7.3 percent of national income in the United States, 9.4 percent in Britain, 10 percent in Germany and 12.6 percent in France. By 2007, the figures were 36.6 percent for the United States, 44.6 percent for Britain, 43.9 percent for Germany and 52.6 percent for France. Military costs once dominated budgets; now, social spending does. 

....



The modern welfare state has reached a historic reckoning. As a political institution, it hasn’t adapted to change. Politics and economics are at loggerheads. Vast populations in Europe and America expect promised benefits and, understandably, resent any hint that they will be cut. Elected politicians respond accordingly. But the resulting inertia poses an economic threat, one already realized in Europe. As deficits or taxes rise, the risk is that economic instability will increase, growth will decline, or both. Paying promised benefits becomes harder. Or austerity becomes unavoidable.

The paradox is that the welfare state, designed to improve security and dampen social conflict, now looms as an engine for insecurity, conflict and disappointment.

Read the whole thing here.