Welfare Systems of the United States and Europe - Essay Example

US and European Welfare System Greve reveals that the welfare system is a government’s concept in whichthe state performs an important role of promoting and protecting the social and economic well-being of its citizen. The welfare system is based on the equal distribution of wealth, equality of opportunity principle and public responsibility for those lacking minimal provisions to lead a good life. The term could be applied to various forms of social and economic organization. A basic feature of the state’s welfare is social insurance that intends to provide benefits in periods where there is the greatest need, for example, unemployment, illness and old age. The welfare state usually includes public provision of health services, education and housing. These kinds of provisions are less extensive in America than in most European countries where they implement comprehensive health coverage and the states commonly subsidize in university-level education. In states which have economies that are centrally planned, their welfare systems also cover consumer prices administration, as well as, employment. Most states have formed institutions that at least implement some of the measures associated with the state’s welfare. In 1948, Britain adopted in comprehensive social insurance. In the US, there are social-legislation programs that are based on principles of the state’s welfare. These programs include the Fair Deal and the New Deal. Scandinavian countries provide the state with aid for the people in almost all phases of their life. The welfare state in America is not as different from that of Europe’s welfare state as traditional wisdom would have it. The welfare state is defined as part of the state, i.e., the whole government’s apparatus at all level, and is devoted to taking charge of the public welfare, the functions of the state’s welfare including public pensions, education and health. These functions make up for 57% of overall expenditure of the US government compared to Europe’s 63%. In this sense, the welfare state of America is only 10% smaller than that of Europe’s welfare state. CATEGORY EU-10a UNITED STATES 1. Public Services 14% 14% 2.Defense 3% 11% 3. Safety and Public Order 4% 6% 4. Affairs of the economy 8% 10% 5. Environmental Protection 2% N/A 6. Community and Housing Amenities 2% 2% 7. Health 14% 21% 8. Religion, Culture & Recreation 2% 1% 9. Education 11% 17% 10. Social Protection 40% 19% 11. Expenditures of the welfare state (7+9+10) 65% 57% 12. Unweighted Welfare State Expenditure 63% 57% The above table overestimates the size of the welfare state of the US. Since the overall expenditure of the government is higher in Europe than the US, the gap in the ratio of the state welfare expenditure to GDP will be larger. The state welfare expenditure to GDP in the US is 21% compared to Europe’s 30%. The 10% gap gets amplified to 30% which is a difference in degree and not a difference in kind. Looking at the fiscal crisis, the US welfare state is 30% smaller than Europe’s welfare state. If the global tax rate gap is not much lower, i.e. 23%, the US welfare state would be expected to develop the same problems as in Europe. Most of the welfare state in America is mostly financed by deficits by increasing public debts in America and therefore by taxes in the future. In 2007, the total gross debt in the US was already close to the Europe’s average. It was 67% compared to Europe’s 72%. It was higher in Europe, i.e., taking the country’s unweighted average, 56%. By the end of 2012, America’s gross public debt was at an estimated 109% of GDP, overtaking Europe’s weighted ratio of 99%. Another important fact to understand is most of the government’s debt accumulated before the Great Recession. The debt at the end of 2010 was three-fourths in the US. The proportions are not very different from Europe’s when taking the unweighted figures, instead of weighted, for Europe. Therefore, it is misleading to present the problem of public debt caused by the Great Recession that only exacerbated a problem that already existed and only advance the day of reckoning. It is very true that since 2010, public debts continued to accumulate. Even after calculating debt at end of 2012 rather than 2010, the proportions of debt accumulated before 2008 still reached two-thirds in Europe and higher than 60% in the US. Furthermore, the public debt continuing growth is partly as a result of the feeble recovery that can be partly traced to the debt crisis. So it reasonable to assume that any incurred debt after 2010 is not the result of the Great Recession. Basically, the largest part of the public debt in both Europe and America, between two-thirds and three-fourths, was brought about by the welfare state growth before the Great Recession. Since the same causes have similar effects, it is realistic to expect a US crisis to be similar to the current developing Europe crisis. Lemieux (2013) argues the threat’s nature becomes more striking considering the increase in tax or the expenditure cuts required to just maintaining the current ratio of the federal debt to GDP at a constant. It is so when the public debt part caused by local and state governments is ignored. Focusing on the simulations of the GAO 2012 (Government Accountability Office) that is a nonpartisan agency of the congress that audits the government. The fiscal gap refers to the difference in the present value between noninterest and revenues spending over a given time horizon, here 75 years, assuming the debt remains at a constant as GDP proportions. Alesina, Glaeser, & Sacerdote (2001) state the similarities between both welfare systems of Europe and the US show that they both aim at reducing inequality, poverty and social exclusion. Both employ incentives that contribute to the improvement of standards for the entire society. Political debates on opportunities of equality allow access of education. Issues of inequality of opportunities and position have been addressed with both governments making mobility of qualifications of education significant. Both Europe and US welfare systems struggle to deal with disability dilemmas. The choice is one between an exclusion strategy viewing disabilities as an excuse from the responsibility to work and ground to deny employment or an inclusion strategy creating and expectation for people with disability to continue working and a requirement for employers to accept them. Neither welfare systems fully capture the complexity of social views in disability and work as they both do not offer a satisfying and complete response. However, both the US and Europe have dealt with the issue through various policies that frequently do not add up to a one whole. Usually, both disabled people and employers are provided with mixed signals on the expectations that the society places on them. In many cases, disabled people are encouraged to work but also told to stay at home or shunted into work setting that are segregated. Employers are both encouraged and excused from providing jobs to disabled people The European government makes an effort of largely redistributing income among their citizens than does the US government. Social programs in Europe are more generous and reach more citizens. It is because the tax systems in Europe are more progressive than in the US. Europe engages in more intrusive regulations that often mean to protect the poor. Considering political, economic and behavioral explanations to distinguish the difference the welfare systems of the US and Europe, focus is based on the skewness and variance of the pre-tax, pre-transfer distribution of pre-tax, the income volatility, taxation social costs and the expected changes in income for the median voter. As much as the differences in both systems of welfare of both states cannot be explained, the American pre-tax income contains both more skew and variance. There is no evidence proving the dead weight taxation losses are lower in Europe. However, the income volatility in Europe seems to be lower than that in the US. There is a possibility that the American middle class has a greater chance of increasing its income distribution, making the median voter more averse to redistribution. In Germany and Sweden, there is an availability of child benefits for every parent without regarding to the parent’s income. In Germany, a child gets family benefits up to the age of 18 while in Sweden, a child enjoys the benefits up to the age of 16.However, and the benefits are extended if the child pursues higher education. In contrast to the American welfare system, the child benefits do not exist. However, there are special allowances for children under Temporary Assistance for Needy Families (TANF) program. In conclusion, Alber (2010) insists that the American welfare system belongs to the Anglo-Saxon type characterized with less redistribution and generosity, minor attention to social protection, lower unemployment subsidies, new interests in private services supply, more choice for consumers, lack of allowances for the family, activation of people’s working age, lower transfers and pension and lower taxes. On the hand, Alesina, Glaeser & Sacerdote (2001) state the European welfare system belongs to the Continental welfare type characterized with higher pension and tax rates, more effective income distributions, paying large attention to public expenditure on pensions and health and exorbitant control over product markets and labor, as argued by Adema, Fron, & Ladaique (2011). Making an analysis on all the disadvantages of the American welfare systems, the country’s social indicators and practical experience of various governments, it is only fair to conclude that the European system of welfare has a better effect on the people’s living standards as a result of proper income distribution and sufficient collective protection. References ALBER, J. (2010). What the European and American welfare states have in common and where they differ: facts and fiction in comparisons of the European Social Model and the United States. Journal of European Social Policy. 20, ALESINA, ALBERTO, & GLAESER, EDWARD L. (n.d.). Why are welfare states in the US and Europe so different? http://www.cairn.info/article.php?ID_ARTICLE=HORI_002_0051. ALESINA, A., GLAESER, E., & SACERDOTE, B. (2001). Why doesnt the United States have a European-style welfare state? Economic Activity. ADEMA, W., FRON, P., & LADAIQUE, M. (2011). Is the European Welfare State Really More Expensive? Indicators on Social Spending, 1980-2012; and a Manual to the OECD Social Expenditure Database (SOCX). Paris, OECD Publishing. CORRADO, LUISA, LONDOÑO, DAVID, MENNINI, FRANCESCO, & TROVATO, GIOVANNI. (2003). "The Welfare States in a United Europe". http://aei.pitt.edu/630/. DRAGOS ADASCALITEI. (2012). Welfare State Development in Central and Eastern Europe: A State of the Art Literature Review. Tallinn University. http://www.tlu.ee/stss/wp- content/uploads/2012/11/stss_nov_2012_adascalitei.pdf. GREVE, B. (2014). Welfare and the welfare state: present and future. GWARTNEY, J, LAWSON, R & HALL, J (2012). Economic Freedom of the World: 2012 Annual Report. KOTLIKOFF, L & BURNS, S (2012) the Clash of Generations: Saving Ourselves, Our Kids, and Our Economy. LEMIEUX, P (2013). American and European Welfare States: Similar Causes, Similar Effects Read More