Jacob Funk Kirkegaard is a senior fellow at the Peterson Institute for International Economics, the author of "The Accelerating Decline in America's High-Skilled Workforce: Implications for Immigration Policy" and co-author of "Transforming the European Economy."

Scandinavian countries are rightly proud of their comprehensive welfare states, which generally propel them, in a fiscally sustainable manner, toward the top of global human development, anti-corruption, happiness, inequality and other social progress rankings.

But their social models are not easy to replicate.

Much U.S. spending is hidden in the tax code, where it disproportionally benefits higher income groups.

In the early 20th century, Scandinavian states relied on their countries’ ethnic and cultural homogeneity to establish a government social safety net that drew from the income of the more affluent. The affluent did not resist because they were benefiting individuals quite similar to themselves.

Establishing the same redistributive system would be very difficult in today’s Scandinavia, where, on average, the foreign-born population is close to 13 percent, which is comparable to the United States. It is no surprise that in the historically far more heterogeneous United States, Scandinavian welfare state institutions have proven politically impossible to create.

Yet Scandinavian governments do not spend much more than the United States when you consider the hidden expenditures of the U.S. tax code.

By conventional measures, the U.S. ranks significantly below average among industrialized countries for public social spending. But when the many complex tax deductions that have accumulated over the years are added in, true American public spending on social issues eclipses Norway, and is no longer so far behind Denmark.

The big difference is the distribution of that spending. The U.S. tax code benefits those who understand it. That usually excludes those of lower income, who often don't earn or have enough money to qualify for many of the tax breaks that benefit those of higher incomes, like the mortgage interest deduction. Scandinavian welfare states, on the other hand, do not offer many tax breaks toward social purposes, but they achieve lower levels of inequality from overt social spending.

The debate in the United States about whether to “be more like Denmark or not” should therefore not focus on whether to substantially increase spending. Instead, the political battle should be about how, and to whose benefit, the United States allocates its current true volume of social spending — which is already at Scandinavian levels.



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