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Home Publications Blogs Beat the Press Robert Samuelson Badly Understates the Size of the Welfare State

Robert Samuelson Badly Understates the Size of the Welfare State

Thursday, 20 September 2012 04:48

Robert Samuelson used his column today to urge Mitt Romney to make the welfare state the major issue in the presidential race. For some reason Samuelson's indictment of the welfare state missed many of the largest items.

For example, in listing the beneficiaries of government largess, Samuelson missed obvious ones like homeowners who benefit from the mortgage interest deduction, the deduction for property taxes, and the subsidy provided by government guarantees of mortgage debt. He also misses the benefit provided by the tax deduction for employer provided health insurance.

While most people may not have a sufficient understanding of the tax and budget system, Samuelson surely knows that if we give someone a $4,000 tax break by making their mortgage interest tax deductible, it is the same thing as if the government wrote them a $4,000 check as a housing subsidy. In both cases they fit the bill as "takers."

Of course the really big beneficiaries of government largess are the folks who Samuelson neglects altogether. These would be people like the top executives at the Wall Street banks who benefit from the $60 billion in too big to fail insurance that is provided at no cost by the government. He would also talk about the hundreds of billions of dollars that the government transfers to the pharmaceutical industry each year by providing patent monopolies on prescription drugs. A similar amount goes to the tech industry. Samuelson could also talk about the selective protectionism in U.S. trade policy that redistributes income from most of us to highly paid professionals like doctors and lawyers.

These highly distortionary government interventions do not feature prominently on Samuelson's list. He only seems interested in attacking government interventions that primarily benefit lower and middle class people.

Comments (10)Add Comment
What's The Difference Between a Parasite Taker and Its Host Maker?
written by Last Mover, September 20, 2012 6:30
He only seems interested in attacking government interventions that primarily benefit lower and middle class people.

In supply side austerian jargon, he seems only interested in government interventions that create parasite takers.

Those other interventions listed by Baker are obviously regarded by Samuelson like tax cuts that create more tax revenue and pay for themselves, so they create supply side makers, not demand side takers.

It's good to know that biology is among Samuelson's areas of expertise which explains how he is such a good economist as well. Any biologist knows the difference between a parasite and a host.
Doctors as Welfare Kings and Queens: it's not just trade policy restrictions that keep them rich
written by Rachel, September 20, 2012 6:52

There are many artificial restrictions on training and practice, there are many artificial subsidies in tax laws and contracts, that combine to make medical doctors much wealthier than they would be in more rational markets.

One important problem is the lack of transparency in health care. People know far too little of prices or efficacy of health care. (If you needed a coronary artery bypass, would you really prefer, ceteris paribus, th $67k American version when you could get one for $16k in France?)

Unfortunately, it seems that too few in the media and politics want people to be better informed.
written by liberal, September 20, 2012 7:07
That "government largess" is an important issue, but it's peanuts compared to the 10-20% of GDP the government forcibly redistributes to landowners.
Premise of column is wrong
written by Robert Salzberg, September 20, 2012 7:23
The entire premise of the Samuelson article is that Romney's comments about the 47% who don't currently pay federal income tax is a great opening to slash the welfare state.

The underlying premise that the welfare state needs to be slashed has little basis in reality. The social safety net in America is spartan compared with the rest of the industrialized world. America needs to repair and strengthen the social safety net not slash it.

deduction vs credit
written by tom, September 20, 2012 7:33
I thought a tax deduction of $4000 would be like writing a check for the marginal tax rate times $4000, not the full amount.
written by Ellis, September 20, 2012 9:05
Is this any different from what the government has always done everywhere? The notion of free enterprise is a complete fraud concocted by sycophants in academia and the media.
written by Bart, September 20, 2012 9:23

We were asked to be comfortable with the NAFTA family of agreements because people in developing countries would do better and go on to buy what we make.

We do make a few things but not enough to justify trading Macs and movies for those $8 t-shirts at Old Navy.
the military private contractors
written by mel in oregon, September 20, 2012 1:31
maybe the biggest waste of all is the subsidizing of the formerly called blackwater, halliburton, heck the oil industry, the farming industry, the lumber industry, the mining industry, the list seems to go on forever. in short we subsidize all of wallstreet, the pentagon & its contractors, all wealthy people period. the tax loopholes these characters avail themselves to by hiring the best tax accountants (mostly ex IRS accountants) to shield their money offshore has to be paid by someone. guess who? john q public taxpayer. the system is so rotten it cannot be fixed, pretending otherwise is delusional. like putting perfume on a rotting fish.
written by David, September 20, 2012 1:57
$4000 would be the tax deduction one gets paying a marginal rate of, say, 33% on $12,000 in mortgage interest payments over the given tax year.
The biggest problem with the elfare state is that it is not targeted at the poor
written by Floccina, September 21, 2012 11:52
The biggest problem with the welfare state is that it is not targeted at the poor. Too much welfare goes to the rich and middle class. Think about it turns out to be a very inefficient unequal transfer from the rich and middle class to rich and middle class. We could do more for less if just targeted better.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.