Robert Samuelson Badly Understates the Size of the Welfare State

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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.