Senate Republican Leader Mitch McConnell recently characterized President Biden of pursuing a “sweeping socialist legacy” with his budget proposals. Florida Senator Rick Scott has said that Biden is pursuing a platform of “systemic socialism.” How fair are these characterizations? In my view, they’re not, at least if the term “socialism” has any legitimate meaning.
As I’ve written elsewhere, the key difference between American-style “liberal democracies” and European-style “social democracies” in the 21st century is basically the size of the country’s welfare state and how much of the country’s GDP is spent by the government. Since the Cold War ended, “socialist” countries are basically capitalist liberal democracies that spend and tax more. (Not to be confused with authoritarian communist countries like Cuba or North Korea.)
This OECD chart shows that America’s total government output as a percentage of GDP has been around 38% over the past decade or so (pre-COVID; see below). We can also see that “socialist” (i.e. social democracy) countries like France, Belgium, and Scandinavian countries are more in the range of 50-55%.
When looking just at “social protection” programs, the difference is even starker; the U.S. spends around 8% of its GDP on social insurance programs compared to around 20% for France and Scandinavian countries.
This chart compares U.S. and European social democracies in terms of % of GDP spending on all “individual consumption” social programs like healthcare, housing, education, etc. Once again, the U.S. is far below comparable social democracy countries, 6% vs. 16%-20%, respectively.
The centerpieces of President Biden’s 2022 budget proposals are a pair of significant spending bills called the American Jobs Plan and the American Families Plan. According to the White House’s budget proposal, these would cost 0.18 trillion dollars and 0.05 trillion dollars in 2022, respectively (I use trillions because it’s easier to convert and compare to GDP which is usually expressed in trillions). Right now the GDP is around 22 trillion per year.
If Biden’s plans were to pass in full, it would cost about 0.185 trillion dollars (before tax offsets) in 2022, which is about 0.008% of current GDP. (The highest proposed year of spending for these two plans is 2024 where it would cost 0.453 trillion before tax offsets, around 0.02% of GDP annually.)
In other words, Biden’s spending plans would raise government spending by about one-hundredth of a percent of GDP. This is nowhere near what would need to be spent in order for the U.S. to reach European-style social democracy social spending levels. It barely moves the needle.
Actual socialist commentators have opined that Biden’s proposed spending “will still leave the measly US safety net well behind even the least generous European welfare states.”
In contrast, President’s Trump’s 2020 COVID rescue relief packages (including the CARES Act) cost a total of 3.7 trillion dollars (17% of GDP) and President Biden’s Rescue Plan package cost 1.9 trillion dollars (8.6% of GDP). (As far as I can tell, these were meant to be spent immediately and not intended to stretch over a traditional 10-year budgeting period.)
Collectively, the COVID relief packages provided a temporarily increase of our spending-to-GDP ratio by about 26%, or well into European-style social democratic spending territory. Note, though, that two-thirds of this spending was signed into law by President Trump, hardly a proponent of European “socialism.” Further, this is a one-time spending infusion, not a permanent social spending program.
In sum, Biden’s proposed increases to the U.S. federal budget would be less than a drop in the bucket of our total U.S. government spending, and nowhere near approaching levels seen in European social democracies.
If Biden’s proposals are “socialist” then the word simply means “government spending on social welfare programs” and every country in the world is socialist.
Note: this represents my best efforts to at a back-of-the-envelope calculation. Any errors are my own; please reach out of there are any significant oversights or misinterpretations in the budget calculations.
Information Knoll 