Rule Five Welfare State Friday

Recently I found this from one of my regular reads, Dan Mitchell over at International Liberty; it’s a great piece on why the U.S. would not be well-served to become a European-styled welfare state.  Excerpt:

The United States has a medium-sized welfare state and nations in Western Europe have large-sized welfare states.

Which approach is better (or, to be more accurate, less worse)?

To answer that question, you want to compare living standards. And that means looking at how much people earn, adjusted for factors such as how much they get to keep after taxes.

The United States wins that contest. Americans earn more and they get to keep more.

That’s apparent when you look at average levels of consumption on both sides of the Atlantic. And it’s even true when you compare living standards of low-income and poor Americans to living standards for average Europeans.

But what if Americans only earn more because they work longer hours? When my left-of-center friends make this argument, my usual response has been that Americans choose to work longer hours because they have better incentives (i.e., lower tax rates).

Read the whole thing, and examine the chart therein.

The simple truth is that Americans are more productive, per hour worked, than almost anyone else on the planet.  (These days I’m not altogether certain whether that’s an accolade for Americans or a comment on the sad state of the rest of the world.)  And the situation may be even more marked than the raw data here would suggest, given that the source of the data, the Organization for Economic Cooperation and Development (OECD) is not known for producing impartial information.

I will point out, though, that (at least by my reckoning) examining income as shown here, adjusted per hour worked, is probably the best way to examine how well the people working in the economy are doing.  Poverty levels aren’t terribly indicative, as that indicator is usually calculated as being a certain percentage of the average household income, meaning that there will always be a certain number of people below the poverty level no matter what is done to ameliorate that situation.

Feature, not bug.  There is no way that the poverty graft industry, consisting of politicians and activists both, can continue to ring the “OMG we need to help the poor” bell it we honestly acknowledge that in the United States today we have the wealthiest “poor” people in the world, and that “poor” folks in the US have better lifestyles than many of the middle class in Europe, much less the rest of the world.

As I’ve said for years, there is little or no abject poverty in the United States.  There is only relative poverty.  Incidentally, the OECD data presents relative poverty, in a world where abject poverty is at historic lows.

The poverty industry also focuses a lot on “income distribution,” as though the economy was a fixed pie that can only be divided.  That’s a canard; in a free-market economy, it’s always possible to make more and bigger pies.

I’d point out that people who focus on growth tend to also favor liberty; the ones who yap about distribution of wealth tend to favor government control.  Draw your own conclusions from that.