Mitt Romney’s Most Unfair, Misleading, and Repeated Assertion

Talking on the campaign stump, Mitt Romney has often argued that President Obama, if reelected, plans on taking America towards a path leading to “European socialism” or a “European-style socialist state”. The simple problem with his oft-repeated assertion is that it is misleading and is completely unfair.  More specifically, it is unfair to Europe and overly generous to Barack Obama and the Democratic Party.

 

This becomes clear simply by looking at tax expenditures and demographics. Thanks to the nature of how Congressional committees work as well as the periodic flare-ups of anti-spending sentiment by the American public, it has been far easier to expand tax credits than direct government spending and subsidies. Although Reagan’s 1986 tax reform cut these subsidies by a third, tax expenditures have grown almost unabated since then

 

Why do I call a tax credit a tax expenditure? A government tax credit is functionally equivalent to a government subsidy. Regardless of whether the government pays you a thousand dollars for buying a car or whether the government says you can take a thousand dollar tax credit, the end-result is that if you buy the car, you will have a thousand more dollars (and the government will have to borrow/print another thousand dollars). The only functional economic difference is that the labor cost of administering the subsidy is outsourced from bureaucrats to tax accountants or those who undergo the ordeal of filing their own taxes.

 

To illustrate the effects of tax expenditure growth, let’s compare the United States with Norway, supposedly a “socialist Nordic model” nation that provides “cradle-to-grave welfare”. The OECD calculated that in 2010, total government outlays (direct federal, state, and local government spending) in the United States comprised 42.5% of gross domestic product ($6.134 trillion out of $14.447 trillion). In Norway, government spending (national, fylker, and kommuner) in 2010 comprised 45.5% of GDP.

 

However, according to the leftist Center for American Progress using data presumably extrapolated from the Congressional Joint Committee of Taxation’s yearly report (they were not clear), total tax expenditures in the USA grew to $1.025 trillion in 2010, or 7.1% of GDP. Statistics Norway and civil servants from the Norwegian Ministry of Finance calculated that Norwegians tax expenditures totaled 5.4% of GDP. As a result, total government payments in the United States comprised 49.6% of GDP compared to 50.9% in Norway. However, Norway’s slim lead in government expenditures can entirely be explained by its slightly older population, which means more retirees drawing on government pensions.

 

How can government in “free market, small government, liberty-loving, capitalistic” America essentially be the same size as government in “socialist, Nordic model, welfare nanny state, cradle-to-grave” Norway? For one, Europe is hardly a monolithic worker’s paradise/socialist hellhole (adjective dependent on your political views). Norway, while being completely within the norm of European government size, is still below the average (and is also one of the wealthiest countries in Europe, being comparable to the USA). However, that also means that the United States, while slightly below-average the European average like Norway, also falls completely within the European norm of government. “European-style” government is not some newly-arrived danger from abroad. It is already here.

 

When conservative commentators mocked Obama’s “Julia” web-ad for being both patently ridiculous and laying out a cradle-to-grave welfare system predicated on a slightly-creepy level of gratitude towards Obama. But what few commented on was that Obama’s cradle-to-grave system proposed very few new things that he would do. Instead, it largely posited that Mitt Romney or Paul Ryan or whoever the caricatured boogeyman of the news cycle was today would reform preexisting social programs. We can sneer at Europe for having “bloated nanny-state welfare states”, but all things considered, we’re not so different after all.

 

So the next time Romney repeats that Obama will try to turn America into a “European-style” state, don’t buy it. Because why would Obama try to turn America into something that essentially already is? Obama and his absolute refusal to entertain entitlement reform (part of the long-term Democratic agenda) won’t, in the words of Mitt Romney, “fundamentally transform” America from a “small government” country into a “European-style” state. Instead, they will eventually transform a European-style state slightly below the average European size into something far beyond even the European norm.

 

If you ask yourself whether you would prefer “American-style” government or “European-style” government, answer that you would prefer “European-style”government, and consequentially support the Democratic agenda, you’re asking yourself the wrong question. After all, there are a wide range of European governments. Instead, you should be asking yourself whether you prefer German-style government or Greek-style government.

 

By the way, just for the benefit of the next generation of Élysée Palace aspirants, does anyone know how to accuse someone of trying to institute “American-style big government” in French? If no one has a clue, I suppose we could just ask Mitt Romney to translate.

 

–Kirk Jing

 

http://www.oecd.org/document/61/0,3746,en_2649_34109_2483901_1_1_1_1,00.html

http://stats.oecd.org/Index.aspx?DataSetCode=SNA_TABLE11

http://stats.oecd.org/Index.aspx?DatasetCode=SNA_TABLE1

http://www.oecd.org/document/61/0,3746,en_2649_34109_2483901_1_1_1_1,00.html

www.americanprogress.org/issues/2011/06/low_tax.html

http://www.skm.dk/public/dokumenter/Tal45/Skatter_og_afgifter86/Tax_Expenditures_in_the_Nordic_Countries.pdf

http://www.brookings.edu/~/media/research/files/reports/2009/11/05%20spending%20children%20isaacs/1_how_much_isaacs.pdf