This piece is part of MI x DW, a collaboration that brings Daily Wire readers exclusive commentary and research from the Manhattan Institute’s world-class team of scholars.

Today, Manhattan Institute Senior Fellow Chris Pope warns against unwieldy entitlement expansion, arguing that the tailored nature of Medicare, Medicaid, and Social Security has kept America more prosperous than Europe, without sacrificing care for the neediest among us.

The piece is adapted from Pope’s forthcoming book, The American Way of Welfare: Providing For Those Who Can’t Provide For Themselves. As the title suggests, this is not a book that denigrates welfare recipients or rambles on about the dangers of big government. This is serious policy analysis, the goal of which is to chart a better, healthier, and more affordable future for Americans. — Tim Rice

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After 250 years, the United States remains a nation unlike any other — particularly when it comes to the role of government. Whereas Europeans turn first to the state to assure their welfare, Americans expect the government to step in only when they cannot provide for themselves.

This approach deserves some credit for America’s superior economic performance. But it has also proven to be more effective at aiding those in need.

Americans’ everyday political fights obscure an underlying ideological consensus. In his 2012 State of the Union address, Barack Obama told Congress: “I’m a Democrat. But I believe what Republican Abraham Lincoln believed: that government should do for people only what they cannot do better by themselves, and no more.”

Yet, America has drifted away from the principle set out by Lincoln. Entitlement expenditure is increasingly dominated by Social Security and Medicare, whose benefits go disproportionately to the middle class, despite greatly exceeding prior payroll tax contributions. Proposals for a Universal Basic Income, Medicare for All, and Universal Free Childcare would altogether abandon the targeted approach that has yielded success for America.

Socialists have rarely found favor at the ballot box in the United States. Their schemes are obviously inefficient, and even partially implementing them would disrupt a vast array of cherished freedoms. Making workers provide for others who could provide for themselves would be widely viewed as unjust and would require tax increases, which politicians understand would provoke a fierce voter revolt. The nation’s entitlements therefore tend to be limited to filling specific unmet needs.

Why is this not the case in Europe? Until the mid-20th century, it was. The continent’s publicly funded entitlements were largely reserved for the poor. But two world wars brought widespread destruction, foreign conquest, and hyperinflation. These devastated private savings and insurance arrangements — creating a need for public assistance which extended across social classes. With normal democratic politics suspended, universal, publicly funded health and retirement schemes were established, which prevented the reemergence of privately financed systems upon the return of peace.

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This left European countries with much broader welfare states than the United States. In 2023, public spending accounted for 49% of GDP in the European Union, compared with 39% in the United States. The difference is largely due to the scale of middle-class entitlements, rather than levels of assistance for the poor, which are similar. In 2023, EU countries spent 12% of GDP on public pensions, compared with 7% in the United States.

Europe’s larger entitlements serve less to improve standards of living than to crowd out private provision for healthcare and retirement. This leaves the continent’s healthcare systems underfinanced and without such broad access to cutting-edge medical treatment. It also deprives European countries of significant pre-funded retirement savings, which enable Americans’ pensions to grow through investment rather than being threatened by demographic change.

The more entitlements are expanded beyond the poor, the more taxes must be increased beyond the rich. Whereas the richest American households pay a larger share of their income in tax than those with incomes below the median, in European countries the poor typically bear a higher average tax rate than the rich. Net of taxes, the United States redistributes more than any other developed country to households with incomes below the median.

The merits of America’s targeted welfare state are clear in comparison with Denmark — a wealthy nation often cited as the model for broad welfare eligibility. Although the poorest quintile of working age Danes obtain benefits worth twice as much as their American counterparts; this is largely offset by the much higher taxes they owe. As this aid also serves to deter employment, these poorest Danish households earn less than their American counterparts — and so have lower disposable incomes, after accounting for taxes and transfers.

Improving the focus of entitlement programs could allow more to be done to assist the needy, while reducing the tax burden on enterprise and employment. Congress should allow younger workers to forego future Social Security benefit increases in return for lower payroll taxes and permit them to borrow from past contributions when they are unable to work. To rein in the cost of healthcare, legislators should empower employees to switch to more cost-effective coverage by extending the tax-exempt purchase of insurance to plans that individuals buy for themselves.

Americans from both parties believe that the government should only provide for people who can’t provide for themselves. That principle has served America well, and the nation’s public policy would be greatly improved if it adhered more consistently to it.

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Chris Pope is a senior fellow at the Manhattan Institute and author of The American Way of Welfare.

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