Ezra Klein argues that “A larger welfare state can mean a lower deficit”.
My main problem is not so much the argument, but that Klein is knowingly or not relying on a trick used by (who else) Paul Krugman, which is to define the welfare state as “Social Expenditure”.
Social Expenditure is a statistical category which sound as if it the welfare state, but in fact includes about half of non-defense spending. For instance education spending is generally not included in “Social Expenditure”. All spending causes deficits, not just the ones somewhat arbitrarily defined as social.
In the U.S, social expenditure is about 45% of total government spending. Even in Sweden, the country which spends most on social expenditure, the category nonetheless only includes 53% of total government spending.
Richer countries tend to have a higher share of Social Expenditure of total welfare state expenditure. It is therefore a trick to use “Social Expenditure” when you are talking about the welfare state. Instead of size of government, they use a sub-category of spending that tends to correlate with good outcomes more than overall government spending does.
But let’s stick with Kleins definition, for now. The last year for which the OECD reports “Social Expenditure” was 2007. Here is a correlation with the public debt that year. It is positive and weakly statistically significant (10% but not 5% level).
Countries that spend more have more debt. The same is true if total spending is used.
Another trick used by liberals is to use ”Government Purchases” (another sub-category) instead of spending. The left love spending, but apparently don’t like to use spending as a statistical variable.