In a recent New York Times op-ed, Harvard professor N. Gregory Mankiw asks, “Can America Afford to Become a Major Social Welfare State?” By welfare state, he has in mind the Biden administration’s plan for better child benefits, improved healthcare, extending free public education to preschool and community college, and the rest.
From a “narrow budgetary standpoint,” Mankiw agrees that these things are affordable. But he is concerned about the larger question of whether stronger social protections are consistent with prosperity and with our aspirations for the “kind of nation we want to be.” Let’s take each of those in turn.
Prosperity, for Mankiw, means GDP. Yes, America has lots of that. He points out that as of 2019, GDP per capita was 14 percent lower in Germany than in the United States, 24 percent lower in France, and 26 percent lower in the United Kingdom.
But GDP per capita has its limits as a measure of prosperity. It is, after all, an average whose numerator lumps together the incomes of billionaires and the incomes of the poor. True, the United States does pretty well in the billionaire sweepstakes. It has 19 percent more billionaires per capita than Germany, 2.7 times as many as the UK, and 3.2 times as many as France. But most people don’t count the “prosperity” of their city or town by the number of billionaires who live there. They are more interested in whether their neighbors, the people they stand in line with at their local supermarkets, can maintain a decent standard of living.
