The Continental Divide
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There is also a question of who, exactly, are "the poor" in Europe. Do they include the bottom 10 percent of income earners in Germany, whose incomes and benefits would make them middle class in Greece? Or should we, again, look at Europe as a whole? If you do that, Europe's "old poor" are mainly Spaniards, Greeks, and Portuguese, while its "new poor" include the Poles, Slovaks, Latvians, and Estonians—whom you can find, of course, doing menial work all over Europe (along with the extralegal workers of Europe's cash economy, who used to hail from Naples but now come from Morocco, Ecuador, Russia—pretty much anywhere).
Taken in this light, transfers to Germans count as middle-class welfare, and there are virtually no transfers from rich to poor people in modern Europe. The European Union makes grants to governments—very important for financing highways in, say, Portugal and Greece. But there is no common European pension scheme, no European earned income tax credit, no European minimum wage—all of which, if they existed, would massively benefit the citizens of the poorer European countries.
America used to have the same problem. Back in the 1930s, in the Great Depression, some states—notably New York—had social safety nets, called "Home Relief." But New York was a rich state! And it couldn't help America's real poor, who lived mainly in Appalachia and the Old South. But now we have nationwide Social Security, the earned income tax credit, and the minimum wage.
And that's not all. We have some pretty good public institutions in this country. Our public universities spend a larger share of GDP than those in almost any European country. Our private universities, which spend even more, operate as not-for-profit charities. Many of them are very rich. How did they get that way? Because the estate tax made it attractive to leave private wealth to your alma mater rather than to your kids. Surprise: Bush and the far right want to get rid of the estate tax; they know very well who, and what, it funds.
Our unified America was forged in four revolutions. The first was the great work of 1862, which gave us land-grant universities, homesteading, and the transcontinental railroad. Second was the Progressive Era, which gave us the estate and income taxes. Third was Franklin Roosevelt's New Deal, which gave us Social Security, the minimum wage, the Wagner Act, the Federal Home Loan Bank Board, the Tennessee Valley Authority, and more. The fourth was Lyndon Johnson's Great Society, which gave us civil rights, voting rights, fair housing, Medicare, and Medicaid. Without these revolutions, we wouldn't be a country—just a collection of states. And we'd have all the current European problems, including high regional unemployment and mass migration from poor to rich areas.
Some American conservatives have figured it out. In a recent op-ed, former Georgia congressman Bob Barr defended one great middle-class housing subsidy—the "government-sponsored enterprises" Fannie Mae and Freddie Mac—against what he called "an ongoing campaign by major Wall Street banks to cripple or destroy" them.
Why is Barr concerned? He doesn't mince words: "Perhaps what is most important for conservatives—the bedrock of our electorate (suburban America) would be hit square in the gut…. Voters we have courted for years with so much success would walk right into the arms of the left."
Barr is right. And much as I'd like his voters to go left, I wouldn't take them there if it meant seeing them lose their homes. But perhaps we might try speaking frankly, and persuade a few suburbanites that free-market fundamentalism isn't what got them into their houses. Love the suburbs or despise them, they were built and maintained by the American welfare state. Earth to ideologues: Mixed economies, with strong states and robust markets, work better.
Though there is much to admire in parts of Europe, the way forward is not to imagine that Europeans have an ideal model. It's to expand the motley public-private nationwide system we've got, and make it better, by offering voters things they actually need and want. Like good jobs at decent pay, health insurance for everyone, better schools, and maybe some alternatives to sitting in traffic and paying three dollars a gallon for gas.
James K. Galbraith teaches economics at the Lyndon B. Johnson School of Public Affairs at the University of Texas-Austin. He previously served in several positions on the staff of the U.S. Congress, including executive director of the Joint Economic Committee.
