Edward Conard

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Social Security Significantly Impacts Distribution of Wealth

In a post  about a survey released this month showing Americans are much less concerned about income inequality than Europeans, despite similar perceptions about the distribution of income in their countries, Paul Krugman described Americans as “delusional.” He sees this delusion stemming from racism that results in a “unique suspicion of and hostility to social insurance and anti-poverty programs,” which “empowers right-wing groups … [to] issue a lot of propaganda dismissing and minimizing inequality.”

graph 3

The survey, as well as Krugman’s blog post, cites the belief among Americans that the top 20 percent own 59 percent of the country’s wealth when, in fact, they own 84 percent as evidence of this supposed delusion. But when estimates of wealth properly include the value of Social Security, Medicare, and Medicaid, American intuition is surprising accurate. After redistribution, the top 20 percent receive 55 percent of the wealth—in line with people’s estimates.

As well, despite popular misconceptions, OECD data confirm America spends more on social welfare than any other country—$13,500 per capita in 2009, nearly 25 percent more than the second largest spender, France, and 35 percent more than Germany, Sweden, and other high-spending Scandinavian countries.

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