Do Americans really want to "Go Dutch"?

Xin Lu — Wed, 06 May 2009 23:07:30 +0000

I just read a very interesting article by an American expat named Russell Shorto in the Netherlands titled "Going Dutch - How I Learned to Love the European Welfare State". The author describes his shock at a 52% top income tax bracket and his eventual acceptance of the social benefits of living amongst the Dutch. Here are some highlights of his experience and my thoughts on the subject.

Some of the benefits that stuck out in the article include a chunk of vacation money that is worth 8% of one's annual salary, reimbursements of as much as 70 percent of the cost of day care, and deposits of money for children's books. Even if a person does not work he or she receives a set amount of vacation money from the government. Another big benefit of the Dutch system is universal health care. Practically everyone is covered in a system that is a mixture of private and public partnership. It is also illegal for insurers to deny coverage to anyone based on their health status. The government essentially subsidizes the insurance companies to cover chronically ill patients. As to housing, a third of the dwellings in the country are below market housing and renters do not have to move out even when they earn more income. These houses are not managed by the government, but by private nonprofit cooperatives.

When I think about it, a 52% top income tax bracket is not really that far fetched. In California I am paying 9.55% for the top state income tax bracket, 25 to 28% for Federal, and 7.65% for Medicare and Social Security. If you add those up my top bracket is already 45.2%. If you consider that my employer pays another 7.65% of my salary for Medicare and Social Security then my top tax rate is essentially above 50%. So why do my taxes buy much less benefits than the taxes of the Dutch?

Shorto's suggests that the Dutch's culture of working towards the collective good is what makes them accept so much welfare. The Dutch also has good mix of private enterprise and government that works to elevate the living standards of everyone. In contrast, there is a polarizing divide between privatization and government welfare in America. The American culture of every man for himself makes Americans more disdainful towards social welfare.

Personally, I found Shorto's view of the Dutch welfare system a bit too romantic. There is no discussion in how much these social programs actually cost the economy of the Netherlands and there is no mention of abuse of these entitlement programs. A more critical piece about the Dutch welfare system tells us that the Dutch disability insurance program nearly bankrupted the country in the 1980s and now the Netherlands has pared back its social programs significantly. The universal healthcare program that relied mostly on the central government has been reformed in 2006 to become a system that allows consumers to choose between insurance companies and promotes personal responsibility.

Perhaps growing up in America has brainwashed me to think more individually, but I think that when citizens depend too much on their government they are essentially giving up a lot of free will. America is not perfect, and many people struggle in the absence of universal healthcare and generous child care subsidies. However, at least we do not live in a country where paying for faster medical treatment privately is technically illegal. What attracted my family and many other immigrants to America is its promise of freedom, and having the power to choose the products and services we use everyday is a big part of that freedom.

In closing, I lived in China in a period when the government took care of nearly everything including healthcare, education, jobs, and housing. Everyone was equally poor, but the basic necessities were provided. It seemed idyllic, but anyone could lose everything just for saying the wrong thing about the government or having a second child. The government basically owned everyone, and everyone knew it. After a couple decades of this the central government understood that it was not economically sustainable and now China is radically different. Although many people in China now fondly reminisce the old days where they ate from the "big pot of rice" (Da Guo Fan), almost everyone agrees that their standards of living has improved greatly under a more capitalistic society where people are able to achieve upward mobility with their own skills and wills. I do not think there is a perfect government anywhere, but I firmly believe that more dependence on the government is not what Americans need.

What do you think? Have you lived in a "welfare state"?

This article is from Xin Lu of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

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Do Americans really want to "Go Dutch"?