In a response to a long piece on the welfare state by David Frum, Reihan Salam points to this paper by David Alexander, on the Australian model of low-tax egalitarianism. Alexander describes the Australian model as
Australia is able to keep government smaller than the United States (and virtually any other OECD nation), with lower taxes and a more progressive distribution of services. This means Australia’s welfare apparatus is not only quite fair, avoiding large transfers of wealth to the rich, it is also more fiscally sound than entitlement systems which largely benefit the middle class and upper class. Avoiding government spending that finds its way into the pockets of the well-connected is a good rule of thumb.
Stimulus dollars, for instance, will be more stimulative if they are direct payments to individuals (or payroll tax cuts) rather than filtered through a vast labyrinth of special interests, where they will be siphoned off by the well-connected.
But in the end, tax policy and back-end redistribution can only go so far. Redistribution of wealth needs to happen on the front-end, prior to state involvement if it is going to be sustainable. Once the state becomes involved, policies should be geared toward transferring payments down the income ladder as much as possible. A strong middle class can only exist in a competitive global market if we work to put an end to corporatist policies and protectionism at home, while ensuring a strong basic safety net for those who cannot provide one for themselves. This is no simple task given how deeply entrenched corporatist policies and interest have grown in Washington, D.C.
Government programs are necessary in all but a perfect world to catch those in society who fall through the cracks, who cannot fend for themselves, and who suffer the bad chance of catastrophe. But it is unsustainable and counterproductive to maintain a state that promises more than it can deliver. I support public options for people, and public spending on investments such as education that end up paying off in the long-run many-times-over, but we should take a look at our friends Down Under for an example of how to make egalitarianism and fiscal responsibility work together to create a fair, low-tax society that avoids transferring payments to those at the top.
