A look at the middle class safety net

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Guy Sorman (Photo: Mariusz Kubik)

Entitlement programs that protect the middle class are under budgetary assault throughout the developed world. In the United States, too, everything from social security payments to mortgage tax deductions appears to be up for discussion. Guy Sorman is a French philosopher and economist. He’s looked closely at the middle class safety net as it functions in Europe and the US. Download MP3

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LISA MULLINS: Entitlement programs that protect the middle class are under budgetary assault, not only in Britain but throughout the developed world. Even here in the United States, everything from Social Security to mortgage tax deductions, appears to be up for discussion. Guy Sorman is a French philosopher and economist. He’s looked closely at the middle class safety net as it functions both in Europe and here in the United States. Guy Sorman, we want to use your expertise right now. The middle class is getting the jitters on both sides of the Atlantic and you can look, especially here in the United States, look at the headlines today and you’ll practically hear the knees knocking at the prospect of this bipartisan commission looking to reduce the national debt and find ways to do that. Do Americans who benefit from the social safety net have just as much right now to be anxious about as their brethren in Europe?

GUY SORMAN: All governments today have accumulated great debt. They have to cut welfare, they have to reduce expenses, but what I think is really dramatic is that this is done without any explanation and without any alternatives. And there are alternatives. I think it’s very possible to save money, to reduce the debt without reducing welfare, but by building welfare on different pillars, on different principles.

MULLINS: I want to get to those alternatives in just a second, but first I wonder if you can tell us, in terms of the differences that do exist right now – just so we have a better perspective on what happens here in the United States versus in Europe – what are the major differences in the social programs that, say, middle class Europeans enjoy now?

SORMAN: The major difference is that, in the United States, you have a diversity of programs which depends on where you live basically. In France, the United Kingdom, it’s the same for everybody. So our programs are more unified, and in the United States, they are more diversified. All these programs, really, on both sides of the Atlantic, they are not efficient, they are bureaucratic. It’s a mess but it’s, you know, it’s a mess that has been accumulated over 50 years. So it’s high time to completely rethink and rebuild the welfare system everywhere.

MULLINS: That’s right, in the article, and it’s a very interesting article, in fact, that you call EUROPEAN MIDDLE CLASS ENTITLEMENTS:  REST IN PEACE, you trace the history of the welfare state, specifically as it began in Britain, and you’re saying that the model that was used in Britain, this structure to protect the individual from the cradle to the grave, is one that came to dominate every western European country. It was the model that succeeded, you say, beyond anyone’s wildest dreams but you’re saying that model is now dead. What’s happened to it?

SORMAN: It is dead because it was based, after World War Two, on two principles. First, we had very high growth and, second, we had a younger workforce joining the labor market. But now, the younger are disappearing or getting older, they are not replaced and the demographic trend is changed from positive to negative and the growth rate is very weak. Therefore, the economic rationale which allowed this very generous welfare system has just disappeared for good, and you must build a new welfare system based on the new realities.

MULLINS: Well, you know, when you talk about a welfare state here in the United States now, it’s considered basically a dirty word, or dirty two words. When you say there are alternatives to what has been going on for the past 50 or so years, give us just maybe two of the most basic alternatives.

SORMAN: I think the first one is what we call the voucher system. The government would give to any citizen a voucher which would allow you to choose a school for your children or to choose any kind of health care you like. So basically, the system is universal, it’s the same for anyone, there is no discrimination between rich and poor, there is no discrimination between citizens. And it would be much cheaper than all kinds of programs that have right now in the United States. Second is what we call the negative income tax. Each citizen declares his annual income and if you are above the poverty line, you pay income tax and if you’re below the poverty line, you receive a certain amount of money and you are free to do what you want with the money. You can buy health care, you can send your children to school, and you don’t get 100% of what you would deserve, so that you have an incentive to work.

MULLINS: Guy, where is it safer to be a member of the middle class today, in the U.S. or in Europe?

SORMAN: I’m quite sure that the United States has a great future because this is the country of innovation, opportunities and entrepreneurship. And if the demographic is very good, I mean, you have young workers joining the work force. This is not the case in Europe where we are getting older and older and less innovative than we were.

MULLINS: All right. Guy Sorman is a French philosopher and economist. He’s the author of ECONOMICS DOES NOT LIE. He talked with us about the social safety nets that governments provide throughout the developed world. Very nice to speak with you.

SORMAN: Thank you.

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