Freedom Index
Listen to the article
“Imagine taking a day off from work in a future without capitalism,” reads the Democratic Socialists of America (DSA) website.
“You have no debt. You don’t need health insurance. You don’t pay a mortgage or have a landlord, because comfortable housing is a human right. Your retirement is publicly funded. Food, education, energy, medicine, and transportation aren’t for-profit businesses; they are common goods and utilities,” it continues.
Sounds pretty good, right? Conveniently, the DSA fails to mention how much it would cost to create this socialist utopia. Unsurprisingly, it would be a lot of money.
This week, Adam Michel, director of Tax Policy Studies at the Cato Institute, added up nine of the largest proposals in the DSA platform. Based on his estimates, the proposals would require between $71 trillion and $212 trillion—which represents 18 percent and 53 percent of gross domestic product (GDP), respectively—in additional government spending.
In the U.S., government spending already makes up about 38 percent of GDP, which is relatively high by historical standards but low compared to the rest of the world. Under a high-end estimate of the DSA’s agenda, that 38 percent would rise to 92 percent of GDP, according to Michel. A lower-end estimate would raise spending to more than 57 percent of GDP, higher than most European countries.
No major advanced economy spends anything close to 92 percent of GDP. This level of expenditure would require the mass confiscation of private property, handing an unprecedented amount of power to politicians. These estimates are, as Michel tells Reason, “much closer to estimates of state control under Soviet-style communism than to today’s European welfare states.”
Who will pay, you may reasonably ask? According to the DSA platform, it would be “the richest individuals and corporations” via “aggressive wealth taxes.” Even if the DSA could get these taxes signed into law, and even if the wealthy decide to stay in the United States, there simply aren’t enough of them to foot the bill. The richest 400 Americans are worth $6.6 trillion combined, and according to Michel, if the government were to confiscate all of their wealth, it would merely cover 9 percent of the lower estimate required to fund DSA promises, and just 3 percent of the higher estimate.
“Ultimately this is the progressive agenda to tax the middle class,” Michel tells Reason. European welfare states, he notes, rely on roughly 20 percent value-added taxes, higher payroll taxes, and income taxes that bite much further down the income scale. “The only sustainable way to fund a government of this size,” he says, “is with high taxes on everyone.”
Ironically, these extraordinarily high taxes would cut against the DSA’s welfare hopes. A 2025 Institute of Economic Affairs (IEA) study of welfare outcomes in 23 wealthy countries found that those with lower tax rates have the best welfare outcomes. The study, which measured health, education, unemployment, and social exclusion, found that no country taxing more than 40 percent of GDP ranked in the top five. Japan, South Korea, and Switzerland—all of which have a tax burden between 26 percent and 32 percent of GDP—ranked first, second, and third for overall welfare outcomes.
The authors provide a few explanations for this correlation, including that lower taxes are correlated with higher levels of growth, which makes “it easier to support good welfare quality.” By contrast, “high-tax models create poverty traps, in which market work is not or just barely more highly rewarded than living on public benefits.” Additionally, the authors argue that high-tax countries tend to waste public funds, “crowding out resources that should have gone to the most essential welfare services and to prevention of future social costs.” Waste is “more common in countries where many people believe that taxes can always be raised more if deemed necessary.”
“The income equality of Nordic countries has never been the result of the welfare state,” Nima Sanandaji, president of the European Centre for Entrepreneurship and Policy Reform and co-author of the report, tells Reason. “High life expectancy compared to the rest of the world, high prosperity—all of these things evolved in Nordic countries during the free-market, low-tax era.”
Sweden, a country often touted by the DSA as proof that expansive welfare states work, actually achieved many of its strongest social and economic outcomes prior to the dramatic expansion of the government. In 1970, just as Sweden was beginning its shift toward a high-tax welfare state, it had the highest life expectancy among the 23 wealthy countries studied. By 2020, it had fallen to eighth, overtaken by several lower-tax countries. Sweden’s tax take is 43 percent of GDP, and it now ranks 12th in terms of overall welfare, according to the IEA.
“For me it felt like the welfare state just sucks out responsibility and makes you dependent,” says Sanandaji, who came to Sweden as a refugee and has first-hand experience of the trap created by the welfare state.
The DSA’s promises may attract thousands of voters who do not know any better, but the evidence shows that America is prosperous because of its economic freedom. Sacrificing that freedom in pursuit of a state that spends more than $200 trillion—and making America poorer and more stagnant in the process—would be a profound tragedy.
Read the full article here
Fact Checker
Verify the accuracy of this article using AI-powered analysis and real-time sources.