Do you need to be a welfare state to have universal healthcare?

William Buiter, a professor at the LSE and blogger for the Financial Times, has just written a wide-ranging, not too focused critique of the Obama administration.  He has the deep insight that:

The reality that you cannot run a West-European welfare state (with decent quality health care, decent pre-school, primary and secondary school education for all), rebuild America’s crumbling infrastructure, invest in the environment and fulfill your post-imperial global strategic ambitions while raising 33 percent of GDP in taxes, has not yet dawned on the Obama administration or on the American people at large.

Matt Yglesias has a good takedown of the idea that a social welfare state requires absurdly higher taxes than what we have now.  He points out that “West European” countries, by which Buiter means any country that has a stronger welfare state than ours, have very different tax regimes and levels of overall taxation.  Australia, for example, collects about 30.6% of GDP as taxes; Denmark, 48.9%.  Switzerland, which has universal health care coverage that is entirely provided by the private sector, collects 29.7% of GDP as taxes.  For America, the figure is 28.3%; of course, they have other more generous benefits than we do, so America would not need to collect an extra 1.4% of GDP (around $190 billion) to ensure universal coverage.  Turkey, which also has universal health care, collects only 23.7% of its GDP in taxes.  These are OECD figures.

Yglesias doesn’t mention it, but we also direct our federal revenue to much different ends than the countries in comparison.  It’s not that we spend our money on the same things but we have less money to go around; instead, we have things like a space program, massive highway infrastructure, and, most importantly, a huge military that we also fund.  In other words, redirecting some of the revenue we have would go a long way to enhancing our welfare state.  The Department of Defense has a $220 billion budget, or 20% of our total government budget.  We shouldn’t cut its budget by $100 billion dollars, but if we did, we could afford health care without raising any taxes.