According to the Organization of Economic Cooperation and Development (OECD), "social expenditures" are expenditures that occur with the purpose of redistributing resources from one group to another, in order to benefit a lower-income or presumably disadvantaged population.
Social Security in the US is one example, and would be considered a "public expenditure" because it involves direct spending by a government agency.
However, governmental bodies in the US and elsewhere also employ a wide array of mandates and tax-based benefits and incentives to carry out social policy. This distinguishes the US in particular from most European countries that rely more on cash benefits or non-cash benefits administered directly by governments.
But governments are not limited to direct benefits. Governments may also employ "tax breaks for social purposes" (TBSPs) including tax credits for child care, and tax breaks for health-care related spending.
Furthermore, in the United States — more so than in other countries — governments create tax incentives and mandates that lead to high levels of "private social expenditure." The OECD defines these private expenditures as expenditures that are designed to redistribute wealth, but are not administered directly by government agencies:
Mandatory private social expenditure: social support stipulated by legislation but operated through the private sector , e. g. direct sickness payments by employers to their absent employees as legislated by public authorities, or benefits accruing from mandatory contributions to private insurance funds.
Voluntary private social expenditure: benefits accruing from privately operated programmes that involve the redistribution of resources across households and include benefits provided by NGOs, and benefit accruing from tax advantaged individual plans and collective (often employment - related ) support arrangements , such as for example, pensions, childcare support, and, in the US, employment - related health plans
The focus on direct government spending, however, creates the impression that the US does not engage in the business of redistributing wealth to the degree of other OECD-type countries. But this is not the case. When we consider tax incentives, benefits, and mandates, the picture is very different.
When just measuring direct government spending as a percentage of GDP, the US ranks fairly low. Note however, that even in this case, the US ranks above both Australia and Canada, two countries that are rarely accused of being excessively capitalist:
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