[theshrike79]

That's how a welfare state operates.

It's long term second-order thinking that people on the right side of the political spectrum tend to lack in my experience.

I pay taxes so other people can afford to have kids, they can stay home and give the kids a stable childhood. Then the kids will go to subsidised childcare (0-250€/month depending on income) and later to school where they have free school lunches and well-paid teachers.

Why? Because I'm getting old and when I retire we need people working and paying taxes so there's money to pay for MY healthcare and pension.

[ETH_start]

I was not trying to start an ideological battle — just pointing out that childcare is not cheaper, it's just paid out of taxes instead of consumer spending.

But if you want to discuss second order effects, what basic economic theory and empirical evidence both show is that the second order effect is less incentive for people to work, and higher rates of children born out of wedlock. The implications of that is higher incarceration rates and other socioeconomic problems as a consequence of the negative effects of being raised in a single parent household.

This is the kind of multi-generational impact that I've found social democracy advocates rarely weigh in their analysis.

In terms of the economic impact, the higher taxes dampens growth, which is exactly why median income is so much lower in the EU than the U.S:

EU Europe average ≈ $30,500

United States ≈ $68,000

A 2018 study shows tax increases significantly reduce innovation. A 1% increase in the top marginal income tax rate leads to a 2% reduction in patents and inventors, while a similar increase in corporate taxes causes even larger declines:

https://www.nber.org/papers/w24982

This shows up in company creation. The United States has vastly more large young companies than the European Union. Looking only at companies started from scratch, and now worth at least $10 billion on the stock market, the EU has about 14 companies worth a combined ~$430 billion, while the US has dozens whose total value is close to $30 trillion — roughly 70 times larger. In fact, the entire EU total is less than half the value of Tesla alone.

You might point to the Nordic countries as examples of welfare success stories, but the Nordics are only proof that a rich, high-trust society can stay rich while paying high taxes. Not proof that high taxes made them rich, or that the model doesn’t slow growth or scale badly elsewhere.

Keep in mind that it was during the Nordics' 100 year free-market era that they got rich. That's when they experienced the massive gains per capita income and average qualify life. On the eve of their experiment with social democratic authoritarianism in the mid 1960s, they were at the very top of global rankings in per capita income and quality life metrics. It wad the preceding 100 years of free market economics that got them there, not social democracy.

Not only has their rate of economic growth slowed since they raised their taxes, there is evidence that they’re losing the high-trust culture that made this model possible in the first place. They’re also losing the work ethic that was built over hundreds of years of hard labor in a cold climate.

More and more people are comfortable lying about being on sick leave, for example. That’s a measurable decline in work ethic. And you simply cannot sustain a high-tax welfare state without an unusually strong work ethic and high trust.