There is a sense among many commentators that the United States is “becoming” more like Europe in that the government is growing beyond thresholds that could be reasonably financed by the private sector. Putting aside the merits of this view, the general description of the U.S. as “moving towards” Europe makes the distance left to be traveled seem farther than it really is. The graphic below, constructed from the International Monetary Fund (IMF) World Economic Outlook (WEO) data, compares the combined government-to-GDP ratio of the 17 countries that use the euro currency to the combined government-to-GDP ratio of the U.S.
Based solely on government outlays, the U.S. government is about 8 percentage points (or about 16%) smaller than that of the euro zone. However, this is not really an apples-to-apples comparison because it does not include the disparate accounting for health insurance premiums. In the euro zone, health insurance premiums are generally financed directly through taxation; in the U.S. employer-sponsored health insurance premiums are deducted from pay checks or contributed directly by employers. The net effect is to leave after-tax income lower to pay for health insurance.
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