What Germany's Welfare State Can Contribute to the Debate About Biden's 'Build Back Better' Proposals By Michael Makowski The Progressive, October 30, 2020

The German parliament building

What Germany’s Welfare State Can Teach the United States

Examples from Europe's largest economy that could and should inform the current debate about Biden's Build Back Better proposals.

Some Americans think of Germany as a kind of socialist state. But that isn’t the case.

Germany does have a robust welfare state, but it is funded through semi-public institutions that share costs between individuals, their employers, and the government. It’s a social democracy, a capitalist country with laws and taxes that provide an expansive array of social services. In short, Germany’s “social market economy” or soziale Marktwirtschaft is a sort of middle ground between the more progressive Nordic Model and the U.S. system. 

Many Americans look longingly at the services that Germans receive, and many Germans might raise their eyebrows at the lack of social services the United States provides (especially as efforts to expand them are currently on the chopping block amidst Build Back Better negotiations currently happening in Congress).

“People in Germany may need to jump through a lot of hoops, but typically a health emergency does not mean that someone has to file for bankruptcy like in the United States.”

Progressives across this country, emboldened by a Democratic trifecta, had high hopes for the Build Back Better Act’s transformative roadmap. Senator Bernie Sanders of Vermont even floated a $6 trillion budget reconciliation plan. 

But gradually, due to the centrist demands of Senators Joe Manchin, Democrat of West Virginia, and Kyrsten Sinema, Democrat of Arizona, the cost of the reconciliation package—and the more progressive programs it contained—were cut from $3.5 trillion, to $2 trillion, and eventually to about $1.75 trillion.

The window to act is closing as some of the plan’s most popular programs are now being eroded: Medicare and Medicaid expansions, free community college, the child tax credit, and paid family leave have already been axed or diminished. These programs had the potential to change the lives of millions of Americans by providing a stronger safety net for the working class. Even if some of these programs do make it through, the effects won’t be as greatly felt when operating under tighter budget constraints.

Nothing in the Build Back Better bill will come close to mirroring the kinds of benefits enjoyed by citizens in other wealthy democracies around the world—including Germany.

Germany has found a way to provide robust social services to its citizens while balancing a strong, market-driven economy. German citizens enjoy guaranteed health care, tuition-free public university, a child benefit, and guaranteed parental leave. 

The differences between the German and U.S. systems are vast, and those who spend time in both countries notice.

Leonie Hintze is a German citizen and teacher who lived in the United States; she now lives in Sweden. As a child, Hintze had an idealized view of the United States as a free and prosperous country, so she was surprised when she moved and saw the reality of health care costs.

Nearly forty million people in the United States are in debt from student loans, totaling $1.4 trillion in student debt.

“I had heard before that people [couldn’t] pay for health care, but I never really believed it before I came,” she says. “Friends said they couldn’t go to the doctor because then they’d have to pay, so instead they would go and buy cheaper, over-the-counter medication.” This was something Hintze had never experienced in Germany.

Germany is one of the biggest health care spenders in the world, putting more than 11 percent of its GDP toward this cost. Germans can elect for private insurance at a higher cost with better care, or opt for the public option, which around 88 percent of the population chooses. Both options share the same providers. With this dual system in place, nearly 100 percent of Germany’s population is covered by a high-quality health insurance plan.  

The coverage isn’t perfect—some Germans do fall through the cracks, and the coverage isn’t necessarily free—but it’s a far cry from health care in the United States, where around 8.5 percent, or more than 27 million people, are uninsured and just over 20 percent, or more than 69 million people, are underinsured. Germans may have to pay the bureaucratic price of more paperwork for their coverage, but generally they can remain confident about receiving care at an affordable cost.

“People in Germany may need to jump through a lot of hoops, but typically a health emergency does not mean that someone has to file for bankruptcy like in the United States,” says Senta Goertler, a German native and professor at Michigan State University. Indeed, currently more than two-thirds of all U.S. bankruptcies are tied to medical costs.

Goertler prepares students who are studying abroad in Germany to navigate the German health care system and its bureaucracy. She often helps students change their mindset and approach doctor visits differently, encouraging students to go see a doctor and not to be afraid that they won’t be able to afford it. 

In some cases, this can save U.S. students thousands of dollars, or even to avoid bankruptcy. One elective surgery that some U.S. students undergo while studying in Germany is the removal of their wisdom teeth, which can cost thousands of dollars in the United States. Goertler says that one of her students saved more than $200,000 in medical expenses for diagnostic work.

As mothers, both Hintze and Goertler acknowledge the lower costs of raising children in Germany. Kindergeld, or child benefit, is a monthly fee of more than 200 euros per child paid out to parents. One consequence of this policy, however, is that the way the benefit is structured sometimes forces people to decide between having children or having a job. Goertler acknowledged this complication, saying that people “often cannot return to their profession or at least not build a career.” 

Raising children in Germany reduces other costs associated with having kids, too, such as access to public transportation and subsidized sports programs. German parents receive paid leave for twelve weeks and can take up to three years of unpaid family leave.

By comparison, the United States is one of only six countries in the world that does not offer paid leave and, under the Democrats plan, would only spend about $500 annually for child care compared to Germany’s estimated $18,656.

In adulthood, young university-bound Germans also have a comparative financial advantage. In Germany, public universities are tuition free and financed by the state. 

“I felt pressure in the United States that you really have to finish your degree quickly and you have to make money after graduation,” says Benjamin Wolfers, a German who spent a year abroad studying in the United States.

Costs associated with studying in Germany are covered through living and administrative fees, which are still significantly cheaper than in the United States. Wolfers, who is also a deejay, could afford to pay his 155 Euro administrative fee for university in Germany by playing gigs and with some help from his parents. For other students, Wolfers says, the university fees and living costs could be covered by working a part-time job.

During his time in the United States, Wolfers noticed how inequality affected Americans’ approach to education. Wolfers worked a part-time job at the student union at the University of Wisconsin-Madison and realized there was a gap between his classmates that worked to pay for their education and other students whose parents paid for their tuition.

In the United States, most low-income students have to take out loans to pay their way through college. Nearly forty million people in the United States are in debt from student loans, totaling $1.4 trillion in student debt. Of those debtors, nearly 40 percent are in default or past due on their payments.

“It comes back to this question of pressure and freedom,” Wolfers says of his experience in the U.S. university system. This balance of pressure and freedom is one that the United States is grappling with right now as Congress negotiates the cost and scope of social services in the Build Back Better Act.

Germany’s social services such as health care, family leave, the child benefit, and tuition-free college remain popular and expected. And they’ve resulted in a less costly and more equitable society.

As Congress debates the Build Back Better Plan, they would be wise to look to one of our closest transatlantic allies to see how they could provide tangible benefits to Americans.

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Michael Makowski is an organizer and writer living in Milwaukee, Wisconsin (Michael Makowski Progressive.org).

What Germany’s Welfare State Can Teach the United States - Progressive.org

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