Could a US state become a "utopian country"?

Like the Nordic countries.

One of the things you might have noticed about the world’s most utopian countries is that they are all small. As of 2021, Sweden has 10.4 million people, Switzerland has 8.7 million, Singapore has 5.9 million, Denmark has 5.8 million, Finland has 5.5 million, Norway has 5.4 million, New Zealand has 5.1 million, and Iceland has only 370,000. 

By comparison, every one of the US states is larger than Iceland. Half of our states are larger than Norway. Our 10 most populated states are all larger than Sweden. California is our most populous state with 39.6 million people—if it were a country, it would have the fifth largest economy in the world. As Austin James points out in his essay “What if democracy has just gotten too big?,” maybe the challenge with democracy is that it’s too hard to scale? 

I can’t help but think he’s right. After all, there were only 13 states when we wrote the Constitution. As of the 1790 census, there were only 3.9 million people in the country—about the size of those utopian countries today. And yet that same Constitution now governs 331.9 million. Is it any wonder we find it complicated to agree? To define what life should look like for all of us when we all have so many differing ideas about that? 

Maybe we’d be better off if states governed themselves.

That’s technically how the United States works today, or at least that was the ideal. In the US, the federal government decides whether we go to war (and keeps war from happening between the states), establishes a military, and regulates currency, but the states are supposed to self-govern. The first Ten Amendments were even designed to limit the powers of the federal government and give the bulk of them to the states. 

“The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State,” James Madison once said.

State governments do have their own (much longer) constitutions, they have their own legislatures (governing bodies that can make laws), and they manage their own budgets and police forces. And this was kind of what the Supreme Court was going for with the whole repeal of Roe v. Wade thing—that the federal government shouldn’t be making all of our decisions and instead that more power should go to the states, to our smaller local communities. 

That’s also how it works in Europe. The European Union (EU) was created to unite the European countries so that together they can compete with larger countries (like the US) economically and politically, as well as in matters of defense (with NATO). This “larger government” has been a benefit to Europe on the global stage where it makes much more sense for Europe to negotiate with the US or China than for Italy to do so, and where Europe might provide military aid to Ukraine more readily than Portugal. 

But EU countries are quite a bit more autonomous than US states—they set their own federal tax policies, develop their own childcare and school systems, and are responsible for managing their national healthcare systems (all managed at the federal level in the US)—often with quite utopian results. If Europe has benefitted from becoming a larger entity like the US, I can’t help but wonder if the US could benefit from giving more power to our smaller entities, like the EU.

Could a US state become a “utopian country,” just like the Nordic countries did? My state of Utah has a population of 3.3 million, not too far off from the population of Norway. Could we implement the same social democracy that has worked so well there? Could we adopt universal childcare, education, and healthcare at the state level? Without waiting around for the federal government to do so?

Technically yes, yes we can. 

Not only do the first Ten Amendments—the Bill of Rights—give states the authority to manage their own budgets and legislations, but most US states are much richer than EU countries. Here’s a chart comparing the GDP per capita of US States (orange) and EU countries (blue). It is striking how much bigger our state economies are than European countries.

Source. In case you were wondering, Luxembourg is richer than all of us because of their thriving financial services and banking center. Ireland jumped up there only recently and is something of a fluke.

If US states have much bigger economies than European countries and are making more than enough money to provide universal childcare, healthcare, and education to their citizens, the constraint is that we aren’t earning the same amount of tax revenue from those economies. The US earns only 26.6% of our economy in tax revenue while European countries earn 34.1%. The Nordic countries earn much more—earning 46.9% (Denmark), 43% (Finland), 42.6% (Sweden), and 42.2% (Norway) of their economies in tax revenue. 

Not only does the US earn much less tax revenue compared to the size of its economy, but most of it goes to the federal government, not the states. Utah’s economy was worth $186.9 billion in 2021, but earned only $14 billion in tax revenue—that’s only 7.4% of the state’s economy in tax revenue. If Utah was taxed the way Denmark was, our state would have earned $87.6 billion—enough to provide our citizens with universal healthcare, universal childcare, universal education, and all other manner of services. Instead most earnings went to the federal government.

States may have the authority to legislate and govern the way they want to, but they don’t have the money to do it. For that they must rely on the federal government—which earns the money from our state economies and then redistributes it to the states as they see fit (the federal government provides 20% of our revenue in Utah). States have some power to generate revenue locally—through state income tax (4.85% in Utah), sales tax, and corporate tax—but it doesn’t come close to the federal earnings of each state, and it’s hardly enough to fund universal services. Even if states want to provide more robust social services for their citizens, the money would have to come from Washington D.C.

Still, many states eke by with the budgets they do have. In recent years, Washington D.C., Oklahoma, Florida, New Mexico, Vermont, Wisconsin, and California all voted to offer state-funded universal pre-kindergarten—a welcome step toward universal childcare. Many more (including Colorado, Georgia, and Oregon) have limited programs, with hopes to expand into more universal ones. But the likelihood that any state would be able to fund universal childcare from ages zero to five is highly unlikely. (However, because it is a bi-partisan issue, there is still hope that it happens federally. Both democrats and republicans have proposed bills to fund childcare between the ages of zero to five!) 

Similarly, more than 20 US states offer some form of free community college to their citizens. But most of these programs are severely limited, not easy to qualify for, and usually applied as a grant toward tuition for some students rather than a full-ride for all students paid for by the state. A true, universal education system in which all students in the state receive free college education paid for by the state would be far too expensive for any state to fund alone.

If states aren’t earning enough tax revenue to support universal programs, there is one exception: healthcare. Even without universal healthcare, the US is spending 17.8% of our GDP on healthcare, while Nordic countries average 11%—and a lot of that money is being spent by states. If universal healthcare turns out to be our more affordable option, it might be our best shot at achieving universal services at the state level—and several states are already working on making it happen.

But I’d love to know your thoughts! What decisions should be made at the larger government level (the US or the EU)? What decisions should be made at the smaller government level (the state, or the European countries)?

I’m going to dive into state universal healthcare next week.

Thank you so much for reading!  

Elle Griffin

Marginalia

Here are a few notes from the margins of my research.

Even government officials think that the U.S. is unable to help internationally because of its size. In “How to reverse a coup” by

Santi Ruiz

:

That's a structural problem with the United States government because it's so big, so fragmented, and there are so many people involved. Normal horse trading becomes impossible.

I joke that the Norwegians can get five people around a table and they can horse trade. In the US, you might not even know the person across the table who has a different view. There's no way to horse trade if you don't have those relationships. All governments are dysfunctional and have multiple objectives to balance, but the US is on its own playing field because of our size and scale.

I also liked “Childcare for all, a blueprint for states.”

There’s ample evidence that policy in the states can pave the way for federal legislation in the same vein—and often in a very direct way. For example, Massachusetts’ health care policy was a precursor to the Affordable Care Act, informing the federal version of the policy and helping its federal-level proponents make the case for it.

Similarly, the eight states and Washington, D.C. that have passed paid family and medical leave laws are serving today as helpful models for federal paid leave legislation—the FAMILY Act. Time and again, state lessons help strengthen federal versions of similar legislation. Thus, state leaders who prioritize universal child care and early education models will not only be serving their own constituents in immensely valuable ways, but also creating a legacy that sets important precedent for the laws of the nation as a whole.

I was particularly fascinated by the research study: “Why Doesn’t the US Have a European-Style Welfare State?” In its introduction, the article asserts its intention:

European governments redistribute income among their citizens on a much larger scale than does the U.S. government. European social programs are more generous and reach a larger share of citizens. European tax systems are more progressive. European regulations designed to protect the poor are more intrusive. In this paper we try to understand why…

It all starts with how we were formed.

The formation of the United States as a federation of independent territories led to a structure that often creates obstacles to centralized redistributive policies. The relative political stability of the United States over more than two centuries means that it is still governed by an eighteenth-century constitution designed to protect property. As world war and revolution uprooted the old European monarchies, the twentieth century constitutions that replaced them were more oriented toward majority rule, and less toward protection of private property…

There might be some cultural reasons for that.

Reciprocal altruism implies that voters will dislike giving money to the poor if, as in the United States, the poor are perceived as lazy. In contrast, Europeans overwhelmingly believe that the poor are poor because they have been unfortunate. This difference in views is part of what is sometimes referred to as “American exceptionalism.”

General government spending in the countries in the European Union averages 48 percent of GDP… General government spending in the United States is smaller than any of these, at 36 percent of GDP…The largest differences between the United States and Europe are in transfers to households (including social security) and subsidies. In fact, the sum of these two categories of spending is almost twice as large, as a share of GDP, in Europe as in the United States…

In all categories except health, the United States spends a smaller proportion of GDP than the European average. The differences are particularly large in family allowances and unemployment compensation and other labor market programs. By this accounting, social spending in the United States was 16 percent of GDP in 1995, whereas the European average was 25 percent.

This chart is telling:

Why does the US spend so little on social services? It might stem from our history.

Americans are inherently more hostile to government, and more prone to believe that governments are wasteful and likely to spend on projects that the voters oppose. Indeed, the United States was created from an antigovernment revolution, and its history includes a civil war in which roughly half the country fought against the federal government. Forty Eight percent of European respondents to the World Values Survey favor greater government ownership in the economy, whereas only 26 percent of Americans express that opinion. This probably reflects a greater distrust of the state within the United States…

They come to the conclusion:

Americans redistribute less than Europeans for three reasons: because the majority of Americans believe that redistribution favors racial minorities, because Americans believe that they live in an open and fair society and that if someone is poor it is his or her own fault, and because the political system is geared toward preventing redistribution. In fact, the political system is likely to be endogenous to these basic American beliefs.