COLUMN ONE : A Safety Net Snags on Its Cost : Western Europe’s prized welfare programs follow citizens from cradle to grave. But tax rates are astronomical by U.S. standards, and critics are gingerly making changes.

Count Otto von Bismarck is the unlikely founding father: The great Prussian warlord, seeking to head off a rebellion against the policies that ultimately led to World War I, provided workers in the newly united Germany with insurance against accidents, sickness and old age.

The seeds Bismarck planted more than a century ago have since blossomed into the pride of an entire continent--a generous array of taxpayer-financed social welfare programs, dwarfing anything found in the United States. The benefits follow most of Western Europe’s citizens from cradle to grave.

Working mothers typically receive 14 weeks or more of government-paid maternity leave. Most countries pay families a lump-sum benefit at birth, followed by monthly allocations while the children remain at home. Health care is basically free. Government benefits are ready for workers who lose their jobs to illness or disability. Public pensions allow the elderly to retire in comfort, at subsidized nursing homes if necessary.

Most of these programs are available to everyone. They mean low poverty rates--often less than half the U.S. rate--and a freedom from fear of falling into an abyss of want. Pierre Pestieau, an economist at Belgium’s University of Liege, calls Europe’s style of social protection “one of our great strengths as a society.”

But now, even as the Democratic presidential candidates have referred to the European social protections as models for America to emulate or exceed, the Gargantuan costs of Europe’s welfare states are threatening to strangle the citizens who pay for them. Tax rates are astronomical by U.S. standards.

Many working Europeans, even those with moderate incomes, take home less than 50 cents of every dollar their employers pay them. In the Netherlands, workers are all but outnumbered by those living entirely on public handouts.

Benefit programs are squeezing government budgets and, arguably, draining national economies. The Organization for Economic Cooperation and Development (OECD), a club of 24 of the world’s richest countries, traces Europe’s high unemployment rates to the relative comfort of living off the dole.

High taxes also mean high wage costs for businesses. Compounding the effect, many European governments force employers to pay lavish worker benefits, such as housing subsidies and commuter allowances. German workers are guaranteed 40 days off each year, about double the American average, according to Dutch business executive and professor Jacob Van Duijn.

Business is rebelling against Europe’s high taxes and wage costs by moving elsewhere, which is becoming increasingly easy in the global economy. “There are not many European-made appliances or textiles in the average home in Europe because it costs too much to make them here,” Van Duijn says.

Sweden, Europe’s quintessential welfare state, is hurting most. Spectacular tax rates have long driven rich individuals to seek foreign tax havens and corporations such as Volvo and Electrolux to locate plants abroad. Now, Sweden has brought the top personal income tax rate, 85% before last year, down to 50%. The rightist government of Prime Minister Carl Bildt, which took office last year after decades of socialist rule, is planning to take slices out of generous pension and worker-injury programs.

Much the same, if on a smaller scale, is happening all over Europe. Pensions and medical benefits are particularly vulnerable because, as in the United States, increasingly elderly populations are driving their costs up.

Will Europe’s social safety net one day be as frayed as America’s? Probably not.

Various international compacts protect Europeans’ social programs. The European Community’s charter, for example, binds 11 of the EC’s 12 members to maintain their safety net. Only Britain, which finished dismantling much of its welfare system in the 1980s under former Prime Minister Margaret Thatcher, has refused to go along.

Even in Sweden, cuts in programs, both actual and contemplated, are mostly around the edges. “Nobody is challenging the system itself,” says Hakan Martin Rahm, chairman of the Health and Social Affairs Ministry.

Nobody dares. “The new prime minister is trying to make changes very fast,” says Nicholas Wennoe, 26, who was paid 90% of his previous salary during a three-month paternity leave last year. “But if he does too much, we’ll vote our old government back into office. The people have grown too used to the programs.”

As pressure mounts for cutbacks in Europe, many analysts on both sides of the Atlantic wish the United States would study how Europe protects its citizens from want.

“Americans, to the extent that they think about other countries at all, assume that it’s better in America,” says Harvard sociologist Lee Rainwater.

Jim Cunningham, a senior economist for Britain’s Barclays Bank, adds: “The U.S. solution isn’t the only one. But Americans seem not to know that there’s an alternative.”

Henry Aaron of Washington’s Brookings Institution says the American and European systems may be of such different species that transplants from one side of the Atlantic would not take. “Each continent has its own history,” he says, “which makes it difficult for one to adopt the approaches of another.”

The ethic driving the American approach, Aaron says, is the “tradition of independence and self-reliance.” The pioneer, every-man-for-himself spirit bred a distrust of big government and a distaste for taxes.

“In the United States,” Pestieau says, “intolerance of inequality is typically restricted to your own ethnic group. If you’re a middle-class white, you’re intolerant of poverty in your own group. But as for blacks or Hispanics, you’re just as likely to say, ‘We don’t care; these are not our people.’ ” In Europe, by contrast, he says, ethnic homogeneity bred a deep sense of social concern, an unwillingness to let one’s fellow countrymen become destitute.

New waves of North African and Turkish immigrants--who have triggered right-wing backlashes in France, Germany, Italy and elsewhere--may now be changing all that. Pestieau worries that the result could be uncomfortably close to the American situation, in which, he says, there are separate ethnic groups that feel no particular kinship.

Change may also be undermining Europe’s close-knit family structure, which has inspired maternity leaves, family allowances and other programs designed to strengthen the family. “The United States tends to regard the birth of a child and the raising of a family as private events,” says OECD economist Betty Duskin. “In Europe, people see a public interest at stake.”

But now, Europeans, like Americans, are becoming more mobile. Religion is declining in importance. Divorce rates are rising. “It’s going to be hard for the family to play its traditional role in the social protection scheme,” Pestieau says.

Great differences exist between Europe’s social protection plans. Scandinavian countries emphasize direct services, from job training to nursing home care, financed from general tax revenue. Germany and many other countries, building on Bismarck’s legacy, use social security taxes on employers and employees to finance insurance against the debilities of illness and old age.

Yet the differences between the European norm and the United States are greater still. “The United States stands out alone,” says Cunningham of Barclays Bank. “It isn’t Sweden that’s the crackpot case.”

Spending on social programs by all levels of government in the United States consumed about 18% of U.S. economic output in 1985, according to the OECD’s most recent comparative data. In Europe, only relatively impoverished Spain and Portugal spent less; France and Denmark weighed in at 34%, even more than the 32% recorded by Sweden. More recent figures from the European Community and the United States suggest that the 1985 pattern holds true today.

To Americans, no European social programs seem more gilt-edged than those dealing with the birth and rearing of children. In the EC, all but Britain guarantee working mothers at least 14 weeks of paid maternity leave. The rate of pay reaches up to 100% of prior earnings in the Netherlands. Employers sometimes supplement these allowances. An Alitalia stewardess, living in Brussels, is in the middle of an 18-month leave, at full pay for the first 12 months and 60% of her former salary for the final six.

Some non-EC countries are more generous still. Sweden allows either parent--but not both at once--to take a year and three months of leave at 90% of previous pay for the first year and about $10 a day for the final three months.

“It’s a chance to get in contact with your child, to form a relationship,” says Wennoe, who took three months off from his job in an after-school center last year on the heels of his wife’s seven-month maternity leave.

Like his wife before him, Wennoe received a monthly check from the government for 90% of his salary. “We could live on that,” he says. “No problem.” To Wennoe, now a journalism student, paid paternity leave is more than a frill. “What do we have economic strength for,” he asks, “if we can’t take care of our children?”

That’s not the only way Europe helps families with children. Besides the lump-sum payment to families at birth and the monthly stipends until children are well into their teens, payments may also go to those who continue their education, even up to the age of 27.

In Belgium, for example, families receive about $920 for the first birth and $630 for subsequent children. The monthly allowance is at least $70 for the first child, $120 for the second and $190 for each of the rest.

Among the industrial nations, says Syracuse University economist Timothy M. Smeeding, only the United States and Japan do not make cash payments to families with children “as a universal right of citizenship.” The United States, in effect, pays working parents through income tax deductions for children. But that only helps parents who pay taxes; besides, most European codes also include tax breaks for children.

Government child-care subsidies, like family allowances, are common in Europe but absent in the United States, except through the tax code. Denmark leads the way with places available for 85% of children younger than 3; elsewhere, families must enroll their children practically at birth to gain entry to subsidized day-care facilities.

Aaron, of the Brookings Institution, calls France a world leader in child care. France has places for only 20% of children younger than 3 (and almost all children from 3 to 5); families shut out of the day-care system qualify for baby-sitter allowances of about $350 a month, if the baby-sitter frees up the parents to work.

Veronique Gagey, a Paris pediatrician, has sent all five of her children to the local Port Royal day-care center, which gets three-quarters of its revenue from the national and city governments. For Eleonore, her youngest, who attends Port Royal from 8:30 a.m. to 4 p.m., Gagey pays about $2,250 a year. “I’m really lucky to have had a center available for all my children,” she says. “Places are so hard to find.”

Gagey also employs a baby-sitter for Eleonore and her four other children, running her total out-of-pocket child-care costs to almost $6,000. But she and her husband get almost $2,500 of that back in the form of tax refunds.

Most European countries also are far more generous than the United States with workers who become sick or disabled. The Netherlands is beginning to realize it has been generous to a fault.

So bountiful are Dutch sickness benefits that DSM, a chemical company in Heerlen, found that 13% of its 12,000 workers called in sick on an average day in 1979. So it began giving bonus vacation days to workers who had not been ill in the previous year--which knocked the absentee rate down to below 4% but also meant fabulous amounts of vacation for some workers.

Arthur Spierts, a DSM press officer, is entitled to 27 normal vacation days plus a 25-day bonus. “I can’t take all 52 days off; it’s impossible,” he says. “I have so many days off that the problem is not the holidays, it’s doing your job.” This year Spierts plans only 42 days off. For the 10 vacation days that he won’t take, DSM will pay him double.

The Dutch disability benefits law, dating to 1967, was deliberately designed to reduce the unemployment rate by purging the elderly from the labor force--a sort of early retirement. Workers could qualify for full benefits, if they could show that they had lost as little as 15% of their earning capacity.

Economist Leo Aarts of the University of Leiden says authorities expected the disability rolls to reach 200,000. Instead, they soared to 900,000. There is one Dutch citizen on disability for every seven in the labor force--triple the American rate, Aarts says.

Parliament tightened the law in 1987 by reducing benefits for the partially disabled and requiring them to look for work. With the Dutch economy in the doldrums, further cuts are under debate this year.

Bart Hoelscher hopes they don’t touch him. He lost his job as chief of a grocery store’s produce section in the southeastern Dutch town of Maasbree three years ago because pinched nerves in his back made it difficult for him to walk or even to stand. He received his full salary of about $900 a month (70% from the government, 30% from his employer) for a year and is still receiving about $650 while studying for a sit-down job as a personnel officer. Meanwhile, his wife works weekends in a nursing home.

If the disability program must be cut, says Hoelscher, 28, the cuts should land on those who have abused the program, not on him. “I can’t help it that I’m disabled,” he says. “I can’t help it that the economy is not running well.”

Many European countries, unwilling to let their disabled subsist indefinitely on welfare, assume responsibility for rehabilitating them. Austria runs seven hospitals and four rehabilitation centers, some situated picturesquely in the Alps; it subsidizes care in a variety of homes and spas.

Klaus Foget, crippled at 19 in a car accident, doesn’t know what would have become of him without Austria’s rehabilitation program, under which he learned how to negotiate through life in a wheelchair; he studied hard enough to make himself a Vienna judge. Government-provided insurance paid for his wheelchair, adapted his house to his disability and covers his continuing orthopedic help. “If you show that you’re willing to work,” he says, “they’ll help you.”

For Europe’s general population, national governments either provide or pay for most health care. Of the 24 industrial countries in the OECD, in only two--Turkey and the United States--does the public sector’s share of health care costs fall below half.

The U.S. medical profession insists that it delivers the best health care in the world, that most medical breakthroughs bear a Made-in-the-USA label.

This much is sure: The American system is by far the most expensive. Health care consumes about 12% of American economic output, half again as much as in most European countries. At the same time, Europeans seem far happier than Americans with their health care system. A 1990 study found satisfaction rates in Europe in the 40% to 50% range, compared with 10% in the United States.

The challenge now facing Europe is to maintain its social safety net without running intolerable budget deficits or crippling the competitiveness of its industry.

The University of Liege’s Pestieau, for one, sees “dark clouds gathering on the European sky.” Aging populations are pushing costs up, even as employers, thanks in part to the EC’s drive to turn itself into a single economic unit, are becoming increasingly free to move where taxes and wage costs are lowest.

Pestieau sees increasing competition, both within Europe and between Europe and its global economic rivals, to lure business and investment. “In a few years or in a decade,” he predicts gloomily, “taxes in Europe will be lower, at the expense of social protection.”

Yet he has not entirely given up hope. “European unity is both the greatest threat and the greatest opportunity,” he says. “We are really at a crossroads.”

Europe’s Best Benefits

A sampling of some of Europe’s most generous government-financed social benefits.

Long-term illness

Norway: After first two weeks, government pays full salary (up to $27,500) for 50 weeks.

Maternity leave

Italy: Maximum 11 months--first five at 80% of earnings, final six at 30%.

Family allowance

Belgium: $70 per month for first child under 18, $125 for second and $190 for rest; plus $920 for first birth and $640 for subsequent births.

Parental benefit

Sweden: Together, both parents entitled to 450 days of leave during child’s first eight years. Benefit: 90% of previous income for first 360 days, $10 a day for last 90 days.

Guaranteed minimum income

Netherlands: $620 a month for single person, $1,070 for couple with two children.

Nursing homes

Sweden: Resident pays up to $12 a day for homes whose costs average $200 a day.

Health care

Denmark: All residents are insured. Care is free at public facilities; at more expensive private ones, patients pay the excess.

Pension

Germany: Maximum of about $23,000 a year.

Child care

France: Publicly financed care available for 20% of children, infants to age 2 and more than 95% of those ages 3 to 5.

Sources: European Community, European Free Trade Assn., Nordic Social Statistic Committee, Council of Europe, U.S. Social Security Administration