Tyler Cowen’s Is the welfare state good for growth? examines Peter H. Lindert’s Why the Welfare State Looks Like a Free Lunch, which makes a few interesting points. First, an unexpected fact:
Whatever one might have thought, the smaller-government countries such as Japan, the United States, Switzerland, Canada, and Australia tax capital and private property at least as heavily as the welfare states of Scandinavia, Germany or the Netherlands.
Second, a potential explanation for why welfare states might tax and spend a bit more wisely:
The higher the social budget as a share of GDP, the higher and more visible is the cost of a bad choice.
If you can stomach an econ research paper, read the whole thing.