State of the Union: US: Sweden

So the President gets up there and unveils a host of big new government programs. Then he says they won’t add a dime to the deficit. That would be true only if:

a) They don’t pass Congress, or
b) Taxes are raised, or
c) Other programs are cut

As to (c), of course the President has proposed no such cuts. In fact, after years of talking about a balance of tax hikes and spending cuts, and indeed campaigning on that issue, Obama in the recent fiscal cliff deal got taxes raised without any spending cuts at all.

Cartoon by Eric Allie, Townhall.com

This he actually thought was a glorious triumph; liberals are cock-a-hoop that they’ve really stuck it to Republicans.

The Pre-K education proposal epitomizes how they think. Pre-K is actually desperately needed to help disadvantaged kids who are otherwise being done down by crappy schools. But does Obama’s proposal target those kids? No. It’s “universal.” Which means that just like Medicare and farm subsidies and so many other government programs, it will mainly give yet more welfare to the affluent, with the disadvantaged getting only a lesser share of the benefits.

This is not the time to be adding a big new “universal” federal program.

Whatever benefit it may buy will be more than wiped out when the shit hits the fan and our economy sinks under the weight of unsustainable debt. That’s true of all Obama’s economic initiatives. They will all come to nothing and worse if we don’t tackle the one big monster looming on the horizon, our debt. Eyes closed to this, Obama is taking us down the road to ruin.

It doesn’t have to be this way. The Economist recently ran an illuminating survey of the Nordic countries. Remember Sweden, the poster boy for a tax-and-spend “social welfare” state, of cradle-to-grave government cosseting, soaking up the lion’s share of GDP? Well, it’s not your father’s Sweden anymore. That model, the Swedes and other Nordics realized, was doomed, so they reformed; in The Economist’s words, they “put an end to the region’s magical thinking about welfare.”

So they enacted sweeping pension and benefit reforms and put their budgets in balance; Sweden reduced national debt from 84% of GDP in 1996 to 49% in 2011; government’s share of GDP fell by a whopping 18 percentage points. The Nordic countries have also become much more enthusiastic toward the free market and entrepreneurialism, moving their economies away from statism. They embrace free trade and resist the siren song of protectionism. The Swedes now even let private companies compete with government bodies to provide services; a majority of new kindergartens and health clinics are being built by businesses, and citizens can shop around.

This includes school choice; Sweden is now the world’s leading adopter of vouchers. Almost half its schoolkids are in non-public classrooms. And the most comprehensive study of the results shows great performance improvement – especially in the public schools, which competition has forced to raise their game. (Milton Friedman, father of the voucher concept, said the point was not that privately-run schools would be better; rather, all types of schools would be better if they must compete.)

Finland too is a hotbed of educational success. Interestingly, Finland spends proportionately less on schools than America, and teacher pay is relatively low. Yet Finland attracts high quality teachers by giving them something more valuable than money: respect, and thus a high degree of autonomy and responsibility for what they do in class.

So, does all this reform throw granny over the cliff, as in liberal nightmares? No. As I keep saying, rich countries have plenty of money to take care of the needy; it’s welfare for the rich that’s bankrupting us. Nordic budgets have not been balanced on the backs of the disadvantaged. What they have done is to create the conditions for everyone to flourish. And, by all accounts, their populations are quite happy with the change, facing the future with a positive attitude.

Why can’t America get its act together like that? Yes, I know all about our frozen politics and the influence of special interests (like the teachers’ unions). But Sweden and Finland were not utopian paradises free of such societal baggage. Those fat and happy with their old paternalistic policies were equally wedded to them. But their special pleading was overcome. It takes leadership and grit. I continue to believe Americans would support sensible reforms like the Nordics, if only some real leadership were shown.

I guess we’ll have to await another president. Let’s hope it won’t be too late.

We have met the enemy and it’s us

Recently I got one of those virally forwarded e-mail blasts, flaying Washington politicians and demanding an array of draconian punishments for them, stopping just short, perhaps, of tumbrils.

But who elected these miscreants?

It doesn’t take a political science genius to understand politicians’ behavior. There’s but a single explanatory factor: winning elections. That means following voter wishes.

So why doesn’t the fiscal cliff deal tackle spending? Don’t voters want that? Oh, yes, absolutely they do, just so long as you don’t cut Social Security or Medicare or education or farm programs or defense or, well, anything, except of course for foreign aid. (On which the average American thinks we should spend no more than 10%. In fact it’s less than 1%.)

Republicans, especially Tea Partiers, really really want spending cuts. But just ask exactly what to cut, besides Big Bird (0.014% of the budget). And just whisper a suggestion and you get the campaign ads with granny shoved over a cliff. Of course Republicans don’t want to hand Democrats this nuclear weapon. What they’d like is for Democrats to disarm by joining them in the spending cuts. But any Democrat doing that would get the granny-over-the-cliff ad himself in his own next primary.

We imagined that Republicans would make a deal with President Obama, agreeing to higher taxes for the rich in exchange for spending cuts. How foolishly naïve. We forgot the nuclear weapon. We forgot that whereas soaking the rich is popular, cutting spending risks granny-over-the-cliff ads and political annihilation. So what we got was soak-the-rich and nothing on spending.

Why did Republicans agree? In the end, instead of trading off soak-the-rich taxes for spending cuts, they were forced to swallow the tax hikes merely in exchange for avoiding even bigger tax hikes.

The New York Times editorially labeled this a big payoff for Republicans, rewarding their “intransigence”! The Times fulminated that the rich aren’t being soaked enough – while saying hardly a word about spending – nor noting that under this deal, deficits will continue to balloon – or that no conceivable level of taxes on the rich could close that gap.

Devotees of this blog may recall how accurately I foresaw this outcome. The Democrats did get their Great White Whale, with Bush’s tax cuts terminated for high incomes. And the argument over spending can seemingly continue. I say “seemingly” because for all the sturm-und-drang, nothing serious will be done about spending because Republicans have now squandered their biggest bargaining chip. Any further blackmail they might attempt would be seen as just that, blackmail, politically suicidal.

I hope President Obama enjoys his whale meat. He might have exercised responsible leadership. He might have forced Democrats to accept the need for spending action, as a trade-off for the tax increases they craved. This fiscal cliff moment was actually a grand opportunity for him to achieve something meaningful – just like Simpson-Bowles – the opportunity he missed earlier. But instead of seizing the moment, the President chose the easy, expedient thing, to pocket the cheap “victory.”

History will write that Obama’s eight years mark the time when America might have saved itself, but didn’t. We may have survived this recent little cliff, but we’re running straight down the track toward a far bigger one, of economic ruin, with clearly now no hand on the throttle.

And if you want to find the real culprit to blame, dear voter, look in the mirror.