State of the Union: US: Sweden

imagesSo 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,

Cartoon by Eric Allie,

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.

images-3It 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.

images-5This 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.

images-4Why 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.

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8 Responses to “State of the Union: US: Sweden”

  1. Chris Punnett Says:

    A previously big fan of Milton Friedman – you need to read Naomi Klein’s “Shock Doctrine:
    Even if over blown as critics suggest it was tough to read and indeed shocking. I am no longer a Friedman fan.

  2. rationaloptimist Says:

    Naomi Klein is a polemicist with a decided point of view — hard left, in fact. What she preaches is very wrong and deleterious in my view. Milton Friedman was a great man and a great intellect who was right on the great issues (as in the school choice issue I mention). I will take Friedman over Klein any day.

  3. Gregg Millett Says:

    “it’s welfare for the rich that’s bankrupting us” Frank could you expand on this, let’s say relative to the President’s educational initiatives? As you can guess, I had tears in my eyes and hope in my heart as the President delivered his State of the Union address. And to get some quick money, not so much to “help the needy,” but to build infrastructure and job and educational opportunity, I’d do away with homeland security and cut the military budget in half and of course substantially increase taxes on everyone making over $75,000

  4. rationaloptimist Says:

    I too had tears in my eyes — tears of frustration.
    I too would do away with Homeland Security and cut the military substantially (because so much of that budget is bloated pork and weapons we’d never actually use). But not only won’t either of those ever happen, they’re not anyway what’s going to bankrupt us. It’s Medicare and Social Security and pensions. That will crowd out future expenditures for infrastructure, helping the truly needy, etc, but even worse it will wreck our whole economy.
    Substantially raise taxes on incomes over $75,000, “of course”? I’m just guessing but maybe your income is, oh, I don’t know, roughly $74,859. Point being that liberals are generally pretty lavish with other people’s money. I lean to the view that one’s earnings belong to oneself, not to the government.
    It’s spending. There’s no conceivable tax increase that can come close to fixing our budget imbalance. It’s spending. It’s spending.

  5. Anonymous Says:

    Government doesn’t create wealth. It is an expense. Government spending is the most significant problem we face. When expenses exceed revenue continuously the resultant insovency ultimately leads bankruptcy. If the government’s problem with spending is not addressed, it is not a matter of “if”, but “when”.

  6. Lee Says:

    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.”

    Sweden does indeed have its act together. Its top income tax rate is 57% and its total tax revenue is 47.9% of GDP. (Did the Economist mention that?) Here in the US, there were people who were nearly willing to drive us over the fiscal cliff in order to stop our top rate, for people earning over $250,000 annually, from going to 39.6%.

  7. rationaloptimist Says:

    Yes; but Sweden’s tax take, govt share of GDP, and debt are on a downward path. The Economist recognized these things with admiration but disavowed satisfaction, saying the Swedes should work to get all these numbers down even more. Oh, and The Economist also said that while tax rates are still pretty high in Sweden, people are happy to pay them because they feel govt really delivers effectively in providing services, something which does not seem to be true in the U.S.

  8. Lee Says:

    Remember all those science fiction books where technology advanced so much that everyone had much more leisure time and had to spend only a few hours working each week? Instead the bulk of the labor was performed by the technology.

    We have much of that magical technology now and yet for many there is still the need to work multiple jobs to make ends meet. So, what happened? The problem with the science fiction projections is that the authors imagined that individual’s owned the technology. However, in the real world, a person who doesn’t own the technology has to pay for its benefits, by working multiple jobs. Universal pre-K, social security, medicare, roads, fire departments, healthcare, etc. are a way to get some of the benefit of technology to everyone.

    Sure, if we go too far, we lose much of the profit-motivated incentive for constantly improving the technology (though profit is not the only such incentive). However, if we don’t go far enough, we have too many people wasting their effort on inefficiently trying to survive — for example, sticking with an inappropriate job because one can’t afford to go without a job during a job search — which hurts wealth. Having only visited Sweden, I could easily be wrong, but I think they are closer to the proper balance than we are.

    And I don’t buy that trope that people will slack off if they aren’t nearly starving. Bill Gates, Steve Jobs, Warren Buffet, etc. work plenty hard despite that it is, at this point, completely unnecessary for their survival.

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