Sizing up Sweden

I commented recently on two recent Internet posts, one from William Anderson, whose blog is called “Krugman-in-Wonderland”. In his blog, he critiques what he characterizes as the mostly false arguments of Paul Krugman. Here is Anderson commenting on Krugman’s post on Sweden:

What Krugman (who is a multi-millionaire and really doesn’t have to worry about what things cost) does not tell people is that Swedes pay much more for goods than do Americans, yet Swedish incomes are not as high, and their real incomes are substantially lower than ours.

The argument from Krugman was that Sweden was a thriving country despite high taxes and a welfare state. Anderson noted the use of the word ‘despite’ and wondered if the wording was intentional, i.e. does Krugman believe that high taxes and a generous welfare state are impediments to growth and prosperity, or does he believe the growth and prosperity are due to the high taxes and generous welfare state?

In the comments section, I quoted from a tweet that I had posted in response to Hans Rosling (a Swede), who asked:

Sweden collects 50% of GDP in tax & has 5% growth, US collects 25% & has 1% growth. Is tax good for growth or who explains the paradox?

My response:

Sweden has roughly same population as North Carolina. Let’s try 50% state tax for NC and 0% federal taxes and see how they do!

The rest of my comment on Anderson’s site read:

The point is that a society like Sweden is much more directly comparable to one of the states in the United States rather than the entire nation. I think that’s why Milton Friedman always caveated his statements on freedom as such: “I do not know any exception to the proposition that if you compare like with like, the freer the system, the better off the ordinary poor people have been.”

The comparing of “like with like” would suggest that comparing the Sweden with the United States is unfair. If Swedes were also burdened with the majority of their taxes being paid directly to the European Union versus the government of Sweden, their tax system and economy would probably look quite different.

The two extremes of the debt ceiling debate

So much has been going on with regard to the debt ceiling debate, I haven’t had time to compose any of my own thoughts that would contribute anything new to the conversation.

Now that the bill looks like it has passed the House and will presumably be signed by the President tomorrow, it’s safe to engage in a little Monday morning quarterbacking.

On the whole I agree with Charles Krauthammer, who wrote:

The distinctive visions of the two parties — social-democratic vs. limited-government — have underlain every debate on every issue since Barack Obama’s inauguration… The debt ceiling is but the latest focus of this fundamental divide.

The sausage-making may be unsightly, but the problem is not that Washington is broken, that ridiculous ubiquitous cliche. The problem is that these two visions are in competition, and the definitive popular verdict has not yet been rendered.

I hasten to point out that the “definitive popular verdict” will likely never arrive and we will surely always have people with opinions all across the political spectrum. This is, as they say, a feature, not a bug.

Regarding the terms of the debate, one thing that interests me the most is just what was considered “normal”, and what was at least originally considered a fringe viewpoint. On the one extreme, you had the President and much of the Washington political commentariat arguing for a clean increase in the debt ceiling with no limitations. This viewpoint roughly equates to “the government should be allowed to spend whatever it needs to spend regardless of how much revenue is being brought in.” On the other extreme, you have folks who are arguing for reducing spending, a viewpoint which might equate to “the government should spend roughly the same amount that it receives in revenue.” Despite the characterization that people in the limited government camp were heartless extremists bent on ripping apart the social safety net, very few people were arguing for anything as radical as a return to 1920 spending levels. Most were simply arguing that we should endeavor to spend only about as much as we bring in, not more.

In a normal household or business, the view that outlays or expenses should be roughly equivalent to income or revenue would be the only logical position to take. But when it comes to government, we are told it’s a special case and any spending by the government has a special effect, regardless of the cost to current or future taxpayers. It looks like that view is getting less and less traction, which in my mind is a positive development.