For years American Democrats, Socialists and Communist Party members pointed to Sweden as evidence that socialism works. This was despite the fact that socialism failed miserably everywhere else.
The Economist on “Northern Lights”
Interventionists in the United States could learn something from what’s going on now in Sweden (although I fear they won’t). According to a recent spread in The Economist magazine:
Sweden has reduced public spending as a proportion of GDP from 67 percent in 1993 to 49% today. It could soon have a smaller state than Britain. It has also cut the top marginal tax rate by 27 percentage points since 1983, to 57%, and scrapped a mare’s nest of taxes on property, gifts, wealth and inheritance. This year it is cutting the corporate-tax rate from 26.3% to 22%.
Compare these rates with the U.S. tax rates, under the 2013 tax law, of 39.6 percent on incomes above $400,000 (filing single) and 35 percent on corporations.
But in some sense the current dramatic policy changes in Sweden are just a continuation, after an interruption of several years, of a dis-interventionist trend that began in the 1990s. The “new” Swedish model is not really that new. Indeed, Sweden has climbed to 30th out of 144 countries in economic freedom according to FreetheWorld.com, compared to the United States, which has fallen to 18th, just ahead of Germany (31st) and far outpacing France (47th) and China (107th).The federal deficit numbers in the United States, however, look worse compared to Sweden’s. Again, according to The Economist.
Sweden has also donned the golden straitjacket of fiscal orthodoxy with its pledge to produce a fiscal surplus over the economic cycle. Its public debt fell from 70% of GDP in 1993 to 37% in 2010, and its budget moved from an 11% deficit to a surplus of 0.3% over the same period.
The current federal deficit—the annual excess of government spending over tax revenue—is around $1.1 trillion.
The accumulated debt of the United States federal government now exceeds $15 trillion, which is roughly equal to the current gross domestic product (GDP), the dollar value of all goods and services produced in the U.S. economy in 2012. That means that the federal debt as a percentage of GDP is now slightly more than 100% percent (compared to 37 percent in Sweden).