Category Archives: Sweden

2012 Primary, Budget, Econ, Europe, Obama, Sweden, Taxes, True Talking Points

Sweden’s Conservative Economic Recovery Continues

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Related: Sweden turns to Reagan’s economic reforms and it’s working – LINK

Matt Kibbe at Forbes:

Sweden Finance Minister Anders Borg
Sweden’s Finance Minister Anders Borg

With Most Of Europe Still On Its Back, Sweden Tries Policies That Actually Work.

While the rest of Europe and the United States have gone on massive spending sprees fueled by government borrowing and tax hikes, Sweden took a different approach. In the Spring 2012 Economic and Budget Policy Guidelines, the Swedish Government and its Finance Minister, Anders Borg, have laid out a plan that is focused on lowering taxes. Their rationale? “When individuals and families get to keep more their income, their independence and their opportunities to shape their own lives also increase.”

Borg also wants to lower the corporate tax rate as a way of meeting the government’s goal of “full employment”. The government has already cut property taxes and other luxury taxes on the rich to lure investors and entrepreneurs back to Sweden. The government has also slashed spending across the board, including on the welfare programs that used to be Sweden’s claim to fame. They’ve also installed caps on annual government expenditures: real and enforceable limits that the Swedes believe are pivotal to economic stability. They explain in their Policy Guidelines that “the expenditure ceiling is the Government’s most important tool for meeting the surplus.” Imagine that, a government that stays within its limits. So why didn’t Sweden hop on the stimulus bandwagon like the U.S. and much of Europe?

Anders Borg explains, “Look at Spain, Portugal or the UK, whose governments were arguing for large temporary stimulus… Well, we can see that very little of the stimulus went to the economy. But they are stuck with the debt.” We have now seen that attempts at austerity within the Eurozone have met a similar fate: none of it was serious. As spending increases have been squandered, spending cuts have been a charade, failing to target the big government programs at the core of the debt crisis. So Anders Borg and the Swedish Government have undertaken an economic and budget plan that slashes taxes and (actually) caps government spending. If you told Paul Krugman and the rest of the Keynesians back at the onset of the financial crisis that Sweden’s finance minister was planning such action, they would have surely laughed in your face and cynically predicted doom and gloom for the Scandinavian nation. However, in reality, a place Keynesians seem to be unfamiliar with, it’s become clear that what Sweden is doing is working. And it’s working better than even Minister Borg expected.

Despite slow projected growth for 2012, Sweden is expecting annual GDP growth of over 3 percent starting next year, projected out through 2016 by which time their unemployment is expected to slide down to just about 5 percent. During this time the Swedish gross debt is expected to drop from 37.7 percent/GDP to 22.5 percent/GDP as a result of government surpluses. For comparison, US gross debt to GDP is well over 100 percent and climbing. All this success must be on the backs of the working class right? Wrong. Wages are slated to rise in Sweden by nearly 4 percent annually through 2016.

2012 Primary, Budget, Econ, Europe, Sweden, Taxes, True Talking Points

Sweden turns to Reagan’s economic reforms and it’s working

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UPDATE – Sweden to lower corporate tax rate to attract new business and investment – LINK

Investors Business Daily: 

Economics: The president (Obama) has been accused of seeking to turn the U.S. into an Americanized Western European welfare state. If he insists on imitating one particular model, we suggest he follow the Swedish paradigm.

Sweden has a reputation as the prototypical cradle-to-grave socialist European nation, and the political left has long yearned for America to be more like the Scandinavian nation.

But it’s looking through a smudged window. With little notice, Sweden has changed.

The turnaround has been driven in no small part by the election of Fredrik Reinfeldt as prime minister in 2006. He took office in October of that year and by January of 2007, tax-cutting had begun. The Reinfeldt government also cut welfare spending — a form of austerity — and began to deregulate the economy.

That doesn’t sound like the Sweden that American Democrats hold up as the standard.

But as Finance Minister Anders Borg told the Spectator, the Reinfeldt government was simply continuing the last 20 years of reform.

Far from hurting Sweden’s economy, the changes have improved it. And they’ll likely help to protect it from the 0.3% economic decline now forecast for the euro zone in 2012.

Sweden fell into recession in 2008 and 2009, as did many developed nations. But it’s pulled strongly out of the decline, posting GDP gains of 6.1% in 2010 and 3.9% last year, when it ranked at the top in Europe’s list of fastest-growing economies.

U.S. growth over those same two years under Barack Obama’s Keynesian stewardship? It was less than half of Sweden’s — 3% in 2010 and an anemic 1.7% in 2011.

While the U.S. continues to struggle with its jobs problem — unemployment is at 8.1% here — Sweden’s jobless rate has fallen to 7.5%.

Not perfect, but 7.5% is far below the euro zone average of 10.2% and significantly lower than the rates in Spain (21.7%), Portugal (12.9%) and the United Kingdom (8%), countries that Borg noted were “were arguing for large temporary stimulus.”

Under Borg, Sweden handled the downturn in the most un-European way. “While most countries in Europe borrowed massively, Borg did not. Since becoming Sweden’s finance minister, his mission has been to pare back government. His ‘stimulus’ was a permanent tax cut,” Fraser Nelson wrote last month in the Spectator.

Borg strongly opposed the Keynesian solution, which the left continues to advance while it inveighs against an austerity that has yet to be implemented.

He also refused to resort to the trickery of a stimulus, instead cutting the taxes that he knew were hindering entrepreneurs from giving the economy the kick it needed.

The country needed innovators and capitalists — “the source of job creation,” says Borg — and he did what he had to, to attract new ones and to keep those already there from leaving.

During Sweden’s decline into a welfare state, it became, as Borg told the Spectator, “a textbook case of European economic sclerosis” punished by “very high taxes and huge regulatory burden.”

That lasted until the 1990s, when the nation realized it had to return to the market policies that had made it rich prior to the onset of its cradle-to-grave coddling.

How much further can Borg and Reinfeldt take their reforms? Will voters ask them to come back and complete the job?

After all, it’s not over. Though it continues to fall, Sweden’s government debt as a share of GDP is still too high at 38.4%. And while it’s dipped below 45% for the first time in decades, the country’s tax-to-GDP ratio is still far too steep.

Despite this unfinished business, Sweden is still moving in the right direction.