Monday, March 4, 2013
The New Swedish Model
The Foundation for Economic Education ^ | March 1, 2013 | Sandy Ikeda
Among policy nerds back in the day, “Swedish model” meant the brand of social democracy practiced in Sweden in the second half of the twentieth century. (Somebody would usually crack wise about Anita Ekberg whenever the phrase was uttered.) But for a very long time, whenever the problems of socialism were discussed, it was common to hear people say as a kind of shut-up argument: “Ah, but socialism works in Sweden; what about the Swedish model?”
Swedish social democracy created an extensive welfare state—including comprehensive health care, generous unemployment benefits, and marginal tax rates commonly in excess of 70 percent. But that followed years of relatively free-market policies in the early twentieth century, which generated impressive economic growth. Government intervention in Sweden didn’t really get going until the 1960s.
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).
So What About the United States?
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).
The United States does compare favorably to Sweden in federal spending as a percentage of GDP. For the United States, that’s about 39 percent, versus over 50 percent for Sweden. Including state and local spending boosts this figure somewhat over 40% percent of GDP for the United States, but that’s still significantly below Sweden's figure. Sweden, though, with one-thirtieth the population of the United States, has a per capita GDP of $57,091 to the United States’s $48,112.
If Sweden Can Do It, Can the United States?
Some fear that a debt-to-GDP ratio above 100 percent places the United States past the fiscal “point of no return”—that is, past the point where in modern times governments have been able to significantly reduce the percentage of debt to GDP. How did things get so bad?
Milton Friedman brilliantly characterized the main alternative politico-economic systems as follows:
1) spending my own money on myself (capitalist model)
2) spending my money on someone else (Christmas model)
3) spending someone else’s money on myself (rent-seeking model)
4) spending someone else’s money on someone else (socialism)
He went on to say that the problem with socialism is that eventually you run out of other people’s money.
But if Sweden, a country in which the welfare state has been so entrenched over so many decades, can make such dramatic, even radical, changes in its interventionist habits, why couldn’t the United States? A comparably dramatic reform here—perhaps “revolution” comes closer to describing what would be needed—is certainly possible, despite staggering institutional barriers, tenacious entrenched interests, and sheer economic ignorance.
The biggest obstacle, as I see it, is not having the strength of will to sustain the relentless intellectual and political battle needed to overcome all those other obstacles. And in all honesty, I find it hard to be very optimistic about that.
The Greek Model
Well into my sixth decade of life, one of the things I think I’ve learned is that radical change and the will to see it through are indeed possible—beyond any so-called point of no return—but only when it’s clearly a matter of life and death. There has to be a sense of urgency, even desperation, to the extent that you become willing to do whatever it takes to survive. But of course desperation is tricky; desperate people can easily make matters worse. It’s perhaps during crises, moments of widespread desperation, that a well-developed philosophy of freedom can have its finest moment by guiding desperate people toward real solutions.
So does the United States have to follow, say, hapless Greece—with its bloated welfare state, strangling regulation and taxation, and monetary profligacy—before our crony-capitalist system develops cracks wide enough for enough of us to see that embracing liberty and rejecting statism is our last, our best, and our only hope?
I’m afraid our economy will have to look much more like the Greeks’ before we’ll muster the will to follow the example of the Swedes.
Sunday, March 3, 2013
Ye Cana Fool a Scottish Caddy!
During his golfing vacation at Martha's Vineyard - President Obama had been slicing off the tee on every hole.
He asked his Scottish caddy if he had noticed any obvious reasons for his poor tee shots, to which the caddy replied:
"Aye, there's a piece of shyt on the end of yer driver. "
The President picked up his driver and cleaned the club face, at which point the caddy said:
"No, the other end!"
Diminished Trust and Woodward’s Woes
Townhall.com ^ | March 3, 2013 | Austin Hill
It’s difficult to imagine that he was surprised by the outcome.
But the White House response that ensued after Author and Journalist Bob Woodward dared to question and criticize the President should be an eye-opener to the world. And the fact that America’s beltway media culture has essentially “sided” with the President and seems quite comfortable with the White House hostility is a very telling sign.
Consider the relationship between the presidency and the press over the course of American history. Believe it or not, the White House has been home to lots of outlandish and at times illegal behavior over the past two hundred years or so, much of which was known to White House reporters at the time but was never reported.
I wouldn’t have believed this, necessarily, until I began researching and writing my first book “White House: Confidential” back in 2005. It was at that time that it became glaringly apparent to me that everything changed in this important relationship during the Nixon presidency. And that very necessary change was mostly brought about by Bob Woodward, and his former Washington Post colleague Carl Bernstein.
First Lady Mary Todd Lincoln, wife of President Abraham Lincoln, conducted séances at the White House in an attempt to “contact the spirit” of their son William, who died at the age of twelve while Lincoln was still President. First Lady Eleanor Roosevelt recruited and hired White House reporter Lorena Hickok, and the two of them lived together at the White House in what many believe was a lesbian relationship.
Senator Warren G. Harding was widely known to have had a mistresses and an out-of-wedlock child. So before he was recruited to run for President, his party – the Republican Party – paid the mistress to leave the country until his presidency was completed (she returned after Harding died in office).
President and former Senator James Buchanan, America’s only bachelor President, was known to have shared bedroom quarters during his congressional days with Senator (and future Vice President) William R. King (the press called them “Mr. Buchanan and Aunt Fancy”). And our two Presidents Adams – John, and his son John Quincy- were so ticked-off about being un-elected after one term in office that the both left town a day before their presidencies were completed, and didn’t attend the inaugurations of their respective predecessors.
Was there scandalous behavior at the White House before Richard Nixon arrived? Absolutely. And while historical records suggest that much of it was known to the press, most of it never got reported. Presumably journalists of the day were concerned that such “news” could have been damaging to the presidency, or perhaps to the entire nation.
But everything changed with Nixon – and with Woodward and Bernstein. The two young thirty-something reporters from the Washington Post quickly discovered that the presidency could be a harbinger for serious, and potentially deadly corruption. One can argue that the fraud of the Nixon presidency helped make a lucrative career for Woodward, but Woodward couldn’t have known that while he was in the process of confronting the corruption head-on.
The courage of Woodward still exists today, largely with independent, web-based media operatives like Matt Drudge, James O’Keefe, and those associated with the late Andrew Breitbart. Most in the traditional media, however, have become so comfortable with the thuggish behavior of “”their President” that, rather than express any real concern over this latest episode of abuse, they’ve instead turned on Woodward himself.
There are many very good reasons why Americans’ trust in traditional media is at an all-time low. Consider Bob Woodward’s story as one of them.
It’s difficult to imagine that he was surprised by the outcome. But the White House response that ensued after Author and Journalist Bob Woodward dared to question and criticize the President should be an eye-opener to the world. And the fact that America’s beltway media culture has essentially “sided” with the President and seems quite comfortable with the White House hostility is a very telling sign.
Consider the relationship between the presidency and the press over the course of American history. Believe it or not, the White House has been home to lots of outlandish and at times illegal behavior over the past two hundred years or so, much of which was known to White House reporters at the time but was never reported.
I wouldn’t have believed this, necessarily, until I began researching and writing my first book “White House: Confidential” back in 2005. It was at that time that it became glaringly apparent to me that everything changed in this important relationship during the Nixon presidency. And that very necessary change was mostly brought about by Bob Woodward, and his former Washington Post colleague Carl Bernstein.
First Lady Mary Todd Lincoln, wife of President Abraham Lincoln, conducted séances at the White House in an attempt to “contact the spirit” of their son William, who died at the age of twelve while Lincoln was still President. First Lady Eleanor Roosevelt recruited and hired White House reporter Lorena Hickok, and the two of them lived together at the White House in what many believe was a lesbian relationship.
Senator Warren G. Harding was widely known to have had a mistresses and an out-of-wedlock child. So before he was recruited to run for President, his party – the Republican Party – paid the mistress to leave the country until his presidency was completed (she returned after Harding died in office).
President and former Senator James Buchanan, America’s only bachelor President, was known to have shared bedroom quarters during his congressional days with Senator (and future Vice President) William R. King (the press called them “Mr. Buchanan and Aunt Fancy”). And our two Presidents Adams – John, and his son John Quincy- were so ticked-off about being un-elected after one term in office that the both left town a day before their presidencies were completed, and didn’t attend the inaugurations of their respective predecessors.
Was there scandalous behavior at the White House before Richard Nixon arrived? Absolutely. And while historical records suggest that much of it was known to the press, most of it never got reported. Presumably journalists of the day were concerned that such “news” could have been damaging to the presidency, or perhaps to the entire nation.
But everything changed with Nixon – and with Woodward and Bernstein. The two young thirty-something reporters from the Washington Post quickly discovered that the presidency could be a harbinger for serious, and potentially deadly corruption. One can argue that the fraud of the Nixon presidency helped make a lucrative career for Woodward, but Woodward couldn’t have known that while he was in the process of confronting the corruption head-on.
The courage of Woodward still exists today, largely with independent, web-based media operatives like Matt Drudge, James O’Keefe, and those associated with the late Andrew Breitbart. Most in the traditional media, however, have become so comfortable with the thuggish behavior of “”their President” that, rather than express any real concern over this latest episode of abuse, they’ve instead turned on Woodward himself.
There are many very good reasons why Americans’ trust in traditional media is at an all-time low. Consider Bob Woodward’s story as one of them.
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