Swedish Model Is Far Better Than American Trillion Dollar Deficits

The US is wallowing in trillion dollar deficits, and if the President’s recently-released budget is any indication, taxpayers won’t be seeing balanced budgets anytime soon. But, believe it or not, the grass is greener in the so-called “socialist paradise” of Sweden, where the budget is in surplus and taxes will soon be slashed. The secret to Sweden’s success has been spending cuts.  Not a concept that either political party is familiar with in the US.

The Nordic country’s flirtation with limited government may surprise some pundits and lawmakers intent on passing Sweden off as a living, breathing progressive manifesto. But conservatives and libertarians are increasingly finding a lot to like as Sweden embraces the principles that made it prosper. For an America that’s bitterly divided and seemingly out of policy reform ideas, maybe it’s finally time to look to our pickled herring-loving friends for guidance.

In fact, so drastic are these reforms that the Swedish government has some explaining to do to parliament. In America, Congress calling officials to testify usually means there was some alleged abuse of power and/or recklessness with taxpayer dollars.

But in this strange nation of 10 million, parliament wants to know why Sweden’s government isn’t spending more money! Bloomberg reports that “the National Financial Management Authority predicted that debt will sink below 35 percent of gross domestic product this year and breach 30 percent in 2021. Fiscal rules stipulate than any deviation of more than 5 percentage points from the 35 percent anchor requires an explanation to parliament.”

This isn’t some fluke engineered by a rogue right-wing government. The current Social Democratic government has run surpluses since 2016, and over the past two decades, surpluses and low deficits have been the norm, while spending has decreased. The International Monetary Fund reports that “Sweden’s national debt to GDP ratio fell from 80 percent in 1995 to 41 percent in 2017.” Keeping a government in surplus requires tough decision-making, and results in inevitable pushback.

As a part of a budget deal between the Social Democratic, Centre, and Liberal parties in January, the Public Employment Service will be closing redundant offices across the country and laying off a third of its 13,500 staff members. While staff reductions are always painful, it’s difficult to see why the government is so heavily involved in the job finding market to begin with. The rise of private job-finding companies and countless websites designed to match employees and employers show that markets can help job-seekers better than a government agency ever can.

The Swedish government’s dominance in the healthcare sector may be loosening as well, as physicians complain that the status-quo just isn’t working. Fortunately, private telehealth providers are coming to the rescue, partnering with supermarkets to open up “minute clinics” near grocery store locations. There are currently 8 of these clinics in the country, but a recent $54 million investment by ICA Group (which owns the largest supermarket chain in the country) will result in many more clinics setting up shop.

Health and employment budget discipline will likely pave the way for tax cuts, which will grow the economy and create more jobs for Swedes looking for a fresh start. A draft policy agreement amongst Sweden’s major political parties envisions broad-based tax reform lowering income and enterprise tax rates, and raising thresholds at which people have to start paying higher rates.

There are plenty of taxes to cut. Few politicians are eager to discuss Sweden’s top individual tax rate of 60 percent. Add that to the 25 percent value-added tax and a 22 percent corporate tax, and things suddenly become nearly unbearable for innovators. But at least there’s progress. Individual tax rates are far lower than the 80 plus percent rates that defined the seventies and eighties, and the Swedish corporate tax will once again be lower than the American rate in 2021 (when it drops to 20.6 percent from the current 21.4 percent).

The usual caveats apply to comparing a small homogenous nation to the bewildering behemoth that is the United States. But if left-wing Swedish politicians can boldly cut spending and taxes, the Trump administration and Congress have no excuse.

Ross Marchand is a Catalyst Policy Fellow and the director of policy for the Taxpayers Protection Alliance. He focuses on a range of issues, ranging from health-care reform to internet regulation to Postal Service-related issues. Ross is an alumnus of the Mercatus Center MA Fellowship at George Mason University, where he received his MA in economics in 2016. He has interned for the Texas Public Policy Foundation and the American Legislative Exchange Council, analyzing and blogging on a variety of public policy issues.
Catalyst articles by Ross Marchand