The Swedish Model

Steve Kate’s Alesina toting views about the aridity of fiscal stimuli are given a boost by this piece in the Spectator

Hip Swedish Finance Minister Anders Borg and his predecessors have for 20 years pursued a policy of cutting welfare payments and matching these cuts with lower taxes.  Sweden experienced a Laffer-like increased level of tax collections as a result.

Borg maintained this approach throughout the GFC  and resisted the pressure to inflate the economy, arguing, 

‘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.’ 

Sweden weathered the storm better than others though there is still a way to go – taxes comprise 45 per cent of the Swedish economy even now. 

 

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66 Responses to The Swedish Model

  1. Pingback: Honest Talk About Academic Factions

  2. m0nty

    Swedish models? Pics or it didn’t happen.

  3. Alan Moran

    SJ
    Quite right. And, as my colleague John Roskam has unkindly pointed out, one of the infamous 364 was Sir Mervyn Allister King, GBE, FBA now the Governor of the Bank of England and Chairman of the Monetary Policy Committee.

    Pointing out new ways to spend money appears to do little harm to one’s career!

  4. Government should not exceed the low single digits of gdp, anything more is stealth communism.

    The cost of government services should mostly be borne by those that use them.

    Progressive taxes would be truly progressive if the rate moved quickly to zero.

  5. Entropy

    I think single digits is a bit low, even the israelites expected ten percent as a tithe to run the country. Or was that just the tabernacle?

  6. The US government was around 3% for a long time. That’s where it should go back to.

    The progressive taxes need to rapidly reduce to zero to enable government to shrink back to its rightful size and that users of government services actually pay for them.

  7. Mk50 of Brisbane

    Rafe: the ultimate Swedish model. Sensational curves, excellent performer…. just gorgeous.

  8. entropy

    You’ll have Monty back for more, Rafe. Not so sure about MK50′s efforts though. Gripen’s aren’t the first thing I think of when swedish birds are mentioned.

  9. Rafe

    Mk I think the Gripens were based on the Western Marsh Harrier.

  10. TerjeP

    If you look at the Heritage Freedom Index then Sweden is comparable to Australia on all measures but the following:-

    Labour Freedom – Sweden worse
    Fiscal Freedom – Sweden worse (ie higher taxes)
    Government Spending – Sweden worse (ie more spending)

    Cutting taxes and spending really ought to be a priority in Sweden. A financial crisis is as good an excuse as any.

  11. Rafe

    I wonder if Labour freedom is still worse in Sweden?

    PS Great recipes for swedes!

  12. Rafe

    I expected Abba, Bjorn Borg or the Volvo.

  13. Rafe

    Go for it Gab!

    Every week we reward the most colorful, vibrant and daring personalities with a brand new collection of Björn Borg underwear. Your photo will also be the profile picture on our Facebook page. Every month, a winner gets a monthly prize: currently it’s a bag (from Björn Borg, of course) filled with Björn Borg goodies.

  14. Gab

    I know, I know. You only visit http://love.bjornborg.com/ for the stories, Rafe :)

  15. Rafe

    And I only visit the recipes for swedes for the pictures:)

  16. Mark P

    There are of course Laffer effects at extreme rates of taxation, but that doesn’t translate when there are relatively low rates.

  17. JC

    There are of course Laffer effects at extreme rates of taxation, but that doesn’t translate when there are relatively low rates.

    Really. So it’s a reflected L shaped curve and not a progressively steepening curve. And here I was thinking Laffer drew a steepening curve.

    You are an idiot, pee. A complete buffoon.

  18. Blogstrop

    Just as Reagan was singled out by the lefty media there for ridicule during his presidency (and the media here used that same material quite happily), there was repeated referral to the Laughter Curve, as if it had been drawn up by a subsidiary idiot.
    Whole tranches of relatively uninformed voters are manipulated by these daily leftist chook feeds. Abbott’s relentless negativity and lack of appeal for women, Costello’s smirk and general unpopularity, these are repeated by a craven media with a view to being spoilers of those who they fear most, those who might bring down their “precious”. A somewhat tarnished precious these days.
    After you’ve witnessed several election and government cycles in both state and federal spheres, you become, if you’ve been paying attention, wise to the tendencies of the parties. Big spend, high tax still applies to the ALP. The media gave Rudd a free pass when he said he was a fiscal conservative. They now laud Gillard for putting runs on the board, even though they are tainted runs.

  19. Blogstrop

    Wrong thread, dammit.

  20. Blogstrop

    Not to worry, but I was thinking of Sinc’s trickle-down taxation post when making that final comment. It’s a flexible fiesta.

  21. Mark P

    Really. So it’s a reflected L shaped curve and not a progressively steepening curve. And here I was thinking Laffer drew a steepening curve.

    You are an idiot, pee. A complete buffoon.

    It’s only buffoonery if you think the impact of the ‘curve’ is exactly as Laffer presents, as you do.
    Of course if you reduce rates from the 90′s to the 70′s as JFK did, you will see an impact.

    But, when rates are already reasonable, such as the prevailing rates prior to the Bush tax cuts, the impact was negligible tax collection above trend growth and negligible job growth. The Laffer curve suggests an improved position until 0% tax rates. The numbers tell a different story.

  22. JC

    Pee

    You have been feeding from the demand management rough for too long and made worse because you don’t seem to have much of a head for economics.

    Supply side is equally as vital as the demand side.

    Of course if you reduce rates from the 90′s to the 70′s as JFK did, you will see an impact.

    You are so gutless. You don’t even have the balls to mention JFK supporter and later president Ronald Reagan taking the rate down from JFK’s 70% to 26%, as though that period never existed. What a sap you are Pee.

    The Laffer curve is a not a reflective L, it’s a steady and progressive climb as it have to be.

  23. Mark P

    You are so gutless.

    JClueless.

    Laffer’s experiment failed with the Bush tax cuts.

  24. JC

    Laffer’s experiment failed with the Bush tax cuts.

    Really, so Bush didn’t inherit a major league bursting o the tech bubble and a stock market crash causing severe deflationary concerns. 911 as a total shock of the economic system. None of that shit happened of course.

    And revenues didn’t rise from that low base.

    You imposter, Pee. You complete imposter.

  25. Mark P

    Really, so Bush didn’t inherit a major league bursting o the tech bubble and a stock market crash causing severe deflationary concerns. 911 as a total shock of the economic system. None of that shit happened of course.

    And revenues didn’t rise from that low base.

    Prove it. The numbers support my position.

  26. JC

    Prove it? Okay

    Here dickfeatures

    Federal receipts in constant dollars from the year the tax cuts came into force.

    http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200

    2003 1782

    2004 1880

    2005 2153

    2006 2406

    2007 2568

    2008 2524

  27. JC

    You ought to be racked in the public square for a week, in a just world, pee.

    Don’t let dot see what you’re saying.

  28. .

    Hahahaha

    Little boy PEE has been embarrassed again. By the FACTS.

    This arsehat has no sense of shame.

  29. Mark P

    As I said, trend growth in tax collections did not increase due to the Bush tax cuts.
    If anything, the Clinton tax increases in 1993 are Laffer busters, just as much as the Bush tax cuts.
    Bush got back to trend just as his other disastrous policies plunged the US into an abyss based on other policy failures.

  30. JC

    Pee

    We were discussing the Bush Tax cuts. You asked for proof and I offered it to you. You could at least offer a thankyou instead peddling other swill.

    You really are a girlyman.

  31. sdfc

    Those figures are current not constant dollars, however that is largely irrelevant. The frame of reference of fiscal stance is always in % of GDP terms because GDP has a tendency to grow.

  32. .

    Pee is wrong, receipts as a % of GDP grew until 2008.

    The matter is settled.

  33. JC

    Those figures are current not constant dollars, however that is largely irrelevant.

    Ummm yea Einstein they are in constant dollars.

    1. The government receives constant dollars, you mental ape.

    2. It’s a very short period of time and the low discount rate at the time would not have made much of a difference as you can see from the link when they use 2005 dollars.

    3. The direction with 2005 dollars is still up, you horrendous non-genius.

    The frame of reference of fiscal stance is always in % of GDP terms because GDP has a tendency to grow.

    Bullshit.

    The frame of reference is in dollars as that is what the government takes in and that’s what it shells out to the deserving and the moochers alike.

    Notwithstanding that, the tax take increased, so it was keeping score even as % of GDP.

    You fuckers are in breathless denial of reality.

    The tax tax take went up with Bush despite what you read in the leftwing lame stream press.

  34. sdfc

    Dot

    Tax as a % of GDP was 20.9% in 2000 and was only 18.8% in 2007 the peak year.

    JC

    They’re current $ check your link again. The correct frame of reference is % of GDP, your denial is rather silly and again shows your general lack of familiarity with economic concepts.

  35. .

    sdfc…you newb “tech boom” “911″ LOL

    your denial is rather silly and again shows your general lack of familiarity with economic concepts

    Yep.

  36. sdfc

    You get more incoherent by the day Dot. No one is arguing that Bush didn’t engage in fiscal stimulus.

  37. .

    sdfc…you newb “tech boom” “911″ LOL

    You get more incoherent by the day Dot. No one is arguing that Bush didn’t engage in fiscal stimulus.

    If you can’t handle your piss, don’t drink, idiot.

  38. sdfc

    I’m not, but I think you might be judging by your rambling.

  39. .

    sdfc…you newb “tech boom” “911″ LOL

    You get more incoherent by the day Dot. No one is arguing that Bush didn’t engage in fiscal stimulus.

    What the FUCK are you arguing here in response to me? In English, please.

  40. sdfc

    You’re the one who jumped in, having your usual head explosion, and now you seem to have forgotten why.

  41. JC

    JC

    They’re current $ check your link again.

    I know. You’re obviously too drunk to have read my reply.

    The correct frame of reference is % of GDP, your denial is rather silly and again shows your general lack of familiarity with economic concepts.

    Doofus. Their dollar receipts went up in the years proceeding the tax cuts. I really don’t know what more can be said about this?

    They lowered the tax rates and receipts went up! Are you too fucking dense to understand? And the receipts are used to pay for spending in that same year.

    The fact that they went off on a spending spree is an entirely different story, you asshat.

  42. .

    You’re the one who jumped in, having your usual head explosion, and now you seem to have forgotten why.

    Thankyou for conceding you don’t have an argument and have trolled this forum with nonsensical crap.

    No. This was my reply earlier.

    Pee is wrong, receipts as a % of GDP grew until 2008.

    The matter is settled.

    JC these chumps are too dense to consider that expanding expenditure growing faster than receipts might also retard economic growth. sdfc’s best effort is a nonsensical and disjointed rant about how the tech bust and a supply side tax cut in fact lead to Bush undetaking classical Keynesian demand management.

    You really have to wonder if the fink will requires jerks like that to pass an IQ test to comment on a blog.

  43. JC

    You really have to wonder if the fink will requires jerks like that to pass an IQ test to comment on a blog.

    That would be a great innovation I think.

  44. sdfc

    No you didn’t.

    Ummm yea Einstein they are in constant dollars.

    1. The government receives constant dollars, you mental ape.

    Let’s leave aside your bizarre contention that the government receives constant dollars. Like I said it is irrelevant to the argument.

    Receipts went up because the economy was larger, the frame of reference that matters in this case in determining fiscal stance is revenue as a % of GDP which quite clearly declined.

    Dot receipts as a % of GDP were around 2% lower in 2007 than in 2000, highlighting that Mark P is correct.

  45. .

    Dot receipts as a % of GDP were around 2% lower in 2007 than in 2000, highlighting that Mark P is correct.

    sdfc…you newb “tech boom” “911″ LOL

  46. .

    On top of that Clinton didn’t overspend for a prolonged period. Bush retarded GDP growth by doing so.

  47. JC

    No you didn’t.

    WTF? SDFC, are you on hallucinates?

    You say I didn’t and you then quote the comment where I say they are in constant dollars: Here

    Ummm yea Einstein they are in constant dollars.

    1. The government receives constant dollars, you mental ape.

    Let’s leave aside your bizarre contention that the government receives constant dollars. Like I said it is irrelevant to the argument.

    Of course the government receives “constant dollars” because that’s what you’re concerned about how tax receipts moved in the years immediately proceeding a tax cut. They are also matched against spending too for that year.

    I don’t understand why this is complicated for you.

    Receipts went up because the economy was larger, the frame of reference that matters in this case in determining fiscal stance is revenue as a % of GDP which quite clearly declined.

    And the economy was larger why? Perhaps from the stimulus of a permanent tax cut?

    Dot receipts as a % of GDP were around 2% lower in 2007 than in 2000, highlighting that Mark P is correct.

    No it doesn’t suggest that at all. In fact receipts as a % were actually moving in the right direction. Pity about the spending however.

    Pee’s an idiot and so are you.

    Tax receipts went up after the tax cuts Pee brain says they went down and so do you. Both you mutton heads are wrong.

    It’s fucking unbelievable with the level of dishonesty and stupidity we have to tolerate on this site from the Left.

    This is like doing penance for sins, having to endure you idiots.

  48. sdfc

    You are on a heavy dose of drugs aren’t you? The figures you quoted are current dollars, which you denied.

    Your obsession with constant dollars is bemusing. Current or constant has no impact on the argument.

    No receipts were 2ppts lower as a proportion of GDP in 2007 than they were in 2000, 18.8% as compared to 20.9%. It’s not that difficult surely.

  49. .

    No receipts were 2ppts lower as a proportion of GDP in 2007 than they were in 2000, 18.8% as compared to 20.9%.

    So Bush’s tax cuts (2003) retroactively worked (badly) when Clinton was still President (1999-2000) and after 9/11 (2001) and the tech bust pt II (2002)?

    Here’s a suggestion for you sdfc: Thorazine.

  50. sdfc

    You’re back to making no sense again.

  51. .

    Let’s recap.

    No receipts were 2ppts lower as a proportion of GDP in 2007 than they were in 2000, 18.8% as compared to 20.9%.

    Now have you heard of i) 9/11 ii) the tech crash pt II?

    Do you really think that Bush’s tax cut worked retroactively for four years?

    If you are so dishonest to put forward an argument only a mental patient could honestly conceive, you will be hammered for it.

  52. sdfc

    You are obviously very confused. 2000 is the base year, we are dealing with tax as % GDP in the following years. There is no retroactivity about it.

  53. .

    I am sick of this insane left wing bullshit about time machines and missing doses of chlorpromazine.

    You cannot answer the questions. You are being dishonest. Fuck off.

  54. sdfc

    Though I hardly ever agree with you I used to think you kind of had some sort of clue however your display today among other bizarre instances in the past suggests you are a bit of a dimwit.

  55. .

    You have nothing left but invective. You are using 2000 as a “base year” for judging the benefits of tax cuts that were legislated in 2003.

    You are so blatantly and outrageously dishonest.

    I have a clue pal. You ought to hand your degrees, if you have any, back to your regional TAFE.

  56. sdfc

    I use 2000 as the base year to compare to the peak year of 2007 because that was the year before the 2001 recession. Fme.

  57. .

    For a tax cut legislated in 2003…yes FME indeed. Such blatant stupidity and/or dishonesty. Let’s include a shock to judge the trend, before the policy in question.

    You are not including a long time series. Do not pretend you are introducing an element of rigour to this. You are intentionally including 9/11 and the baby tech wreck to muddy the waters.

    You are a fucking disgrace.

  58. sdfc

    You really are a bit of a nong. The relevant years to assess the impact of the tax cuts are 2000 and 2007. The first because it is pre 2001 recession and the second because it was the peak year of the following expansion.

    It really doesn’t get any simpler yet you struggle.

  59. .

    This is the most dishonest backwards justification I’ve ever seen. Your story just keeps on changing.

    You have no shame.

    You have justified nothing.

  60. JC

    . The government receives constant dollars, you mental ape.

    oops… that should read current dollars.

  61. JC

    Here’s a chart going back to 1930 which shows no matter where the highest marginal tax rates are in the US the Federal government share of GDP doesn’t waver from 19% of GDP.

    People simply adjust everything from their work, their lives, everything, but the most amount that can be extracted from income tax is 19%.

    http://reason.com/blog/2010/11/29/the-remarkably-stable-amount-o

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