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.