A warm hearted tale for all ObamaBot Drones.........
http://mjperry.blogspot.com/2012/05/anti-keynesian-supply-side-tax-and.html
Anti-Keynesian Supply Side Tax and Spending Cuts in Sweden, and the Finance Minister Behind It
From the U.K. Spectator's report on the amazing success of supply-side economics in Sweden, and finance minister Anders Borg, the man behind it:
"When Europe’s finance ministers meet for a group photo, it’s easy to spot the rebel — Anders Borg (pictured above) has a ponytail and earring. What actually marks him out, though, is how he responded to the crash. 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. To critics, this was fiscal lunacy. Borg, on the other hand, thought lunacy meant repeating the economics of the 1970s and expecting a different result.
Three years on, it’s pretty clear who was right. "Look at Spain, Portugal or the UK, whose governments were arguing for large temporary stimulus," he says. "Well, we can see that very little of the stimulus went to the economy. But they are stuck with the debt." Tax-cutting Sweden, by contrast, had the fastest growth in Europe last year, when it also celebrated the abolition of its deficit. The recovery started just in time for the 2010 Swedish election, in which the Conservatives were re-elected for the first time in history.
All this has taken Borg from curiosity to celebrity. The Financial Times recently declared him the most effective finance minister in Europe.
"Everybody was told 'stimulus, stimulus, stimulus'," he says — referring to the EU, IMF and the alphabet soup of agencies urging a global, debt-fueled spending splurge. Borg, an economist, couldn’t work out how this would help. "It was surprising that Europe, given what we experienced in the 1970s and 80s with structural unemployment, believed that short-term Keynesianism could solve the problem." Non-economists, he says, "might have a tendency to fall for those kinds of messages." (That would be YOU willy!!)
He continued to cut taxes and cut welfare-spending to pay for it; he even cut property taxes for the rich to lure entrepreneurs back to Sweden. The last bit was the most unpopular, but for Borg, economic recovery starts with entrepreneurs. If cutting taxes for the rich encouraged risk-taking, then it had to be done. "In most cases, the company would not have been created without the owner," he says. "There would be no Ikea without [Ingvar] Kamprad. We would not have Tetra-Pak without [Ruben] Rausing. They are probably the foremost entrepreneurs we have had in the last few decades, and both moved out of Sweden."
But they were not rich, I say, when they were starting out. "No, but they were becoming rich. If you have a high wealth tax and an inheritance tax, people emigrate because it becomes too costly to own a company. Ownership is a production factor. Entrepreneurs are a production factor. Yes, these people are rich and you can obviously argue that we want to encourage social cohesion.
But it is also problematic if you drive out entrepreneurs from your country, because they are the source of job creation."(HEY WILLY, TAKE NOTE!!!!!)
Update: The chart below displays constant dollar GDP growth rates for Sweden vs. the U.S. from 2002 to 2011, and shows that Sweden's economy has outperformed the U.S. economy over the last ten years by 0.8% per year on average (OECD data here). Over the last two years (2010 and 2011), Sweden's real GDP growth has averaged 5%, or more than twice the U.S. average of 2.35%, and provides evidence that Sweden's supply-side approach to the 2007-2009 recession has been more successful than the demand-side Keynesian approach in the U.S.
First of all, Sweden's recent economic history is far different than ours. For the last 30 years they've had a high tax rate, and one of thee best social safety nets in the world. To put this in perspective, one of the things Sweden's gov't pays for is that they will pay for their citizens to go on vacation to get some sunshine in warmer climates. To put this in greater perspective, 80% of Swedish workers belong to a union, and 30% work for the public sector.
Despite this, as your own graph shows, Sweden's enjoyed greater GDP growth than the United States year after year.
http://www.nber.org/chapters/c5360.pdf
A better picture can be seen when we compare less socialistic economies with each other and compare policy differences in regards to austerity.
Here in the United States, we've resisted most attempts at austerity, and rather we passed an economic stimulus. In the UK, on the other hand, when Cameron became Prime Minister in May of 2010, the UK implimented stiff austerity measures.
We can now look at the results of these two policies. Below is a pic of two charts. One charts the GDP growth of the US and the UK. Take note what happened in the UK in 2010.
The second chart looks at initial unemployment claims in the USA, next to when the stimulus went into effect.
Yes, MrNoBug. Demand matters.
It's ridiculous (like all of your arguments) to suggest that a country with our populaion can copy the economic and social programs of a tiny Scandanavian country.
your attempt to change the subject.
Sweden is the topic:
Lessons From the Swedish Welfare State
New research shows bigger government means slower growth. Our country is a prime example..
By ANDREAS BERGH AND MAGNUS HENREKSON
Americans are debating whether to substantially expand the size of their government. As Swedish economists who live in the developed world's largest welfare state, we urge our friends in the New World to look carefully before they leap.
Fifty years ago, Sweden and America spent about the same on their government, a bit under 30% of GDP. This is no longer true. In the years leading up to Sweden's financial crisis in the early 1990s, government spending went as high as 60% of GDP. In America it barely budged, increasing only to about 33%.
While America was maintaining its standing as one of the world's wealthiest nations, Sweden's standing fell. In 1970, Sweden was the fourth richest country in the world on a per capita basis. By 1993, it had fallen to 17th.
This led us to ask whether Sweden's dramatic increase in the size of government contributed to its sluggish growth. Our research shows that it did.
We surveyed the existing literature looking at the trade-offs between government size and economic growth throughout the world. While results vary, the most recent research, by Diego Romero-Avila in the European Journal of Political Economy (2008) and by Andreas Bergh and Martin Karlsson in Public Choice (2010) find a negative correlation between government size and economic growth in rich countries.
The weight of the evidence demonstrates that when government spending increases by 10 percentage points of GDP, the annual growth rate drops by 0.5 to 1 percentage point. This may not sound like much, but over 30 years this would result in the loss of trillions of dollars each year in an economy as large as America's.
To put it in personal terms, the average American's per capita income in 2009 was $46,405. A dip of 1% in the economic growth rate (to 2% from 3% for example) would mean an individual income loss of $464 in the first year. Over 30 years, a one percentage point difference in the growth rate translates to roughly $354,000 in lost income per person.
We also investigated the claim that Sweden is proof that big government does not harm the economy. While Sweden has done very well compared to other developed countries in the last 15 years, it has also implemented sweeping pro-market reforms. Examples include a national system of free school choice based on vouchers up through senior year of high school, a financially stable public pension system that can adjust payouts if contributions to the system fall for some reason, and comprehensive tax reform that has lowered marginal tax rates tremendously.
Even if Sweden's government still spends some 20% of GDP more than the U.S. on average, the Swedish economy is now much more market oriented and government spending is down by almost 10% of GDP since the early 1990s.
Sweden's recent growth is thus the result of opting for free-market solutions instead of growing government. By comparison, the U.S. already has a relatively free economy, and therefore does not have as much potential for further market-based reform in order to offset the negative growth effects of a larger government.
Also, in Sweden, high personal tax rates encourage people to do work around the house that Americans pay others to do for them. Americans eat out more and hire people to clean their homes, take care of their children, or mow their lawns. Swedes, who have less money to spend after taxes, will do such work themselves. Raising government spending and taxes would cause Americans to behave more like Swedes, hurting the entire U.S. service sector and throwing many—mainly working class Americans—out of a job.
Many Americans argue that the U.S. could safely increase its spending share from roughly 32% of GDP to 37%–38% of GDP. The evidence suggests otherwise. The U.S. needs to acknowledge the trade-off between government size and economic growth. A larger government sector may decrease some economic inequality, but will ultimately leave Americans sharing smaller pieces of a smaller pie.
Mr. Bergh is an associate with the Research Institute of Industrial Economics, Lund University and the Ratio Institute in Stockholm. Mr. Henrekson is the CEO of the Research Institute of Industrial Economics in Stockholm. They are the authors of "Government Size and Implications for Economic Growth" (AEI Press, 2010).
MrNoBug, please don't copy and paste shit without a link.
You should listen to Cartmann. The US economy and Sweden's economy is very different. It's apples and oranges.
In economics, there are no absolutes. You're postulating the idea that "gov't spending is bad". That it hurts growth.
Yes, this can be true. It can also be false. It depends on the circumstances.
Spend money on infrastructrre when you need it. It will produce more growth in the future. Spend money on infrastructure when you don't need it. It will harm growth.
It seems your years of "real world experience" has never given you insight to such subtleties.
other countries in comparisions as if it's relevant. I just find it HILARIOUS that one of your poster child nirvanas has been CUTTING taxes, CUTTING nanny state entitlements, PROMOTING private capital investments and their results are stellar.
You should pay attention to OC and your own words.
"""The US economy and Sweden's economy is very different. It's apples and oranges."""
OC and I will remind you of that ever fucking time you want to talk about apples when we are talking about oranges.
Now go smoke a joint and read a book.
The Boss and managers making big bucks, aren't wasting time asking elementary questions .
I wondered if you were serious asking for a link , then I remembered, you
are proud to be inept , lazy , government employee .
When searching for links , copy a sentence or two from suspected plagiarist , paste into google search .
Hit enter .
Link search example :" New research shows bigger government means slower growth. Our country is a prime example."
http://online.wsj.com/article/SB10001424052748704535004575348641192320912.html
Posted By: willywonka4u
link please? MrNoBug, please don't copy and paste shit without a link.
You should listen to Cartmann. The US economy and Sweden's economy is very different. It's apples and oranges.
In economics, there are no absolutes. You're postulating the idea that "gov't spending is bad". That it hurts growth.
Yes, this can be true. It can also be false. It depends on the circumstances.
Spend money on infrastructrre when you need it. It will produce more growth in the future. Spend money on infrastructure when you don't need it. It will harm growth.
It seems your years of "real world experience" has never given you insight to such subtleties.
MrNoBug,
You're really not understanding this idea that there are no absolutes in economics, are you?
Here, I'll give you an example. In the USA, I've long said that we need to raise wages. Why do I say that? Because there is a lack of demand. Productivity (the main source of supply) is outpacing wages (the main source of demand) by more than 2:1. Ergo, the recression.
Raising wages isn't an absolute positive thing to do. It would just be a positive thing to do in our particular situation.
Let's look at China instead (or perhaps China 8 years ago). They have very low taxes on business. They don't (or didn't) have a well established industry. In their particular case, you want to stimulate supply. You want trickle down. You want low taxes on business. Why? Because they can't stimulate demand if there's nothing that being produced in the first place. They're still developing markets.
Facts matter, Bug. If taxes on corporations were 98%, then cutting taxes to 88% would likely create more growth. If taxes on corporations were 2% then raising taxes to 12% wouldn't necessary harm growth, and it could stimulate growth.
I realize absolutist thinking is comforting for conservatives, but it's also intellectually lazy.
Another, MrNoBug was the person making the claim on his last post. I have no obligation to research his claims or prove that they're true. That obligation is solely on him. He brought it up, he should prove what he's saying is true. As a rule, I never read something that is copied and pasted around here, and most particularly I never do unless someone cites it's source.
"One of the things Sweden's gov't pays for is that they will pay for their citizens to go on vacation to get some sunshine in warmer climates".
The Swedish government pays for this perquisite? And exactly where does the government get the money for this? Oh, that's right. From the citizens on vacation. No thanks, I'll pay for my own vacation. And if I don't happen to have the money for it this year, I won't go on vacation.
