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Saturday, November 30, 2019

Socialism in Sweden: Another Fact Check

Some libertarians continue to misrepresent the Swedish economy, and even lie about it. They are doing more harm than good in the fight to save America from socialism.

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When people on the right want to make a difference in politics, they usually face a significant headwind. We only get one chance at reforming away big government and restoring liberty and the American experiment to what she was meant to be. 

In the headwind we face, we cannot waste any time or effort on making errors. When you only get one chance, you better be meticulously prepared when the moment comes. 

The best way to squander your only chance is to go into it with preparations that are based on sloppy analysis and ill-informed scholarship. Nowhere is this more true than when it comes to the debate over how Sweden is being used in conservative and libertarian circles as some sort of example of successful capitalism. The example of this my native country is being tossed around in the context of "just do what we did, and America will be fine". 

No one person has done more to spread the myth of Sweden as a non-socialist, capitalist success story than Johan Norberg. In a pop-tart iteration of libertarianism, he has conned broad audiences into believing that Sweden is leading America in liberty and economic success. 

As I explained earlier this year in a three-part series on socialism in Sweden, it is hard to be more wrong than Norberg. 

Unfortunately, his work has now reached new audiences, the latest being The Fund for American Studies (TFAS), which has put out an ebook with a speech Norberg gave at a recent TFAS event in New Orleans. Reading it, I am compelled to yet again set the record straight. Norberg's outright fanciful blabber about Sweden is beginning to take on the proportions of propaganda. He is not there yet, but he is drifting into those waters. 

Let us start with this passage from his speech:
The funny thing is that if the Sanders and Ocsio-Cortezes of the world made the U.S. more like Sweden, what would really happen? They haven't updated their perception of Sweden and if the U.S. became more like us, the United States would have to have more free markets, more free trade, pension reform with private accounts, a national school voucher system with freedom of choice and public funding going to private schools as well, low corporate taxes and no taxes on wealth, property and inheritance. Be careful what you wish for. 
Norberg should be careful what he talks about. He is flying fast and loose with the facts. 

1: "More free markets". Can Norberg please list the free markets that Sweden has, that we don't have here in the United States? To give a couple of examples of markets missing in Sweden, they have no market for health insurance and no market for health care. The private health providers that do exist are all funded by taxpayers. There is not a single private full-service hospital in Sweden, and private health clinics cannot open unless approved by government. There is absolutely no free market for higher education - all colleges and universities are funded and operated by government. The same is true in elderly care and largely in child care. Government consumes half the economy. Where are the "more free markets" Norberg talks about?

2: "More free trade". The Swedish GDP depends critically on foreign trade. The U.S. economy is only to a minor degree dependent on foreign trade. What Norberg refers to as "free trade" is also dictated entirely by the EU - in other words, Sweden has surrendered its freedom regarding trade to a government bureaucracy in Brussels.

3: "Pension reform with private accounts". The private accounts Norberg refers to are doing so poorly that poverty is rising among retirees in Sweden. Furthermore, the tax feeding the pension system is twice as high as in the United States. It is also difficult to open IRAs in Sweden, limiting the free market for income security (adding to the first point above). 

4: "A national school voucher system". Every private school operating under that voucher system must follow a national curriculum. You cannot open a private school in Sweden without the approval of the local school board and the national school oversight agency. If government finds that the private school is not adding anything meaningful to the education opportunities in the school district, the school is not allowed to open. It is also worth noting that confessional schools are not allowed unless they are non-confessional, and homeschooling is completely outlawed. 

5: "No property tax". This is patently false. Local governments charge a property title tax. Titles must be renewed every year, and can only be renewed if the property owner pays the tax.

6: "No wealth tax". Not much point in a country where very few people build wealth. But those who do, do it in their homes. Therefore, government charges a 20-percent tax on the accrued net value when you sell your house. Norberg can call it whatever he wants - this tax was introduced to replace the wealth tax, and effectively serves as both a wealth tax, an inheritance tax and a death tax.

7: "Low corporate taxes". The Swedish rate is 21.4 percent. The U.S. federal corporate income tax is 21 percent.

Norberg keeps repeating that Sweden has "more free markets" than the United States, but he does not provide any evidence for it. He refers to the Indes of Economic Freedom from the Heritage Foundation, but that index does not measure "more" or "less" free markets. It measures the burden of red tape and taxes on the economy, and it does so under an index that reflects a narrow set of variables. It does not weigh in the share of the economy that is left alone by government. 

There is a good reason why the Heritage index is constructed the way it is. Norberg misrepresents the index, giving it a meaning it does not have. 

Likewise, he leaves out the excruciatingly high income taxes, which start above 30 percent for low-income earners and top out north of 50 percent for incomes above the equivalent of $56,000. To pay that high of a combined federal and state tax rate here in the United States, you would have to make more than $600,000 - and live in a Tax Hell state like California or New York.

On top of the income taxes, Swedish employers have to pay a 31.4-percent payroll tax.

Norberg also evades talking about the value-added tax, a costly, bureaucratic and fraud-prone European alternative to the American sales tax. It applies to everything you buy, far beyond a standard U.S. sales tax. The rate ranges from six percent (e.g., theatre and museum tickets) to 25 percent (e.g., bank safes and tap water). 

Not bad for a country with "more free markets" than the United States.

There is so much more to be said about Norberg's pop-tart approach to public policy. Click here for the rest of the story

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