tisdag 20 september 2011

A Tale Of Two Countries

Den här artikeln publicerades ursprungligen på caffeinatedthoughts.com och är en berättelse om världsekonomin och två länder.


I’m going to tell you a story: A tale of two countries

The first country is currently running a significant budget surplus, has overall committed to fiscal tightening during the recession and in recent years cut back on unemployment benefits as well as sick pay.

In the first country, income taxes for the average worker has been slashed 25 % since 2006, giving an average (approx.) $250 dollars extra per month for each worker.

The first country has privatized parts of the health care industry, and also sold out several government-owned companies. The second country recently passed a health care reform which bears close resemblance to universal health care.

Tax cuts are made every year, but balancing the budget is still the highest priority. In the second country, the administration is fighting tooth and nail to raise taxes. Balancing the budget is far down the list of priorities.

The first country stood firm when the world was trembling with fear in september 2008, refusing to bail out losers. As a result, national debt in 2010 was lower than it was in 2006, and budget surpluses are expected this year as well. In the second country, the budget deficit is about 10 % of GDP, and the national debt is 100 % of GDP (39 % for the first country).

The first country criticized the second country’s stimulus package, with the minister of finance stating (about the latest stimulus package):

“I don’t think this kind of package has any significant effects on the economy. The most obvious effect is that you end up with a larger deficit and a larger national debt [...] so far, these packages in the [second country] has had a very small effect. They promised unemployment would fall below 8 % when they put forward the first package. Now, they’re around 9 % even though they went through with all these interventions”

The first country’s GDP grew with 7.3 % and is expected to continue to grow this year, although significantly less. The second country didn’t even manage to grew half as much in 2010, and is now expected to enter into a new recession. In the first country, the government took the initiative to lowering growth forecasts for 2011 when the eurozone crisis heated up, while in the second country, the President keeps insisting the economy has already turned around. The past three summers have all been “recovery summers” in the second country – and all of them have come and gone without recovery.

What two countries is this tale about?

By now, you’ve probably figured out that the second country is the US. But you’re probably surprised to find out that the first country is… Sweden.

Sweden elected a centre-right government in 2006 (re-elected in 2010 but unfortunately without a majority). While America has taken a left-winged turn in recent years, Sweden has taken a turn to the right. While Sweden’s economic policy hasn’t been perfect, the size of the Swedish stimulus spending hasn’t been nearly the size of the US (yes, even if you take into account that Sweden’s economy is much smaller).

When did we become the conservative guys?

While unemployment has gone up, it is still below the american level. The biggest problem Sweden faces consists of the Eurozone crisis. Being an exportdriven economy, Sweden is badly dependent on the success of its neighboring European countries. And if you’ve been following the news lately (or read my post on the issue), you know that the eurozone is close to collapse.

Anyway, so what’s the point of this post? I want to assure everyone I’m not trying to mock America or American conservatives. My two points are:

1) If even Sweden can turn around fiscally, you can too. Don’t be discouraged, even if Obama were to be re-elected in 2012. The Swedish right-winged parties spent 44 years in a row in opposition (1932-1976) and yet never gave up.

2) But since the path back to a fiscally sustainable path becomes longer the longer you wait (we will never be able to turn back Sweden to what it was pre -1932), please consider electability when you choose your nominee. Remember that any Republican is better than Obama. The Swedish right didn’t really start to consider electability until the election of 2006. Therefore, even with all these positive changes that have been done lately, we’re still largely a socialistic country with skyhigh tax rates. Maybe if the current government can stay in power for another 15-20 years that will change, but for now it’s still true.

Questions and/or feedback? Leave a comment below.

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