Social welfare expenditures in the United States and the Nordic Countries

[Gustaf]

All they do is run deficits and encourage ppl to stay home on their couch because they know they won't have to work.

What is "they" here? If it refers to us Nordic countries we actually have a lot stronger public finances than the US, thank you very much.

[Gustaf]

Weird and distorted conclusion. "After adjustments for direct and indirect taxes paid," indeed. That's the whole difference: The Scandinavians have a much better taxation system.

I'm not sure what you mean, but the point is that Sweden has the weird habit of taxing benefits, something I think few other countries do. People who get, say, unemployment benefits get taxed on it. Thus, both tax levels and spending levels SEEM higher in Sweden than they actually are, since some of that spending is taken back through taxes and some of those taxes are on money already earned by the state through other taxes.

[Gustaf]

Weird and distorted conclusion. "After adjustments for direct and indirect taxes paid," indeed. That's the whole difference: The Scandinavians have a much better taxation system.

I'm not sure what you mean, but the point is that Sweden has the weird habit of taxing benefits, something I think few other countries do. People who get, say, unemployment benefits get taxed on it. Thus, both tax levels and spending levels SEEM higher in Sweden than they actually are, since some of that spending is taken back through taxes and some of those taxes are on money already earned by the state through other taxes.

The studies conclusion is that welfare expenditures per capita are similar in the United States and Scandinavian countries provided you control for taxes per capita. But, of course, taxes per capita are higher in Scandinavian countries than in the US, so the benefits are not actually comparable, and the study is saying nothing meaningful.

By "better taxation system", I was just referring to the greater progressive-ness of the tax rate: higher top marginal rate, etc. I'm sure Scandinavian countries have their own weird tax quirks as well.

Well...I think you misinterpreted it. The way I read it is that they're correcting for the thing I pointed out in my post. Looking at the link this indeed seems to be the case. The operation you think they're doing is stupid and inconsistent with the rest of the stuff they say.

[Gustaf]

Weird and distorted conclusion. "After adjustments for direct and indirect taxes paid," indeed. That's the whole difference: The Scandinavians have a much better taxation system.

I'm not sure what you mean, but the point is that Sweden has the weird habit of taxing benefits, something I think few other countries do. People who get, say, unemployment benefits get taxed on it. Thus, both tax levels and spending levels SEEM higher in Sweden than they actually are, since some of that spending is taken back through taxes and some of those taxes are on money already earned by the state through other taxes.

That almost sounds like redistribution of the wealth.

Well, it's not.

[Gustaf]

Gustaf, what are you opinions on the Nordic Model? It seems the most ideal time to ask.

It's never an ideal time to answer.

It is a pretty big question, but I will try to give an answer. I'll start by saying that I think it is a pretty good model (note, good, not necessarily best). It makes it possible to attain high growth levels for the economy, fully comparable to anglo-saxon models and also makes it possible for individuals to become very rich. At the same time, it doesn't allow the extent of poverty and related suffering evident in countries like the US.

People often seem to think of the Nordic model as a socialist nanny-state ideal, but that is largely misguided. The basic idea of it is to create a lot of wealth and then redistribute it. Therefore, businessfriendly policies with low corporate taxes, simple rules for starting companies, free trade and liberalized markets are important elements of the system. There is a clear difference between the Nordic model and the more corporatist model used in continental Europe.

So, what are the problems? One problem is ideological, of course. You might object on political grounds to the reduction in freedom that follows from such a large amount of your money being taken by the state.

More practically, I would argue that a contributing factor to the success of the model has been specific cultural factors at play. For one thing, the Nordic countries are EXTREMELY homogene. Basically, everyone who lived in each country had the same language, skin colour, religion, culture, etc. This makes it much easier to "sell" a socially cohesive model and motivate people to show solidarity. With the more globalized world this is changing and creating increasing social tension - crudely put people were more ok with paying high taxes going to churches and unemployed whites than they are with paying them for mosques and unemployed arabs.

Another cornerstone was probably the Lutheran work ethic. The Nordic countries have always prided themselves on a large degree of openness and honesty and everyone doing their share. This has allowed us to run a system which operates largely on trust and is relatively easy to cheat. (this is also very evident in the business world where Swedish companies don't monitor their employees to the same extent that is done in say Germany or the US).

The problem is that, especially since the radical years of the 60s, this way of thinking is becoming rather old-fashioned. We no longer have a society where kids are taught good, old'fashioned Christian values, if you know what I mean. I'm not saying this is all a bad thing, it is probably an unavoidable effect of a more liberal society, but it does mean that problems arising from people taking advantage of the system seem to be on the rise.

There is also a general unprincipledness of the Scandinavian system. The idea is that we all get together and reach an agreement on the best solution. This is in sharp contrast to the anglo-saxon system where you have a constitution laying down ground-rules and then you basically fight it out in debates. It is not yet clear whether the Scandinavian model works with a more mixed society where everyone do not share the same basic values and where we see more corruption. There have been a number of rather disturbing court cases recently in Sweden high-lighting problems in the judicial system.

Economically, Sweden, at least, has a system that I think is excellent as far as concerns the running of the public sector. My main problem is more ideological - I think the taxes on average earners are too high and there is too much money paid out to people who could probably do more to take care of themselves.

Overall, I'm not convinced it is or will always be the best system, but it clearly has worked pretty well so far and is working pretty well right now. In Sweden we have a right-winged government right now which is tweaking the system a little bit in a more liberal direction and I think their ideal society, a somewhat more liberal version of our current system, is probably fairly close to mine.