Yes, the Swedish Model

Swedish voters have re-elected their center-right prime minister, and that has caused rejoicing among my right-wing colleagues. "Sweden votes for tax cuts, privatization and deregulation," a Wall Street Journal editorial proclaims. "It's time the world started imitating the Scandinavian -- or at least the Swedish -- economic model."

Know what? I agree! Sweden was rather extreme in its high taxes, intrusion into business affairs and extravagant benefits. Thus, the government of Fredrik Reinfeldt was right to reduce some of those crushing levies. It was right to privatize the maker of Absolut spirits. (Why on earth should the state be running a vodka company?) And it was right to end some cushy early retirement deals. 

But the Journal's cute promotion of the "Swedish model" -- something it normally abhors -- steers clear of key facts that might confuse readers. Overly generous benefits have been trimmed, but no one is messing with the beloved health care system.

Furthermore, the top income tax rate in Sweden remains almost 60 percent. Despite having the second-highest taxes in the industrialized world (after Demark), Sweden enjoys the fastest-growing economy in Western Europe.

Americans wouldn't tolerate income tax rates anywhere near Sweden's. But it's nonsense to insist, as Republicans do, that letting tax rates for the richest 2 percent rise modestly would drive a dagger into the heart of our economic recovery.

Speaking of Republicans, why don't they copy the campaign vow that helped Reinfeldt win re-election?

"We won't promise any more tax cuts for 2011," he said. "The room for reform that exists should be used for spending on the core of welfare, on education and health care."

Reinfeldt said that he would like to cut taxes further, but not at the expense of raising deficits. During the campaign, his finance minister, Anders Borg, added that the government intends to run a budget surplus before proposing more tax relief. Happily, a budget surplus may come next year.

Imagine that -- politicians who treat the voters like adults. They tell the people that if they want tax cuts, they must lower spending first.

There is no free lunch.

Contrast this message with the Republican happy hour promise of lower taxes combined with no specifics on spending cuts of any significance. Republicans couldn't even get behind reducing the overpayments to insurance companies in Medicare, and now they're talking real big about slashing government.

Meanwhile, they make great sport of calling President Obama a socialist. Obama is barely a liberal. His health care plan -- less socialistic than Medicare -- should reduce budget deficits and contain the medical costs that are bankrupting American business. Why would any real conservatives object to that?

On public benefits, Reinfeldt's center-right Moderate Party stands well to the left of most Democrats. But on fiscal matters, it's far more conservative than most Republicans.

Reinfeldt is basically following the sort of pay-go rules adopted by the current U.S. Congress. Pay-go requires that all new programs be paid for and that tax cuts be offset by reductions in spending.

In 2002, the Republican Congress let the pay-go rules die. That enabled them and the Republican White House to cut taxes plus enact a very expensive Medicare drug benefit without paying for a cent of it. It took a Democratic-controlled Congress to restore pay-go.

Today's Republicans are peddling the same free lunch as last decade's Republicans. That makes the fiscally conservative part of me shudder at the thought of another GOP takeover. 

But let me briefly join the "conservative" Wall Street Journal in toasting the new Swedish model, and with this promise: If the Journal should promote the model's sense of fiscal responsibility, I will take the asterisks off the word conservative.

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Views expressed in this column are those of the author, not those of Rasmussen Reports.              

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