In his daily-or-so Forbes post, Tim Worstall explains the real reason why it will be somewhere between difficult and impossible to turn the United States into a Scandinavian mixed economy like Denmark:
The essence of the argument is that sure, we’d like quite a lot of equity in how the economy works out. Wouldn’t mind that large (but efficient! of which more later) welfare state. We’d also like to have continuing economic growth of course, so that our children are better off than we are, theirs than they and so on. And we can have that welfare state and equity just by taxing the snot out of everyone but that does rather impact upon that growth. So, the solution is to have as classically liberal an economy as one can, with the least regulation of who does what and how, then tax the snot out of it to pay for that welfare state. Not that Sumner put it in quite those words of course.
The lesson so far being that if the American left want to turn the US into Scandinavia, well, OK, but they’re going to have to pull back on most of the economic regulation they’ve encumbered the country with over the past 50 years.
The other point is an observation of my own. Which is that those Scandinavian welfare states are very local. To give you my oft used example, the national income tax rate in Denmark starts out at 3.76% and peaks at 15%. There’s also very stiff, 25-30% of income, taxes at the commune level. A commune being possibly as small as a township in the US, 10,000 people. The point being that this welfare state is paid for out of taxes raised locally and spent locally. Entirely the opposite way around from the way that the American left tells us that the US should work: all that money goes off to Washington and then the bright technocrats disburse it.
Instead they have what I call the Bjorn’s Beer Effect. You’re in a society of 10,000 people. You know the guy who raises the local tax money and allocates that local tax money. You also know where he has a beer on a Friday night. More importantly Bjorn knows that everyone knows he collects and spends the money: and also where he has a beer on a Friday. That money is going to be rather better spent than if it travels off possibly 3,000 miles into some faceless bureaucracy. I give you as an example Danish social housing or the vertical slums that HUD has built in the past. And if people think their money is being well spent then they’re likely to support more of it being spent.
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So, the two things I would say need to be done as precursors to turning the united States into Scandinavia are the following. First we need to move back to a much less regulated, more classically liberal, economy. Secondly we need to push the whole tax system and welfare state provision down from the Federal government down to much smaller units. Possibly even right down to the counties. The first of these will generate the economic growth to pay for that expanded welfare state, the second make people more willing to pay for it.
If you find any American leftists out there willing to agree to these two preconditions do let me know. Because I’ve never met a single one who would think that those were things worth doing in order to get that social democracy they say they desire.
