By Holly A. Bell
While the economies of the U.S. and most of Europe have continued to struggle under Keynesian style stimulus, Sweden has taken the opposite approach enacting supply side tax and spending cuts. The result? Over the last two years (2010 to 2011) Sweden’s real GDP growth has averaged 5%. That’s more than twice that of the United States. Sweden’s Finance Minister Anders Borg is not quite what you’d expect when you think of a supply-sider. He is a youthful middle age, sports a ponytail and an earring and describes himself as a feminist. But his policies are almost good enough to make me forget about the high personal income tax rates in Sweden. Here’s how he did it:
- He implemented permanent tax cuts. This left the future certain as opposed to the U.S. where tax cuts are in danger of going away at any moment creating uncertainty and incentives to save rather than spend.
- He did not borrow money like the rest of Europe; he cut spending by paring down government and cutting welfare spending. As a result Sweden has abolished their deficit and encouraged private sector development.
- He cut property taxes for the rich to increase entrepreneurship and bring businesses back to Sweden. He also revisited wealth taxes and inheritance taxes that were causing business owners to leave the country.
There’s one more little known fact about Sweden that has helped them through this crisis. While the U.S. and the rest of Europe are struggling to figure out how to continue to pay for social programs like Social Security, Sweden privatized their social security system in 1999.