the article you posted while mentioning tax cuts on various sectors specifically credited the tax cuts for the "low paid" as increasing economic growth.
That couldn't be more untrue. Let's re-examine what the article actually says in reference to tax cuts for high-income and low-income earners:
___________________
He continued to cut taxes and cut welfare-spending to pay for it; he even cut property taxes for the rich to lure entrepreneurs back to Sweden. The last bit was the most unpopular, but for Borg, economic recovery starts with entrepreneurs. If cutting taxes for the rich encouraged risk-taking, then it had to be done. ‘In most cases, the company would not have been created without the owner,’ he says. ‘There would be no Ikea without [Ingvar] Kamprad. We would not have Tetra-Pak without [Ruben] Rausing. They are probably the foremost entrepreneurs we have had in the last few decades, and both moved out of Sweden.’
But they were not rich, I say, when they were starting out. ‘No, but they were becoming rich. If you have a high wealth tax and an inheritance tax, people emigrate because it becomes too costly to own a company. Ownership is a production factor. Entrepreneurs are a production factor. Yes, these people are rich and you can obviously argue that we want to encourage social cohesion. But it is also problematic if you drive out entrepreneurs from your country, because they are the source of job creation.’
Just as George Osborne took a hit for reducing the 52p tax to a 47p tax, so Borg’s party paid an political price for helping the rich. ‘If you are going to survive that politically, it is very important to cut taxes on low-income earners.’ He focused the tax credit on the low-paid, giving some the equivalent of a month’s extra salary every year. But there was still resentment. ‘We lost a lot of voters when we cut the property and the wealth tax, I don’t make any excuse for that. It was a severe blow to our support.’__________________
From the above passage, it becomes quite clear that the article (or at least Borg speaking through the interviewer/author) credits the tax cut on entrepreneurs (aka high-income earners) with the bulk of the resulting economic growth. The ONLY mention of tax cuts for lower-income earners is in relation to how it is politically necessary to cut their taxes when the taxes of high-income earners are cut.
Of course, this does not mean that tax cuts for low-income earners don't stimulate economic growth. If properly structured as to increase the incentive to work and save, they most certainly will stimulate economic growth. But it is a simple fact of life that nine times out of ten, tax cuts for low-income earners are not as high-powered as tax cuts for higher-income earners, if only because high-income earners control more resources (by definition of being "high-income") and engage in more entrepreneurial activities (which is usually how they became "high-income" in the first place).
But notice that this is essentially a
supply-side argument that Borg, the interviewer/author, and I are making, as opposed to the
demand-side argument you are making.
The supply-side argument is this: properly structured tax cuts increase the incentive to work, save, invest, and engage in other productive activities. With increased incentives to engage in productive activities, people will produce more. More production means that people are able to consume more. And by definition, the more production goes on in the economy, the larger that economy is.
The demand-side argument is this: in order to grow the economy, more money needs to be spent. In other words, there needs to be more demand for goods and services. If demand is increased, the supply-side will follow. The best way to increase demand for goods and services is to have the government directly spend money on goods and services. Tax cuts are only a second-best option because not ALL of the tax cut will be spent.
The inherent logical contradiction in the demand-side argument is that demand cannot outstrip supply. In fact, demand is derived from supply, or as the French liberal economist JB Say put it,
supply constitutes demand (if you have time, listen to
this closely and watch
this). In short: the only way to increase aggregate demand is to increase aggregate purchasing power - but the only way to increase aggregate purchasing power is to produce
more (increase aggregate supply).
So your argument that the Swedish economy grew because the tax cuts were focused on low-income earners falls flat on its face.
BUT there is a second reason why your argument fails, more intimately related to the article itself rather than abstract economic theory: if demand-side (aka Keynesian) economics is right, then Sweden should have suffered from economic stagnation as a result of its tax cut. Why? Because the tax cut was paid for by reduced government spending. And remember, because less than 100% of a tax cut is spent, while by definition 100% of government spending is spent, according to demand-side theory Sweden should have suffered from a more severe recession. But it didn't. The spending cuts along with the tax cuts had a positive economic impact, an impact which is only explained by "supply-side" and classical economics.
you mentioned a few times that you believe Sweden has less regultion but you have no examples that I can remember reading exception mentioning Sarbanes Oxley and Dodd Frank -both horribly flawed responses to the damage caused by under-regulated captilism in this country.
Do you have any other examples that are more specific to Sweden.
I don't live in Sweden so I cannot provide you with a list of specific regulations that they have. I can't even provide you with a list of regulations in the United States, or even a list of regulations that have impacted my life, as there are too many to list. However, you can rest assured that Sweden is better off in terms of regulation, thanks to the work done by the Heritage Foundation and the Frasier Institute - both think-tanks ranked the United States worse in terms of business regulations than Sweden. And though you might question the accuracy of these indices of economic freedom, know this: that most professional economists from a varying array of political/ideological backgrounds recognize the accuracy of these indices, which is why they are continually referenced by academic economists in peer-reviewed journals.
Also, to call the US economy "under-regulated capitalism" is a joke. Does this look "under-regulated" to you?
And that's just FEDERAL regulations. There are also a multitude of state and local regulations. Local regulations tend to be especially onerous, at least in the part of the country where I live (South-West Michigan).
