If you could pay 50 to 60% of your income in taxes in return for all your retirement benefits, unemployment benefits, childcare, paid time off, health care for life and perhaps a few other goodies like college, would you make that choice?
No doubt, many people would answer yes, as they have in other countries. In Scandinavia, people seem to like this system. In Sweden with the second highest tax burden in the world, the median voter is a women who works for the public sector and around two-thirds of the electorate draws most of their income from the state either as an employee or from the benefits collected. On the other hand, as one
Swede said, “the only downside is that our taxes also have to pay for a very large and cumbersome public sector that lags a long way behind Sweden’s private sector in terms of productivity. One has to wonder if some of those taxes could be put to more productive use, but productivity and innovation is not what this is not the topic at hand..
Of course, it is relative. Sweden’s’ debt as a percentage of GDP is 36.5% while in the US it is as follows:
GDP in Billions Debt as % of GDP
2007 13807.5 65.24
2008 14280.7 69.93
2009 14291 88.90
2010 14902 94.47
If you looked at these numbers in isolation one might conclude that the US is the bigger welfare state. However, Sweden has 9 million people and few, if any world obligations. Perhaps they are on to something, just stay in Happy Valley, and make steel, cell phones and furniture that takes six hours to put together. All this socialism may get you something though, the life expectancy is Sweden is 80.86 and in the US currently 78.11, or could it be all the fish?
Now for those who did answer yes, what would that make you? It would make you an “interest group just like unions, environmentalists, gun enthusiasts and employer organizations. Why does that matter, well as an interest group you would be competing with all other such groups for more of what you want. You would want politicians to be responsive to your demands, you would in fact, want them to give you more and most likely knowing that you vote them into or out of office, they would be responsive to your desires.
Over time, you become dependent on the government for many important things and your focus turns from personal responsibility to dependency. When things do not go right or are no longer affordable you may become upset, you may even march in the streets or perhaps go on strike. In the process you become more and more like everyone else, there is less and less point to striving to be different because no matter what you do your basic needs are taken care of by the government and, of course, you always pay that 50% to 60% of income in taxes.
As you seek more and more “free stuff from the government, politicians are increasingly interested in keeping you happy in the short run and as is usual do so with short-term solutions while long-term costs and problems grow. Keep in mind that the main goal of government is to get re-elected or otherwise stay in power. The main objective of bureaucrats is to keep their jobs in anonymity.
The common view is that all these benefits are “free when provided by the government. How many times have you heard someone use the phrase “free health care? However, they are not free; they are now in the magical land of “government with the typical inefficiency and mismanagement that always goes with it.
Regardless of any misgivings, there are still many people who find the welfare state appealing, but what happens when a population so dependent on government finds itself with leaders who are not so nice who seek power over service or have goals beyond their own country? How quickly do the checks and balance work? How quickly are citizens willing to put their welfare at risk?
Is it the job of government to “provide for its citizens? Alternatively, is it the job of government to organize and manage those things that are best done equally for all citizens such as roads, defense, security, emergency services, education and oversight of businesses that do affect the health and well-being of all citizens? Is it the job of government to remove barriers to inequality heaped on man by man and to assure a fair playing field for opportunity?
So, what is the point of all this? The point is that the US is on the road to a system with citizens more and more dependent on government, which in turn will be more and more dependent on taxes, which in turn means that the citizens will be more demanding of the services they get with those taxes because they are more and more dependent on those services.
If that is what you want, that is fine. If you would like more control over the use of the fruits of your labor than it is not so fine. Frankly, if all the world becomes like Sweden (nothing against the Swedes mind you I am part Swedish), where do the high stakes risk takers, innovators entrepreneurs go? Where do the people who want to keep the value they create go, perhaps China? Contrary to current popular opinion, in my view (and in the view of many prominent and Nobel winning economists), capitalism has not failed. Capitalism has done far more good for far more people than can be counted, not perfectly of course and not always fairly, but in the long run the results are positive.
Let the games begin. If you are getting the kind of change you voted for, be happy!
