Thursday, February 18, 2016

You really can’t have a Scandinavian-style welfare state without a broad high tax burden

American capitalism has always been distinct from continental European capitalism
notes David Brooks in the New York Times (more on Denmark here).
We’ve had more entrepreneurial creativity but less security. Our system has favored higher living standards for consumers while theirs has favored stability for employees and producers.

 … American values have always been biased toward individualism, achievement and flexibility — nurturing disruptive dynamos like Bell Labs, Walmart, Whole Foods, Google and Apple — and less toward dirigisme, order and economic equality.

It’s amazing that a large part of the millennial generation has rejected this consensus. In supporting Bernie Sanders they are not just supporting a guy who is mad at Wall Street. They are supporting a guy who fundamentally wants to reshape the American economic system, and thus reshape American culture and values. As he told ABC’s George Stephanopoulos, he wants to make us more like northern Europe.

 … First, Sanders would centralize power in Washington. If you radically increase the amount of money going to the Washington establishment, as Sanders would, you’re giving that establishment greater resources to control American life.

Second, Sanders would weaken the ability of members of the middle class to make choices about their own lives. He would raise taxes on the rich, but there is only so much money you can squeeze out of such a small group of people. European welfare states generally rely on a highly regressive value-added/sales tax — usually around 20 to 25 percent.

Middle classes across Europe bear a much higher tax load than the American middle class. As Austan Goolsbee, a former economic adviser to President Obama, has noted, you really can’t have a Swedish-style welfare state without a broad high tax burden. That means less spending power for most Americans, and fewer resources to choose one’s own lifestyle.
Giving that establishment greater resources to control American life…

Less spending power for most Americans, and fewer resources to choose one’s own lifestyle…

Hm…
Isn't that exactly what leftists — and not just Bernie — want?! (Even your beloved Obama, David Brooks?)
Third, Sanders would change the incentive structure for the country’s most successful people. He proposes raising the top tax rate to 52 percent. As Josh Barro noted in The Times, when you add in state, local and other taxes, top earners would be paying a combined tax rate over 73 percent. 

 … When you make risk-taking less rewarding, you get fewer risk-takers, which is exactly what you see across the Atlantic. When you raise taxes that high, the Elon Musks of the world find other places to build their companies.

Fourth, Sanders would Europeanize American public universities. It sounds great to make college free. In fact, it’s a hugely expensive program that would mostly benefit the already affluent.



It would create, as in Germany, a legion of eternal students who have little incentive to leave school because the costs are so low. It would give Washington officials greater control over state universities, determining what sort of faculty they could hire and what sort of programs they could run. It would threaten hundreds of private colleges, which could no longer compete against the completely subsidized state system. It would reduce the pressures universities now feel to reform themselves because it would cushion them with federal largess. Slowly, American universities would look more like their European counterparts. They’d be less good.

The changes in the health care system would be along the same lines. Sanders would create a centralized and streamlined system. His approach would also, as in Europe, reduce the rate of medical progress, increase the rationing of care, increase the wait times for patients, induce many doctors to retire and centralize decision-making. He might reduce health care costs by $6 trillion over the next decade, but his proposal to do this gives new meaning to the word vagueness.

 … It’s amazing that so many young people want to mimic a continent that has been sluggish for decades. It’s amazing that so many look to the future and want a country that would be a lot less vibrant.
That's what state education will do for you, David Brooks
Related: Scandinavia’s quality of life didn’t spring from leftist policies; It survived them