Swedes have ?enviable cradle-to-grave benefits,? as Bloomberg Business Week reminds us in the latest issue. But the Social Democrats who created Sweden?s ?fabled? welfare state are in danger of losing a second straight general election. Why?
[T]he cost of such largesse kept rising. [Prime Minister Fredrik] Reinfeldt came to power by convincing voters that lowering income taxes and benefits would increase the number of jobs and actually boost the tax revenues necessary to keep the welfare state intact. Once in office, Reinfeldt’s coalition cut income taxes by 70 billion kronor, or about 2.3 percent of gross domestic product; tightened the budget; and trimmed jobless benefits to nudge people back to work. ?
The economy has cooperated. After contracting last year, GDP will probably grow 4.5 percent this year, making Sweden one of Europe’s top performers.
Wow. Cutting taxes to boost the economy. Who knew that might work?