Recently, Cenk Uygur, the Internet least favorite Armenian genocide denying progressive, and the Young Turks, released a video telling us silly Americans how amazing Sweden is. Of course, the video is nowhere near accurate but he basically calls conservatives evil, so he must be right. Right?
Before the debunking starts, let me be clear about something. Sweden is not “socialist”. They have a generally free market economy with a generous welfare state. That is not socialism.
“Sweden actually put a very left-wing government in power in 2014, their economy was struggling…”
Can we get a definition of struggling? This is fairly important to Cenk’s case. He claims Sweden’s economy was struggling before leftist reforms and now it is doing great. I think some clarification on what “struggling” means would be helpful in evaluating this claim. Sadly, we get none. So instead, we will go with some fairly noncontroversial indicators to evaluate their economy in 2014 and today.
Let us start with annual GDP growth. Looking at this indicator, we see annual growth rates have stayed between zero percent and six percent pretty consistently. That stayed true from 2014 onward. To be fair, 2014 was on the low side of this trend, one point nine percent, but lulls happen in economies, however, this low growth rate was part of a growth acceleration trend that started in 2012 and continued until early 2016. Once the growth rated peaked in 2016 it began a deceleration to basically where it was in 2014, just over two percent.
If we look at the Swedish unemployment rate, we see that 2014 was part of a Swedish unemployment rate downward trend that began in 2009 and continues today. At the same time, the average hourly wage has been increasing at a constant rate since 2008. This trend held in 2014 and in 2016, to today.
This leads to the obvious question. How was the economy struggling? I am not a Swedish economist so maybe I am missing something but I do not think I am.
“All the media that you cannot do that. You lower taxes to stimulate the economy.”
Why is this controversial? It really should not be. There are arguments against cutting taxes like income inequality or lose of government services, but saying they do not help economies is a pretty baseless statement. We can argue exact nuances but this statement on its face is not debatable.
“Raising taxes will kill the economy”
This is true. To quote a Federal Reserve study, “comparing contiguous counties straddling state borders over the period 1970 to 2010, we find that increases in corporate tax rates lead to significant reductions in employment and income.”
The research is pretty clear that raising taxes hurts economies although it is less clear when it comes to lowering taxes.
Their economic freedom score went from 73.1 in 2014 to 74.9 in 2017. Just putting that out there.
“I thought it was supposed to kill the economy. It turned out it actually powered the economy. it made it grow much faster than it was before…”
Here is a chart of Swedish GDP annual growth rates. Yes, it accelerates in the short term but, as I mentioned above, this was part of a four-year growth rate acceleration trend which ended in early 2016 when the growth rate began to be cut in half within the next year. Furthermore, for most of 2014, GDP annual growth was higher than the last two quarters. In truth, in this 2016 to present time frame, only three, maybe four, months so significantly better than 2014.
“…and much faster than it is growing here in America.”
This would have held more water in late 2015 through 2016. There was a fair amount of separation but Swedish growth has come back down. Regardless, you can hardly discern anything about reality from casually comparing six quarters of growth.
“…recently their GDP is growing around 4% when American politicians talk about growing at 4% they are dismissed, rightfully so in this context in America, as making outlandish statements that are not remotely possible in the American context. Turns out they could be possible if we raised taxes.”
You remember how I just said you cannot discern reality from casually comparing six quarters of economic growth? Can someone please tell Cenk that? This is the perfect example of a Post hoc ergo propter hoc. Absolutely no evidence was presented to suggest that higher taxes help an economy. Cenk just bloviated about Sweden raising taxes in a super-unspecific way, said their economy got better in the same period without actually proving that in any way, and proceeded to say their tax increases must be the reason. It is not like advanced economies are complex or anything. He then basically did the same thing to America with even less evidence and argumentation for his position.
As a side point, if we are going to use fallacies, then the deceleration in growth seems to prove my point that taxes hurt economies. After they raised taxes growth rates began to fall so, by Cenk’s own logic, taxes hurt economies.
“And I know you’ve been brainwashed by TV for so long — no, the rich have to have everything, if they have everything it will trickle down to you and maybe you will get something.”
I have a general rule about political statements. If you are making grand statements about groups, and you can replace that group with Jews and sound like Hitler, you probably should reevaluate your statement.
Also, trickle-down economics is still not a real thing, and no one is not arguing that tax cuts will cause money to “trickle down” to the poor.
“It’s just not true. You know what happens when you have a more equal distribution of wealth? People in the lower economic brackets have more money. You know what people in lower economic brackets do? They spend the money because they don’t have a choice. They have to eat, they have to have clothes for the kids, and they immediately spend it. And that’s not a bad thing, it goes back into the economy and circulates, it helps your economy, that’s why you have a higher GDP and higher economic success.”
This shows the fundamental difference between conservatives and progressives, and what progressives don’t understand. Progressives think consumption drives an economy when it is actually production. Poorer people spending money does increase spending but it does increase production. Investment does that, and who do most of the investing? Rich people.
“When you give massive tax cuts to the very wealthy, they don’t spend it. They put it in their bank account. They might buy a yacht or a mansion here or there, but overall the billions that they have, they largely save it and don’t put it back in the economy. It’s a losing strategy.”
This is such a naive view of what the economy is. Cenk, what do you think banks do with money when they are given? Sit on it? No, they lend it out. This is basic economics, saving is deferring consumption in the present so some else can. And to be clear, the same basic principle applies to rich people investing their money.
“When we were actually number one — 1950s, 1960s, the era that the right-wing in this country says was a golden era – you know how high the top marginal tax rate was in America? Oftentimes it was 70%, at sometimes it was at 90%. That didn’t apply to everyone; it doesn’t mean they will take 90% of your money.”
And no one paid those rates. Effective tax rates have always been at or below thirty percent, and federal revenue has always stayed below twenty percent no matter the rates.
“What I am telling you is when we had high marginal tax rates, we had a booming economy. When Sweden has a high marginal tax rate they have a booming economy.”
These two lines show that Check does not understand that loose correlations do not prove causation
“But I know another thing the right-wing says — it will turn them into bums. Nobody will work anymore. Let’s see if this is true. Sweden has the highest labor participation rate in the EU.”
Yes, because people respond to incentives. Why work for money when it is given to you for free?
“They take the money and put it into things like healthcare so you don’t die…”
No one is dying because of a lack of healthcare in America, and Medicare for All, which Cenk and other progressives support, would save all of zero lives as the Oregon Medicare experiment showed.
“…education so your kids have as much chance as any rich kid does…”
Do you know who spends more per student on primary education? What about secondary? Tertiary? The US or Sweden? I will let you guess.
“…and parental care and daycare so that you can actually leave your kids in daycare and go to work. And guess what happens, more people go to work.”
And so workers have to take a small paycheck
“Sounds pretty good”
I would stress the word sounds. Everything Cenk has said till now has been highly misleading and not reflexive of reality
“When you do all this taxing and spending and do a record amount of welfare, it will destroy your budget, right?”
Not if you tax poor people like Sweden does. America gets thirty-nine percent of its tax revenues from taxes on incomes, profits, and gifts, which target the rich, while Sweden only gets twenty-nine percent. On the flip side, Sweden gets over a fifth of their revenue from VAT taxes which the poor pays, while we get seventeen percent from sales taxes, our equivalent of the VAT.
Note, it is actually worse than this when we compare the federal level tax system to the Swedish tax system because our federal government does not use VAT or sales taxes, making them more reliant on income taxes than the Swedish government.
“Our budget is a disaster, we keep cutting taxes, we have giant deficits and enormous debt…”
Cenk is right here, but only if we ignore the fact that government spending is far bigger today than it ever was, while revenues are in line with historic standards. Federal expenditures have come to be consistently above twenty percent of GDP while federal revenues have always been below the twenty percent of GDP thresh mark, no matter the tax rate. When you ignore these important facts, Cenk is spot on.
“They [right-wingers] probably already said it in the comments section. That’s not fair because Sweden is so homogeneous.”
It is not so much that Sweden is homogenous, but that it is really small. Sweden is basically the size of New York City (side note, Sweden has a significantly lower GDP per capita, by 16k). So maybe Sweden is not the best model for such a large country.
I don’t care much for the homogenous argument but it has credence. Diversity (not just race) is a centrifugal force, so a diverse population would have less social cohesion allowing for a less effective government due to a more fractured population. It is easier for a government to operate when society is cohesive than when it is fractured.
The Young Turks have been around for years, and we all have come to expect trash from them, but this was pathetic. There was little to no actual substance that was correct but, in truth, that should not be a surprise. The progressive obsession with countries like the Scandinavian ones, is baseless and not founded in any version of the truth.
Update: The original article said, “On the flip side, Sweden gets over a fifth of their revenue from VAT taxes which the poor pays, while we get nineteen percent from sales taxes, our equivalent of the VAT.” It has been updated to say “seventeen percent.”