By John McClaughry
Bernie Sanders is fond of explaining socialism by pointing not to Nicaragua or Cuba or Venezuela but to Scandinavia, especially Denmark. Veronique deRugy, writing in Reason magazine, offers some additional information about how the Danes do it, and it’s sure not Sanders’ socialism.
She explains that the generous welfare benefits Denmark offered in the 1970s dug a large fiscal hole, that ever since the Danes have been trying to backfill.
The Danes lowered their top income tax rate from 73 to 63 percent, lowered the corporate tax rate from 50 to 22 percent, abolished the wealth tax, reduced the length of government supplied unemployment benefits from indefinite to two years, and raised the retirement benefit age.
Its parliament passed an act in 2014 aimed at ensuring a balance or surplus on the general government balance sheet and tight expenditure management across government. The annual deficit can’t exceed half a percent of Gross Domestic Product.
The independent Danish Economic Council assesses annually whether government policy is adhering to the targeted structural public balance, and whether the proposed expenditure ceilings are consistent with medium term projections in the structural balance for public finances. In 2017 the country ran a budget surplus of 1.09 percent of GDP.
In short, the capitalistic Danes are letting economic growth bring in the revenues to pay for the welfare state, under tight budgetary controls. I suppose Bernie has no idea about any of that.
John McClaughry is vice president of the Ethan Allen Institute. Reprinted with permission from the Ethan Allen Institute Blog.