Congrats, Barry. US falls out of top 10 most prosperous nations

You know that period between sleep and wakefulness where you're not quite sure you're still dreaming? I read this blog item at Powerline and had the exact same reaction:

Via InstaPundit, we learn that for the first time, the United States does not rank as one of the world's ten most prosperous nations, as rated by London's Legatum Institute. The authors of the report found that the U.S.'s slippage is being driven by "a decline in the number of US citizens who believe that hard work will get them ahead." Well, they're right: in Barack Obama's America, hard work doesn't cause you to get ahead; being politically connected does. We are all paying the price for the corruption of the Age of Obama.
Consistent with this finding is the fact that for the first time in history, the average Canadian is wealthier than the average American. Canada has a conservative government, and they have passed us like we are standing still. Which we are, at best.
All of which raises the question: do Barack Obama and his minions want America to be one of the world's ten most prosperous countries? If you believe, as I do, that actions speak louder than words, the answer is No.

I wouldn’t trash some of the countries on that list.

Let’s pick one country for instance — SWEDEN.

The general thinking is that taxes are high and it is a welfare state.

However, read this part :

http://www.americanthinker.com/2012/10/the_swedish_model_government_austerity.html

Sweden, like Norway, is often held up as a country which is “socialist and successful.” For example, Sweden has high taxes yet also has had healthy economic growth recently. In this century so far, Sweden’s total tax bite amounted to 52% of GDP, while the U.S.’s was 32%. Yet Sweden’s real GDP grew 2.3% per year from 2001 to 2011, and ours grew only 1.6% per year. Prima facie evidence that high taxes don’t kill an economy, right?

In July I deconstructed the Norwegian “Miracle,” the other “socialist and successful” country. It’s Sweden’s turn now.
Sweden, like Norway, consists of a small, not very diverse, mostly white and Christian people. Its population is 9.1 million — a bit less than North Carolina’s. (There are 13 cities in the world with bigger populations.) Not only are native Swedes white, but so are most of Sweden’s immigrants. The CIA World Factbook lists its immigrants as “Finns, Yugoslavs, Danes, Norwegians, Greeks, Turks.” And 85% of that population is Lutheran; 85% live in cities — 22% in the Stockholm area itself.

But unlike Norway, which is swimming in oil, Sweden is not richer than the U.S. On a GDP per capita basis (Purchasing Power Parity), the U.S. is 20% richer than Sweden. So Sweden has enjoyed somewhat faster growth than the U.S., at least over some cherry-picked periods of time, but it has not caught up to us in over three decades.

In 1980, Sweden was 81% as rich as us; 31 years later, 83%. That’s not much movement on Sweden’s part. In fact, even that 2% difference all came in the last year, 2011 (the last year of available data), not exactly a banner year for the U.S.

The real story of Sweden is the exact opposite of a “socialist success story.” The real story is that big government stifles growth and that what works is austerity. The real story of Sweden comes in two parts: pre-1993 and post-1993, or the quasi-socialist years and the austerity years.

From 1980 through 1997, Sweden’s government spent more than all other advanced economies as a fraction of GDP. It peaked at 68% of GDP in 1993, an all-time record for advanced economies.

And how did that “socialism” work for Sweden? Its economy grew only 1.4% per year from 1980 to 1993, when the U.S. was growing 3.0% per year. And over those last five years, 1988-1993, it stopped growing altogether — 0% growth. It fell farther behind the U.S: from 81% as rich to 72% as rich. Its debt grew to 70% of GDP.

In short, government spending in Sweden had the effect that free-market types always predict: slow growth and high debt. Government spending does not stimulate; it stifles, and it sticks our kids with the bill.

Around 1993, Sweden’s government changed its behavior: it started spending less. By 2011 it was spending “only” 49% of GDP. While that is still pretty high, that represents a cut of 19% of GDP, or about what the entire federal government of the U.S. spent each year in most of the Clinton and Bush years.

By 1998, Sweden was no longer Europe’s biggest spender. By 2011, it had dropped to 9th place of 34 advanced economies. Sweden’s government is still big, but not near the biggest, and it lost a lot of weight — the equivalent of shedding the weight of the entire federal government of the U.S.

That is what I call “austerity”: the government simply spending less. And how did that work out for Sweden? Since 1993, its economy grew 2.8% per year, or double its previous rate, while ours grew only 2.5% per year. Its debt was cut from a high of 73% of GDP to 37%.

SNIP SNIP

Sweden’s debt was cut from 73% of GDP in 1996 to 37% in 2011. Do you know what U.S. government debt did during those same years? It rose from 70% of GDP to over 100%! What’s more, the U.S. government did all that in just the last four years.

It took Sweden 12 years to cut its debt by 35% of GDP. It took the U.S. just four years to increase its debt by 35% of GDP. We are taking Sweden’s example and turning it on its head.

Look at Pew’s summary of what Sweden did and compare it to what the U.S. is doing now.

Sweden “enacted a large deficit reduction plan.” The U.S. has had deficits in excess of a trillion dollars each year that Obama has been president. President Obama’s latest budget plans for a debt that skyrockets to infinity.
Sweden “reduced its subsidies for medical and dental care.” The U.S. passed ObamaCare in 2010, calling for a whole new class of subsidies.

Sweden “indexed certain taxes and increased contribution rates for the unemployment benefit system” (although it reduced the fraction of GDP it took in as revenues — see below). Obama makes up tax policy as he goes along, increasing rates on everything from tanning beds to medical devices, and cutting payroll taxes, the very taxes that fund Social Security and Medicare, which actuaries expect to go broke in the next decade or two.

And, of course, Sweden simply cut government spending. Government spending in the U.S. is at post-war record highs. The federal government in particular has been spending over 24% of GDP in every year of Obama’s presidency, a significant increase over the 16 years that preceded Obama (which averaged 19.7% of GDP).

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