Tag Archives: Economics

News

Sweden turning to capitalism as money for government spending runs out

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I hear a lot of people in my office predicting doom and gloom for the United States. Rubbish. The worst that’s going to happen is that we have the kind of slow economy that France has, and that will only last until we run out of money to borrow.

Yahoo News explains what happens when socialists run out of money.

Excerpt:

The Nordic model, known for high taxes and its cradle-to-grave welfare system, is getting a radical makeover as nations find themselves cash-strapped.

[…]In the wake of a banking crisis in the early nineties, Stockholm scrapped housing subsidies, reformed the pension system and slashed the healthcare budget.

A voucher-based system that allows for-profit schools to compete with state schools was introduced, and has drawn attention from right-wing politicians elsewhere, including Britain’s Conservative Party.

In 2006, conservative Prime Minister Fredrik Reinfeldt’s government accelerated the pace of reform, tightening the criteria for unemployment benefits and sick pay while lowering taxes.

Income tax in Sweden is now lower than in France, Belgium and Denmark, and public spending as a share of GDP has declined from a record 71.0 percent in 1993 to 53.3 percent last year.

Just so you know, his numbers might be out of date.

The latest Heritage Foundation Index of Economic Freedom says this:

The top individual income tax rate is 57 percent, and the top corporate tax rate has been cut to 22 percent. Other taxes include a value-added tax (VAT) and a capital gains tax. The overall tax burden is 44.5 percent of GDP. Public expenditures make up about half of GDP, and public debt is below 40 percent of GDP. The government is attempting to expand investment in infrastructure and research while reining in welfare spending.

The United States had this:

The top individual income tax rate has risen to 39.6 percent, and the top corporate tax rate remains at 35 percent. Other taxes include a capital gains tax and excise taxes. The payroll tax holiday expired at the beginning of 2013. The overall tax burden amounts to 25.1 percent of gross domestic income. General government expenditures are slightly over 40 percent of GDP. Total public debt equals over 100 percent of the size of the economy.

So we are actually worse than Sweden now, in terms of government spending as a percent of GDP.

Denmark, too

More from the Yahoo News article:

If Sweden is the Nordic country to have gone the furthest in shrinking its welfare state, Denmark has moved the fastest.

When her Social Democratic government took power in 2011, there was little to suggest Prime Minister Helle Thorning-Schmidt would make any dramatic changes to the country’s cherished welfare state — funded by the world’s highest tax burden.

After a centre-right government had raised the retirement age and reduced the unemployment benefits period from four to two years, “Gucci Helle” — as she is known among her detractors — went on to cut corporate taxes to 22 percent from 25 percent.

Other reforms have included requiring young people on benefits to undertake training, and withdrawing student aid to those taking too long to finish their studies.

Denmark has been spurred into action by a persistently sluggish economy since a housing bubble imploded in 2007, leading to anaemic household spending.

But among Danes there is also a sense that the welfare state was ballooning out of control.

In 2011, a TV report aiming to show what life was like for the poor in Denmark visited the home of a single mother on benefits, whose disposable income turned out to be 15,728 kroner (2,107 euros, $2,860) per month.

“Poor Carina”, as she was later nicknamed, sparked a national debate on the level of unemployment benefits, with one pollster crediting her with fuelling a rise in the number of people who felt benefits were too high.

It would be nice if we had journalists who could do a story like that.

A different article from a Swedish newspaper called The Local has more on the new Sweden.

Excerpt:

One in ten Swedes now has private health insurance, often through their employers, with some recipients stating it makes business sense to be seen quickly rather than languish in national health care queues.

More than half a million Swedes now have private health insurance, showed a new review from industry organization Swedish Insurance (Svensk Försäkring). In eight out of ten cases, the person’s employer had offered them the private insurance deal.

“It’s quicker to get a colleague back to work if you have an operation in two weeks’ time rather than having to wait for a year,” privately insured Anna Norlander told Sveriges Radio on Friday. “It’s terrible that I, as a young person, don’t feel I can trust the health care system to take care of me.”

The insurance plan guarantees that she can see a specialist within four working days, and get a time for surgery, if needed, within 15.

I used to make fun of Sweden for being so socialist, but then I started to read more about them on Reason.com and from the Cato Institute (two libertarian sites) and my mind changed. These new articles confirm for me  that Sweden is improving their economy by embracing the free market system and rejecting socialism. Obviously, there is more to do, but the trend is good, and the results cannot be questioned. What could the United States do if we acted more like Sweden? It seems like just as they are moving away from government control of health care, we are moving towards it! We are embracing old ideas, and we need something new.

I am still worried about the European countries because of the breakdown of the family, the disrespect of marraige and the low fertility rates. But still, this is a good sign for those of us who are worrying that we need to cheer up. This is how socialism ends. We’ll get there.

Polemics

Does the Bible teach government-controlled wealth redistribution to help the poor?

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Eric from Ratio Christi posted an essay by famous Christian philosopher J.P. Moreland entitled “A Biblical Case for Limited Government”. 

About the author:

I am the Distinguished Professor of Philosophy at Talbot School of Theology, Biola University in La Mirada, California. I have four earned degrees: a B.S. in chemistry from the University of Missouri, a Th.M. in theology from Dallas Theological Seminary, an M. A. in philosophy from the University of California-Riverside, and a Ph.D. in philosophy from the University of Southern California.

Here’s the intro from the essay:

In what follows, I shall argue that, when properly interpreted, biblical teaching implies a minimal government with a specific function to be mentioned shortly. I will begin by describing the three-way worldview struggle in our country and explain why two of those worldviews have a vested interest in big government. I will then present a biblical methodology for getting at scriptural teaching about the state. I will apply that methodology to support the claim that Israel’s ethical policies in the Old Testament are better analogies for the church/covenant community than for the government, and in this context I will clarify the role that “defining terms of address” plays in my discussion. I will then distinguish negative and positive rights and argue that the best texts for unpacking biblical teaching about the state are two:  four key New Testament texts and the obligations placed on pagan nations by the Old Testament prophets. I will try to show that these key texts depict the state as a protector of negative rights and not a provider of positive rights. Thus the scriptures support a limited view of government and its function.

Next, I will turn to a description of the decisive feature of New Testament ethics in general, and Jesus’s ethics in particular, namely, virtue ethics with voluntary adherence to the love commands. I will show that, given this ethic, the state may be able to show mercy, but it cannot show compassion due to both the nature of the state and the nature of compassion. I will close with a brief treatment of the importance of Natural Moral Law in the state’s fulfilling of its God-given role so as to avoid a theocracy. And I will examine the charge that commitment to the Natural Moral Law makes one an intolerant bigot.

And here’s the best part:

[W]e need to make a distinction between positive and negative rights. A positive right is a right to have something given to the right-holder. If Smith has a positive right to X, say to health care, then the state has an obligation to give X to Smith. In general, positive rights and duties are correlative. That is, if someone has a positive right to something, then a duty is placed on others to provide that right to that person (or class of persons). Thus the state has the moral right to impose on citizens the duty to provide that right to the right-holder. A negative right to X is a right to be protected from harm while one seeks to get X on one’s own. If Smith has a negative right to X, say to health care, then the state has an obligation to protect Smith from discrimination and unfair treatment in his attempt to get X on his own. We learn much if we approach key biblical texts about the state armed with the distinction between positive and negative rights.

Then he brings up the Romans 13 passage that Wayne Grudem mentioned yesterday in the post on the Bible and capital punishment, which talks about how the state can punish evildoers.

More:

A second feature of the Romans 13 text is that it seems to depict the state as the protector of individuals from harm due to negative-rights violations (and as the praiser of those who do not engage in such law-breaking behavior) rather than as the provider of positive rights. In the preceding context (Romans 12:17-21), the issue in focus is someone who has had evil done against him, i.e., has had his negative rights violated. The passage makes clear that in such a case, the individual is not to take revenge and repay evil with evil. This would most naturally raise a question of criminal justice, viz., will the person have to pay for what he/she did to me in this age? Romans 13:1-7 answers that question in the affirmative by stating that such justice is precisely the purpose of the state. Moreover, in the verses that follow Romans 13:1-7 (verses 8-10) the focus is on showing compassion and love to one another, a topic mentioned in Romans 12:20 in the context of providing things (food and drink) for one who has harmed you. Now while compassion, love, and providing for others are mentioned just before and after Romans 13:1-7, it is significant that these topics fall from sight when the nature and function of the state is in view. A good explanation for this is that the state is not to be in the business of showing compassion (for more on this, see below) or providing positive rights for others. That is an  individual moral responsibility. No, the state is the protector of negative rights.

[…]By contrast with the voluntary nature of compassion and genuine ethical action, the state is coercive and forces conformity to its dictates. The coercive approach works well when the state is protecting negative rights, but it raises an ethical problem if the state tries to provide positive rights. While the state can show mercy—it bears the sword and can refrain from using it—the state cannot show compassion. As an individual, a representative of the state can have compassion in his heart as he gives to the poor; but this compassion is exhibited by him qua individual and not qua representative of the state. The state’s care for the poor is coercive since it redistributes wealth by force. It takes from some and gives to others, all by the force of law. Such actions count for very little in God’s eyes because they do not reflect the features of Jesus’s ethic identified above. And because Jesus was not a utilitarian, even if such actions accomplish good ends, the end does not justify the means. In a biblical ethic, helping the poor by the coercive power of the state is of little ethical value. If I am right about this, then it follows that when the state steps outside its role of protecting the violation of negative rights, the state will be incompetent and less effective than private or charitable alternatives.

And J.P. Moreland is right about it. This is a great essay and it helped me to understand how to talk about these issues. I think you should print this out and read it. Send it to everyone, especially young people who seem to be so confused about the free market system.

You can grab the PDF here from the Institute for Faith, Work and Economics (IFWE). It’s only 11 pages long, without footnotes. It took me only 15 minutes to read it.

Polemics

What is the purpose of capital punishment? Does it deter crime?

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Why do some people support the death penalty? Because research conducted by multiple teams of scholars at multiple universities have shown that the death penalty deters crime.

Excerpt:

“Science does really draw a conclusion. It did. There is no question about it,” said Naci Mocan, an economics professor at the University of Colorado at Denver. “The conclusion is there is a deterrent effect.”

A 2003 study he co-authored, and a 2006 study that re-examined the data, found that each execution results in five fewer homicides, and commuting a death sentence means five more homicides. “The results are robust, they don’t really go away,” he said. “I oppose the death penalty. But my results show that the death penalty (deters) — what am I going to do, hide them?”

Statistical studies like his are among a dozen papers since 2001 that capital punishment has deterrent effects. They all explore the same basic theory — if the cost of something (be it the purchase of an apple or the act of killing someone) becomes too high, people will change their behavior (forego apples or shy from murder).

And specifically:

• Each execution deters an average of 18 murders, according to a 2003 nationwide study by professors at Emory University. (Other studies have estimated the deterred murders per execution at three, five and 14).

• The Illinois moratorium on executions in 2000 led to 150 additional homicides over four years following, according to a 2006 study by professors at the University of Houston.

• Speeding up executions would strengthen the deterrent effect. For every 2.75 years cut from time spent on death row, one murder would be prevented, according to a 2004 study by an Emory University professor.

In case anyone is wondering what sort of crimes are deterred by the death penalty, you can read this graphic description of a recent death-penalty crime.

What sort of crimes are eligible for the death penalty?

Here’s an example of a death-penalty eligible crime from the Hartford Courant. (WARNING: graphic!)

Excerpt:

A Superior Court jury today sentenced Steven Hayes to death for the murders of Jennifer Hawke-Petit and her daughters, Hayley and Michaela, during a seven-hour home invasion, robbery and arson at their Cheshire home in July 2007.

Outside the courthouse after the verdicts, Hawke-Petit’s father, the Rev. Richard Hawke, said “There are some people who do not deserve to live in God’s world.”

Asked what he had in his heart, Dr. William Petit Jr. struggled with his answer. “….Probably many of you have kids,” he said, pausing to choke back tears. “Michaela was an 11-year-old little girl…tortured and killed in her own bedroom, surrounded by her stuffed animals….”

Petit then talked about his daughter Hayley’s bright future and her strength and the children that his wife, Jennifer, helped.

“So, I was really thinking of the tremendous loss” during the verdict, Petit said, adding that he was pleased with it, but “mostly I was sad for the loss we have all suffered.”

Asked if he thought there’d be closure now, Petit said, “There’s never closure. There’s a hole…. with jagged edges…that may smooth out with time, but the hole in your heart and the hole in your soul” remains.

“This isn’t about revenge,” Petit said. “Vengeance belongs to the Lord. This is about justice.”

[…]The jury sentenced Hayes to death on six counts: killing Hawke-Petit and Michaela and Hayley in the course of a single action; killing a child under the age of 16; killing Hawke-Petit in the course of a kidnapping; killing Hayley in the course of a kidnapping; killing Michaela in the course of a kidnapping; and killing Hawke-Petit in the course of a sexual assault.

[…]Hayes, 47, of Winsted, was convicted Oct. 5 of breaking into the Petit home, beating Petit, tying up and torturing the family as Hayes and another man ransacked the home for cash and valuables and tortured the family for seven hours. Testimony during Hayes’ trial showed that at one point in the break-in, Hayes forced Hawke-Petit to go to the bank to withdraw money. During that time, according to testimony, Komisarjevsky sexually assaulted Michaela Petit, 11.

When Hawke-Petit and Hayes returned from the bank, Hayes raped and strangled Hawke-Petit. The house was doused with gasoline and set on fire as the intruders fled, testimony showed. Hayley, 17, and Michaela died of smoke inhalation.

[…]Prosecutors used the words of Hayes’ younger brother Matthew to counter testimony that home-invasion crime was an aberration in Hayes otherwise troubled but basically nonviolent life.

Matthew Hayes portrayed his brother as a conniving, sadistic, violent thief who saw Matthew take countless beatings from his brutal father for Steven Hayes’ misdeeds. At one point, Steven Hayes held a gun to Matthew’s head, according to the statement, which was given to state police after the home invasion.

Examples of Hayes’ sadistic behavior toward his brother included hooking Matthew to the garage door by his belt and raising the door up and down, and holding Matthew’s hand to a red-hot burner. Matthew said his brother’s life of crime was not a result of bad parenting or poor childhood. He said Hayes never learned to take responsibility for his actions.

Sometimes, I think that we have stopped judging others because we do not want to be judged ourselves. We hope that by not judging anyone, that we will somehow escape being judged by anyone – especially by God himself. The opposition to punishing the guilty is, I think, really just a way of expressing our desire to do away with the idea that we will finally face judgment.We seem to be able to ignore the victim’s needs and act as if the criminal is the victim. We act as if deterring a crime with punishment has no impact on the decision making of people who are considering whether to commit the crime. But crime isn’t some random action – criminals do consider what will happen to them if they are caught. We send potential killers a message by being willing to punish the ones we catch. But if we treat them like victims, then others watching are not going to be deterred from committing crimes.