The Size of Government: Palin and Sweden Vs. Obama

One of the European social democracies the Left has consistently wanted the United States to emulate is Sweden. Sweden, with their cradle to grave welfare state, is the real shining city on a hill to which we should aspire claim liberals. Ironically, however, Sweden has recently been moving away from this failed statist model as their unsustainable government spending and the punishing tax rates which accompany it have resulted in a lagging standard of living relative to other countries. The Center for Freedom and Prosperity, to whom I have referred before, has produced another video in their Economics 101 series, which explores what has recently been taking place in Sweden:




There is a lot of information is this short video. I want to focus only on the overall theme of the proper size and scope of government. When Sweden had a relatively small government and larger private sector, the country prospered. When they began travelling down the road to socialism, their prosperity waned. Most recently, as they have moved to reduce the size and role of government, prosperity is again on the increase. This is not by accident.

There has been much economic research in this area and the results have been notably consistent. The best way to assess the size of government is to measure total government spending relative to Gross Domestic Product (GDP). The greater the ratio of government spending to GDP, the larger and more intrusive the government. The bottom line is that an economy's ability to grow is inversely related to the amount of government spending. Profligate government spending results in lower economic growth, higher unemployment, and lower living standards. To be sure, a small amount of government is necessary to guarantee private property rights and enforce contracts, but beyond that it becomes problematic. For more on this, Dan Mitchell at the Heritage Foundation has an article here.

Freedom, economic as well as political, is the most important factor in prosperity. But freedom can be messy; not all people are equal and equality of outcome is not possible or even desirable. One of the temptations of socialism is the idea, promoted by liberals, that average people aren't smart enough to handle freedom; that they are not knowledgeable enough to know what is in their own self interest and therefore, will make poor choices. This, liberals say, can be rectified if free people are willing to give up some of their liberty in exchange for security which, of course, can only be provided by big government. But, as history has consistently shown, those who give up freedom for security end up with neither.

Those like Obama, who believe the opposite, ignore history as well as human nature. Free markets, which consist of millions of people continuously making decisions in their own self-interest, result in the greatest prosperity for all. This is why countries with limited government are the most prosperous. Governor Palin, who has consistently and repeatedly advocated smaller government, understands this. As governor of Alaska, she is one of the few political leaders in our lifetime who actually reduced the amount of government spending, as opposed to simply reducing the rate of growth in spending which, incidentally, is what Washington politicians consider "spending cuts".

Under Governor Palin's fiscally responsible stewardship, Alaska weathered the recent recession with relatively few problems. However, such has not been the case in states burdened with a large state government. California, with their enormous state government, is effectively bankrupt. New York is not far behind. Obama, with his multiple trillions in new government spending, clearly prefers the failed socialist model to Governor Palin's commonsense small government approach.

Sweden, though they still have much work to do, is moving toward free markets and away from the big government model which has stifled economic growth in their country for the past two generations. Ironically the United States, under Obama's regime, is moving away from free markets and toward socialism. The fact that Governor Palin, a staunch free market / limited government advocate, has policy positions more closely aligned with present day Sweden than those of President Obama is one indication of his appalling (if not surprising) lack of economic literacy.

Update: Obama's unprecedented deficit spending has resulted in the real possibility that the U.S. could soon lose their AAA credit rating. More from Matthew Brown at Bloomberg here.