Monday, September 22, 2008

Swedish Government Fight Recession The Right Way

As Sweden in the wake of global unrest and even more importantly, home grown problems, risk falling into a recession, the Swedish centre-right government today presented its budget. As previously reported, the budget is largely good news as the government tries to fight the recession with tax cuts, with corporate income taxes, payroll taxes and personal income taxes all being reduced (although not dramatically).

Austrians, when opposing more monetary inflation and bailouts of bankers, are often accused of opposing any relief to the economy, because of some moral imperative that the economy must suffer (see for example Krugman make that accusation here).

But that is not true. We do favor solutions that will provide relief as long as they do not create even more future problems. Because we realize that the crisis was the result of previous monetary inflation and previous bailouts and that more of that will create more problems in the future, we oppose monetary inflation and bailouts.

However, solutions that do not create future problems, such as marginal tax rate cuts, are welcomed and that is why I am glad that the Swedish government now appears to fight the problem the right way.

Unfortunately, there will be spending increases as well (Sweden has until now had a large budget surplus), but not surprisngly the left-wing opposition wants even more of that while having no tax cuts.


Anonymous Anonymous said...

lower taxes is of course the thing, but if they do not reduce government spending at the same time you will get an artificial boost threw borrowing, from whom? The Riksbank threw the printing press? Or some "Sovereign wealth fund"?

Göran, Sweden

8:32 AM  
Blogger stefankarlsson said...

Göran, as you should know, Sweden has a large budget surplus, so the tax cuts will not be paid by borrowing, but by less forced savings by the government.

9:34 AM  

Post a Comment

<< Home