Wednesday, March 12, 2014

Mitchell strikes out again

If Cato’s Daniel J. Mitchell is “particularly impressed” by Sweden’s “genuine fiscal restraint” from 1992-2001, he must love President Obama.

Mitchell shows a graph of total government expenditures in Sweden over the period, noting that “spending grew by an average of 1.9 percent per year” over those nine years. Let’s leave aside the fact that this is in nominal currency– a frequent oversight in Cato’s budget reporting. What I find particularly interesting is that equivalent spending in the United States grew only 0.9 percent per year from 2009-2013. Does that impress Mitchell? I’m guessing not, because spending was especially high in 2009 on account of the bursting of the housing bubble, and resulting unemployment, bailouts, and stimulus. But the story was hardly different in 1992 Sweden– suffering the fallout of a housing bust and banking crisis.

Of course, Sweden went as far as nationalizing banks to deal with the banking crisis and was fully recovered by 1995. So maybe the U.S. should take a lesson from Sweden: nationalize a few banks, get to full employment, and then consider some “fiscal restraint” of its own.

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