Jazz just wrote about the new Pew survey which found a big divide between Republicans and Democrats on the question of socialism. But as Jazz noted, there are a significant number of Democrats (38%) who say they support both socialism and capitalism. That’s higher than the 26 percent of Democrats who say they support socialism but not capitalism. But what exactly does it mean to support both capitalism and socialism?
What a lot of Democrats who call themselves socialists will say is that they support the Nordic model. In fact, that’s essentially what Bernie Sanders said earlier this month on the Daily Show. He specifically mentioned Denmark and Sweden as examples. And while it’s common to associate the Nordic countries with socialism, Charles Lane at the Washington Post pointed out yesterday that the Nordic model is actually capitalism with much higher taxes on the middle class. That’s the conclusion of a new report published by analysts at JP Morgan Chase:
Drawing on data from the World Bank, the Organization of Economic Cooperation and Development and other reputable sources, the report shows that five nations — Sweden, Denmark, Finland, Norway and the Netherlands — protect property rights somewhat more aggressively than the United States, on average; exercise less control over private enterprise; permit greater concentration in the banking sector; and distribute a smaller share of their total income to workers…
Sanders and other left-leaning Democrats promise to pay for tuition-free college and Medicare-for-all with higher taxes on the top 1 percent of earners. Most Nordic countries, by contrast, have zero estate tax. They fund generous programs with the help of value-added taxes that heavily affect middle-class consumers.
In Sweden, for example, consumption, social security and payroll taxes total 27 percent of gross domestic product, as compared with 10.6 percent in the United States, according to the JPMorgan Chase report. The Nordic countries tried direct wealth taxes such as the one that figures prominently in the plans of Sen. Elizabeth Warren (D-Mass.); all but Norway abandoned them because of widespread implementation problems.
The report itself says this about Nordic countries:
The Nordic tax burden is among the highest in the world, but to be clear, Nordic reliance on regressive VAT, Social Security and Payroll taxes accounts for much more of the tax revenue gap vs the US than progressive income taxes on households and corporations. In other words, the Nordic model is highly reliant on taxing lower and middle class spending and wages.
This chart shows the significantly higher taxes that support the Nordic model.
The report concludes: “The bottom line: copy the Nordic model if you like, but understand that it entails a lot of capitalism and pro-business policies, a lot of taxation on middle class spending and wages, minimal reliance on corporate taxation and plenty of co-pays and deductibles in its healthcare system.”
That may be what Bernie Sanders wants now but it’s not what he wanted in the 1970s or, seemingly, in the 1980s when he was a big fan of the USSR and the Sandinistas. And it’s not what AOC and many actual Democratic Socialists want now either. They want something considerably to the left of the Nordic model. Of course, what all of the proponents have in common is their habit of selling people on the benefits of the Nordic model without ever mentioning the costs. Sanders, Warren, AOC, and many others like to talk about taxing the wealthy but there aren’t enough wealthy to cover the costs of the Nordic model. For that, you need to tax the middle class at significantly higher rates. I eagerly await the moment when some of these socialists admit that’s what their plans would require.