Paul Krugman Stands Up for Sanders, Dismantles Right-Wing Lies About Denmark's Economic Success Story

Krugman takes on the hoary right-wing myth that Denmark, the country touted by the Sanders campaign as getting a lot of things right, is somehow a dangerous example of runaway socialism in Monday's column.

He began by mentioning that Bernie Sanders and Hillary Clinton discussed what we might learn from Denmark in last week's debate. "Such an exchange would have been inconceivable among Republicans, who don’t seem able to talk about European welfare states without adding the word 'collapsing,' he said. "Basically, on Planet G.O.P. all of Europe is just a bigger version of Greece."

Not quite true. A more sober analysis:

Denmark maintains a welfare state — a set of government programs designed to provide economic security — that is beyond the wildest dreams of American liberals. Denmark provides universal health care; college education is free, and students receive a stipend; day care is heavily subsidized. Overall, working-age families receive more than three times as much aid, as a share of G.D.P., as their U.S. counterparts.

To pay for these programs, Denmark collects a lot of taxes. The top income tax rate is 60.3 percent; there’s also a 25 percent national sales tax. Overall, Denmark’s tax take isalmost half of national income, compared with 25 percent in the United States.

These facts would strike horror in the heart of the American conservative, who would assume they would make all workers lazy, and cause job creators to flee. But, alas, conservatives, this is not the case. "Labor productivity in Denmark is roughly the same as it is here, although GDP per capita is lower, mainly because the Danes take a lot more vacation," Krugman writes.

Imagine the horror of all that vacation.

Krugman also debunks the myth that Danes are melancholy (on accoiunt of all that vacation, prosperity and free stuff). Denmark ranks at or near the top on international comparisons of “life satisfaction."

"It’s hard to imagine a better refutation of anti-tax, anti-government economic doctrine, which insists that a system like Denmark’s would be completely unworkable," Krugman concludes. Even France, a bigger welfare state than Denmark, maintained by high taxes has a better employment rate than America and roughly equal productivity. 

Denmark's economy has taken a hit in recent years, Krugman points out, a fact he attributes to poor fiscal policy.

Denmark hasn’t adopted the euro, but it manages its currency as if it had, which means that it has shared the consequences of monetary mistakes like the European Central Bank’s 2011 interest rate hike. And while the country has faced no market pressure to slash spending — Denmark can borrow long-term at an interest rate of only 0.84 percent — it has adopted fiscal austerity anyway.

The result is a sharp contrast with neighboring Sweden, which doesn’t shadow the euro (although it has made some mistakes on its own), hasn’t done much austerity, and has seen real G.D.P. per capita rise while Denmark’s falls.

But those mistakes have nothing to do with how sustainable the welfare state is.

It turns out that there is nothing rotten in the state of Denmark after all.

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