Congress is, or at least should be, busy. Over the next few months it is supposed to tackle reforms to our health care system and tax code and produce a new budget. Even if not enacted in their present forms (or outlines) – as I hope not – they are bound reshape our economic lives toward a more conservative vision. That prospect got me wondering, What would an America driven by conservative economic policy actually look like?
While liberals are quick to look to Scandinavian countries as exemplars of societies driven by liberal economic (and social) policies, it might be natural for conservatives to look to Switzerland. In many respects, Switzerland is a conservative’s dream country. It has a weak federal government with much state power given to the cantons (equivalent to our states) and municipalities within them; low taxes; high tariffs on foreign goods; and a consumer driven health-care system.
And the results of these policies are remarkable. Unemployment is typically low (about 3.3% now and forecast to drop). Its GDP per capita is $63,616, one of the highest in the world and beating the U.S. ($57,325). With an average family tax rate of 9.1% (compared to the U.S.’s 20.8%), high wages (despite no official minimum wage – another plus for conservatives – the actual minimum wage tends to hover around $25/hour), and moderate costs for health care, the average household disposable income is $35,952, with the top 20% earning four times the bottom 20%, while in the U.S. it is $41,071, but the top 20% earn eight times the bottom 20%. Government debt is about 45% of GDP, less than half what it is in the U.S. Despite its lean government, Switzerland spends about 50% more per student than the U.S. and has excellent educational outcomes. Public university education – there really isn’t a private one to speak of – is by our standards virtually free. (Most of these figures come from OECD data, found here). And it’s a clean country with a diverse population, a great infrastructure, and happy residents.
This would seem to be a strong endorsement of the Republican agenda – after all, if it moved us more toward Switzerland, how bad could that be? As always, though, there are catches and caveats.
Things cost a lot – a lot – in Switzerland. There is more income, sure, but also $6/gallon gasoline, $5.50/gallon of milk, and a $14 combo meal at MacDonalds. Switzerland is a society of renters, not owners (only about 45% own their homes). These concerns over costs are certainly a factor in the country’s low fertility rate of 1.5 children/woman. Nor is there much economic growth (typically 1%-2% annually, tops, per year) and economic mobility is low; although university is free, most students are earlier tracked into (excellent) vocational programs. The health-care system requires that everybody has insurance and is tightly regulated, using company profits to subsidize weaker parts of the system. The government spends relatively little on “welfare” programs because such issues are dealt with on a local level, and often families are expected (compelled) to support their own less fortunate. Arguably the biggest difference, though, is bearing the expense of our military. Whereas Switzerland spends about $300 per person on its military, we currently spend about $1860. For a family of four, that’s, on average, an additional $6000 each year.
Personally, with the salaries of academics significantly higher than they are in the U.S. (I was told that post-doc could make $80,000/year) I suspect that I and my family would do very well in Switzerland, or a country that was more like it. Its policies are excellent for a population that largely wants to maintain the status quo. But the status quo in the U.S. – with twice the rate of inequality and more than twice the poverty rate – is not what we need as a country now. Perhaps one day, but not today.