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On Monday, the government will present next year’s budget proposal, which has been compromised with the Center Party and the Liberals. The budget proposal contains new reforms of around SEK 100 billion in a restart package. Never before has so much money been spent on startups.
The opposition parties M, SD and KD also have no objection to the size of the budget. However, the parties have worried about the content in advance.
Annika Winsth, Nordea’s chief economist, says there is a lot of talk about restarting and reviving the economy after the crown crisis.
– I strongly oppose it. Half of the drop in GDP was recovered already in July. He’s recovering, he says.
On the other hand, he believes that it is justified to give municipalities, regions and, for example, the hospitality industry and foreign-born people, who have often worked in the most affected hospitality industry, additional support. in the pandemic and states that they may need support for a long time.
The government and the cooperation parties, among other things, pledged a billion-dollar contribution for the care of the elderly and medical care. In the words of Prime Minister Stefan Löfven (S): a “diabolical investment in well-being”.
– But drawing on everything between heaven and earth. It’s more about the policy that the parties normally want to follow, which has nothing to do with the pandemic. And if measurements are to be taken, they must be analyzed in the same way as before, says Annika Winsth.
She thinks it was a mistake to put the 100 billion on the table from the beginning.
– If someone says that we have 100 billion to distribute here, it is clear that they are starting, anyone would have done it.
She sums up:
– One. If you want to stimulate and have an expansive budget, you have to be honest and say why you do it: you want to implement these political measures. And then they need to be evaluated based on regular reviews, says Annika Winsth and continues:
– two. If the pandemic you want is 100 billion too much money.
– Three. It is good to keep in mind that we need money in the future, public finances are not infinite.
He says he criticized the government and the opposition before the pandemic for being stupid. But now you throw yourself at 180 degrees.
– If you burn 100 billion now, you won’t have 100 new ones in two years. There is a risk of burning everything now, especially because of how the Finance Minister has expressed himself, that we need order and we don’t know what will happen tomorrow. There seems to be no need here tomorrow. And not according to the opposition either, says Annika Winsth.
Money for reforms is borrowed at low interest rates. Annika Winsth is not particularly concerned about the upcoming increase in central government debt because the initial situation before the crisis was good, and more taxes will be generated when the economy has started to improve.
– But borrowing for something you haven’t really thought about isn’t usually that good. Borrowing a lot for something you haven’t thought of is immediately inappropriate.
Opportunity to invest a lot
Lars Calmfors, emeritus professor of international economics at Stockholm University and a researcher at the Institute for Business Research, says that we are now in a situation where it is reasonable to invest heavily.
He was chairman of the Fiscal Policy Council during the 2007-2011 global financial crisis and later criticized the coalition government for not stimulating the economy sufficiently.
– I ended up in conflict with Anders Borg. It was such a rare crisis, so more stimulus measures should have been taken early. Then unemployment would not have risen that much, says Lars Calmfors.
While he is now satisfied with the general direction of the budget, that more support measures are needed, he sees that the generous sums carry the risk of reducing the driving forces to make things as sensible as possible.
What are the consequences?
– That measures are taken that are either ineffective as crisis management in the short term, or that become permanent in the long term but do not have greater value.
Take the theme of the Center Party parade, the reduction of employer contributions for young people, as an example of something that is not very effective in relation to what it costs. The second: the reduction of income tax.
– In general, money invested in public consumption and investment seems to be a more efficient economic policy.
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The long-term risk is that if your earned income taxes are already lowered now, you lose a card before future tax reform, according to Lars Calmfors. He says that in such a case one might want to trade lower income taxes for higher taxes on consumption and property that are not as popular and that it will be harder to see such a change take place if taxes are already reduced about rent.
Can Sweden afford this budget?
– Yes I think so. Both what we did before during the crown crisis and the budget will lead to a rise in the central government debt ratio, but it will rise less than we thought when it was at its worst this spring.
It says that it is far from the debt ratios that Spain, Ireland and Greece had during the financial crisis, and that the increase in debt that we now see ahead does not have to have particularly important effects on the Swedish economy in the long term. Rather, they are factors such as the rising proportion of older people, demands for higher standards in health and care, and future investments in, for example, defense, which means that taxes will eventually need to be raised.
How do you see the risk that politicians will find it difficult to break this? That people get used to such large budgets?
– There is a risk that both politicians and citizens get used to this, but hopefully not. I think it’s important that politicians, when we’re done with this, agree on a plan to lower the debt ratio again, says Lars Calmfors.
Who is the winner of the budget?
– Center Party and Liberals. They have overcome several of their favorite ideas.
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Budget proposals 2021
New $ 100 billion reforms have been promised in budget proposals and are described as a restart package.
On Monday, the budget bill is presented in the Riksdag and therefore must obtain a parliamentary majority to be adopted.
These are some of the bets:
Climate and sustainable growth:
Electrification of heavy traffic, tax deductions for individuals who make green investments, increase in the green vehicle bonus and stricter requirements for what are considered green vehicles, support for rail transport and maintenance of railways, more stringent requirements for incorporation of biofuels for cars and airplanes and investments in road networks for bicycles.
Wellness:
The care and care of the elderly receive a permanent supplement of 4 billion annually, the opportunity for staff to train as assistant or care assistant in paid working hours, billions for the regions to work to catch up with the care debt that arose during the pandemic, continuous increases in general government subsidies, more money for municipalities with a high reception of refugees and 1.2 billion to combat mental illnesses and strengthen psychiatry.
Work, financial security and conversion to work:
Reduced employer contributions for youth ages 19-23, temporary tax reduction to address increased labor costs due to the pandemic, further reduced employer contributions for companies’ first job, rotation-based support for individual companies , recovery bonus for health and care employees to improve the work environment, one billion more unemployed people will be able to take advantage of matching services.
1.6 billion SEK for schools, which will be used, among other things, to help with homework and more teaching time and to help municipalities avoid cuts.
The whole country will grow:
Greater support for the development of broadband, investments in green industries, sustainable hotel industry and rural entrepreneurship, and slow indexation of the GDP of the tax on gasoline and diesel.
Security:
Efforts in vulnerable areas and the possibility of serving children in problem families will be increased: subsidies for the placement of family homes, school initiatives in vulnerable areas and strengthened language promotion in preschool children in vulnerable areas and new service offices in vulnerable areas. Investments in police and prison care, intensification of the reconstruction of civil defense, as well as investments in incorrect payments and fraud within the unemployment insurance fund, as well as measures to combat tax fraud and benefit fraud are also proposed.
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