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1. Why Denmark Model is Not Scalable
Many in Denmark are proud of the Danish system of govt, as they should be, which seems to be working well for them. They don't seem to mind paying high taxes in return for generous welfare programs.
Many in Denmark are proud of the Danish system of govt, as they should be, which seems to be working well for them. They don't seem to mind paying high taxes in return for generous welfare programs.
2. Many people from Denmark, and many socialists in the U.S., often are puzzled as to why the system of govt in Denmark can't be ported to the U.S. They clearly believe that it can be. Allow me to explain why that is not the case. While not impossible, it's pretty close to.
3. First keep in mind the essence of what we are talking about. Denmark has broad and high taxation. Transcribed to the U.S., it would mean something like 70+% income tax on all income above about $50K. In return, you get generous welfare programs. Most Danes like the trade.
4. Why is such a deal not portable to the U.S.? Good question! As hypothetical questions of this type go, there is no way to answer them with absolute certainty, but one can try to intuit an answer by looking at deeper context and close parallels, which is what I will do.
5. For starters, let us look at the scale we are talking about. The population of Denmark is about two-thirds of the population of New York City. In other words the U.S. population is about 57 times larger than that of Denmark. U.S. GDP is about 60 times that of Denmark.
6. Secondly, and this is very important, people should always keep in mind that U.S. stands for United States. U.S. did not create the States in the U.S. The States in the U.S. created the United States by 'uniting' as per strict rules of engagement.
7. And in agreeing to unite, the States and the people in the States of the United States placed severe restrictions on what the federal govt can and cannot do. And just like Danes like their system of govt, most Americans like their Constitutional framework, thank you very much.
8. The point I am making is that the United States is not a small homogeneous nation like Denmark, but more like European Union of various and diverse States (with much better fiscal union, in addition to political union, e.g. a single currency, a single federal budget, etc.).
9. Danish system wasn't developed overnight. It was developed over many generations, spanning decades and centuries, with various incremental iterations. Now imagine if someone asked Danes to agree to take their system Europe-wide, with the following obvious next steps for Danes.
10. People of Denmark will still pay the high taxes they currently do, but their tax dollars will be diverted to Brussels, to be expended as per the policies espoused by European 'leaders' and bureaucrats, who promise to continue to provide current level of services to Danes.
11. And by the way, the EU 'leaders' in Brussels will enforce their policies with federal fiat, as they will have the police powers to ensure compliance with European Law. This is what 'scalability' in real life looks like, rather than a romanticized multiplication table.
12. Danes would readily agree to such an aggregation of power in Brussels because it is still their own model, just scaled up to European level, right? Well, we don't have to wonder how Danes might react. We know how they reacted to the formation of the current EU arrangement.
13. In Denmark, the first Danish Maastricht Treaty referendum on Denmark becoming a part of EU was held on June 2, 1992. People voted against it.
14. Alterations had to be made through addition of Edinburgh Agreement, which carved out several exceptions for Denmark, before the treaty was eventually ratified after a second referendum on May 18, 1993. As per the exceptions, Denmark did not use Euro as its currency.
15. Ask the people of Denmark to explain why they refused to cede the power over their 'currency' to Brussels and you may begin to understand why Americans across the 50 States in the United States may be in no mood to cede a whole lot of power over a whole lot of things to DC.
16. And that, in a nutshell, is why the Denmark model of 'high taxation in return for generous welfare' is not scalable. That said, any State in the United States, be it Vermont or California, is free to implement the Denmark model. Here's what Vermont would have to do:
17. Vermont could provide free healthcare and free college and other generous benefits to the good people of Vermont, in return for the people agreeing to pay a State Tax equal to about one-and-a-half times as much as they pay in federal taxes. Simple as that. Bernie, go for it!
18. Do not think I exaggerate. U.S. Federal Income Tax is about 18% of the U.S. GDP. In Denmark, it is 46% of their GDP. The incremental difference is what it takes to provide those generous welfare benefits. It's a simple trade-off. Any State in the U.S. is free to try.
19. The welfare benefits can be calibrated to 'length of residency in the State' to deal with the issue of movement of people across States. This is a good way to gauge cultural appetite and govt competence to implement the Denmark model in State(s) in the U.S. Put up!
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