The Swedish Economic Model

Stockholm strikes a different balance between COVID and GDP

 

WSJ Opinion

By The Editorial Board

Aug. 5, 2020 8:26 pm ET

 

Progressive politicians love to wish that America’s economy could be more like Sweden’s. After Wednesday’s economic-data release there, we share the dream, albeit for different reasons.

The Nordic country suffered an 8.6% decline in GDP from April to June, which sounds bad until you remember the eurozone economy contracted 12.1% in the same span with some European countries doing much worse. The U.S. economy shrank nearly 10%, or 33% on an annual basis.

Sweden fared better because, unlike the rest of Western Europe or much of the U.S., Stockholm hasn’t imposed a total lockdown in response to the coronavirus. Schools, shops and restaurants remained open through the spring. The economic decline results partly from a fall in trade as other countries shut down and partly because Swedes took individual responsibility for moderate social distancing, as their government asked, in lieu of a lockdown.

The evidence on the no-lockdown policy remains mixed and will be for some time. Sweden’s per-capita death toll is higher than in neighbors Norway and Denmark that locked down tightly, but lower than Britain, Spain and Belgium, which also locked down.

The virus isn’t raging out of control in Sweden, as daily new cases per million people fall in line with the counts in lockdown countries (setting aside a June “surge” arising from a new testing program). Some European countries are experiencing new flare-ups, although it’s not clear whether Sweden’s Nordic neighbors will too. Sweden’s death toll also was worse due to policies that ration hospital care for nursing-home patients—something America’s progressive lockdown fans ignore when they criticize Stockholm’s death figures.

Lockdown proponents say Sweden should have shut down because it’s suffering a recession anyway. But the magnitude of decline matters. Sweden might emerge from this global crisis with a recession caused by moderate social distancing, but countries such as Spain face a depression induced by total lockdowns on top of their health disasters.

If Sweden manages to bring the coronavirus under control without wrecking its economy, expect enthusiasm for the Swedish model to wane quickly among America’s pro-lockdown left. But voters can take away some lessons even if politicians and much of the media prefer to ignore them.

IMPORTANT TAX RELATED INFORMATION:

Tax Filing Deadline Postponed

For most people in the US, taxes for calendar year 2019 are officially due on Wednesday, July 15, 2020. That noted, the IRS usually allows taxpayers to file for an extension. This year, according to the instructions on Form 4868 ("Application for Automatic Extension of Time To File US Individual Income Tax Return"), taxpayers can apply for an extra six months to file, making Thursday, Oct. 15, 2020 the due date. 

 

2020 IRA Required Minimum Distribution 

Required Minimum Distributions (RMD) for retirement plans in 2020 have been suspended. As such RMDs for IRAs, 401Ks and 403Bs have become optional for 2020.

 

Other Cares Act IRA Withdrawal Possibilities

Under certain circumstances the Cares Act provides for penalty free early withdrawals and tax free "borrowing" of up to $100,000 if replaced with within three years.

 

However, both of the above appear to be rather complex and should not be done without consultation with a professional tax advisor.

Securities and Advisory Services offered through:

        Centaurus Financial, Inc.  

        Member FINRA and SiPC

     Registered Investment Advisor