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Denmark’s Childcare System has Problems Too

Childcare and its accessibility has always been a contentious subject in the United States, and the Biden administration’s multi-trillion dollar reconciliation bill plans on changing that. Part of the bill includes universal pre-K, subsidizing childcare, and extending the Child Tax Credit (CTC). We might be ready for a better childcare system, but we’re far from ready for the devastating economic consequences that will come with it.

Biden’s team, according to CNBC, is modeling the proposed system after the Nordic welfare programs. Scandinavian countries always seem to appear alongside the debate on childcare in the U.S. Many look to their generous childcare budget with envy and liken these countries as prime examples of successful socialist nations.

But they have it all mixed up.

A capitalist economic model is a free-market one. A free-market economy is one that requires little to no government intervention and no central planning. The U.S. government, however, is achieving neither of those and is notorious for deficit spending. Its wild $787 billion package during the 2007-2008 financial crisis and Biden’s $1.9 trillion COVID stimulus plan are prime examples.

The U.S. economic model is certainly not a capitalist one; the minimum wage laws, healthcare subsidies, and overregulation problems don’t help either.

On the flip side, the Nordic economic model is not socialist. Scandinavian countries like Sweden and Denmark are free-market advocates. They are not protectionists and do not have minimum wage laws.

These countries have generated massive wealth from being one of the freest economies in the world and rank highly for ease of doing business, enough to support their generous welfare programs. Their hefty welfare policies range from universal healthcare to unemployment benefits, all paid for by equally heavy taxes. Childcare subsidies, like the rest, are also funded by taxpayers’ money.

Sweden and Denmark can be found in the top five countries with the highest taxes, and their tax system is rather burdensome. Denmark imposes income tax rates up to 55.86 percent, 25 percent alcohol tax, up to 15 percent state taxes, and many others. Their corporate tax remains at 22 percent, surprisingly lower than the sales tax (25 percent).

The numbers show the fiscal burden is shouldered by low and middle-class families, while corporations receive preferential treatment, possibly to boost entrepreneurship. The Danish government has an array of tax deductions for corporate expenditure, such as start-up and research and development expenses, and payments to foreign affiliates.

Denmark’s wealth started generating since its economic liberation in 1870 and came to a gradual halt when the government introduced the welfare state. Only one of Sweden’s biggest companies and none of Denmark’s was introduced after 1970 when welfare policies and taxes increased in the Nordic region.

These Scandinavian countries are relying on accumulated wealth and taxes that don’t hurt production but hurt the poor to finance childcare, education, and other social benefits. High economic growth and low poverty rates are qualities of Nordic nations that many social democrats admire, but these traits came before the welfare state.

Americans who wish to adopt Scandinavian policies can champion for them, but they need to understand where their wealth and luxury came from.

Government regulations did not make Sweden and Denmark the success they are today, it is economic liberalization and the free-market policies that are generating wealth and supporting their huge welfare system. These countries are not examples of success in socialism and promising free childcare is certainly not the antidote for expensive childcare prices.

Promising universal childcare and putting up subsidies on education only put heavier weight on the shoulders of Americans who are already heavily burdened, financially. Policymakers who insist on going through with this policy will only harshen living conditions and keep pushing America toward a total transformation into a socialist state.

America wants to imitate Denmark’s welfare program, hoping to achieve the same results as them, but failed to consider Denmark’s economic model in its entirety. If politicians truly want to make childcare more accessible, they should start with cutting some red tape.