Tax increases and cuts in the state's expenditures should instead finance the defense buildup, thinks Lars Calmfors, professor emeritus in international economics at Stockholm University.
Everything suggests that these will be permanent expenditures and then they should not be financed through loans, he says.
The new NATO targets will be met in 2035. Sweden is betting on being there a few years earlier and after 2030, the loan financing will be phased out and the buildup will start being paid through the state budget.
”Wishful thinking”
The fact that all parties in the Riksdag agree to increase the defense budget is another argument for not borrowing the money, he believes.
If we have a consensus in the country that we need to build up the defense, then people should also understand that it will cost money here and now. But it is politically more convenient to increase expenditures without paying for them now.
What distinguishes the parties is how Sweden will finance the increased defense budget when the loan money runs out. Finance Minister Elisabeth Svantesson (The Moderate Party) talks about finding financing step by step. Her party hopes that increased Swedish growth will increase tax revenues and take care of the bill.
I would call it a little wishful thinking. It's easy to talk about higher growth, but harder to achieve. Politicians also seem to forget that increased growth also means higher wage payments in the public sector and that benefits are increased.
Depends on growth
Lars Jonung, professor emeritus in national economics at Lund University, is more positive about borrowing for the buildup as long as it is a short-term loan within the fiscal policy framework.
However, everything depends on whether we get growth in the next 5-10 years, he says.
One way to promote the desired growth would have been to introduce market rents for increased construction, Jonung believes. Colleague Calmfors has previously also suggested measures in housing policy, but instead advocated that increased property tax should pay for the defense effort.
Of the 5 percent of GDP, 3.5 percent should go to military defense and 1.5 percent to civil defense in the form of, for example, infrastructure that the defense can benefit from.
It's quite vague. Much of what is included in these 1.5 percent is probably investments in infrastructure that would have been needed anyway. I think most have added it to be able to say that the figure is 5 percent to make Trump happy, says Calmfors.
