On the Wikipedia page for Danish Prime Minister Lars Løkke Rasmussen, who currently leads a center-right (by Danish standards) coalition, I read the following about his time as Finance Minister before Anders Fogh Rasmussen stepped down as PM to be the top civilian official in NATO:

In February 2009, Lars Løkke Rasmussen was the chief negotiator in the political agreement behind a major tax reform, implementing the government’s ambition of reducing income tax and increasing taxes on pollution. The reform was, according to Lars Løkke Rasmussen, the biggest reduction of the marginal tax rate since the introduction of the income tax in 1903. The opposition accused it of being historically skewed in favouring those with high-income jobs and giving very little to those with low-income jobs.

You can read Google’s translation of Danish newspaper articles about this here and here. Relative to the tax agenda pursued by George W. Bush, Rasmussen’s approach:

1. Achieves the U.S. right-wing’s core policy objective of reducing taxes on rich people.
2. Also contributes to solving a bona fide public policy problem.
3. Does a much better job relative to the budget deficit, an issue the U.S. right-wing at least claims to care about.
4. Would have screwed around with the Democratic Party’s political coalition by attracting support from green groups and from upscale liberal voters.

That seems like a lot to like had a more serious, thoughtful, and courageous group of people been in power. Obviously the interest-group politics is totally different in Denmark where there are substantial industries around wind power and efficiency and basically no fossil fuel production. They use coal and oil, in other words, but don’t produce much of any so there’s not the same kind of pro-pollution constituency. That accounts for part of the difference. But much of the rest of the difference seems like a lack of imagination combined with a lack of good sense and a lack of morality.

I’m here in Denmark primarily to learn about energy and environmental policy, but visiting a country is always a good time to fire up the old Google and learn about health care policy. 84 percent of Danish health spending is accounted for by the state, with the remaining sixteen percent mostly representing out-of-pocket spending on medicines and dental products. The state just straightforwardly pays for care out of tax revenue. Denmark has the highest taxes in the world, and part of the reason is that they rather efficiently don’t monkey around with a lot of quasi-taxes in which they make employers contribute to health funds or whatever. It’s just straight-up tax and spend.

For the purposes of non-hospital care, all Danes need to choose to be either in Group 1 or Group 2. Children under the age of 15 are enrolled in the group chosen by their parents, and when you turn 15 you’re enrolled by default in Group 1, though you’re free to choose Group 2. In practice, almost nobody chooses Group 2 and Group 1 covers 98.5 percent of the population. The good news for Group 1 patients is that you get to choose your general practitioner and you get to see him (or a substitute if he’s sick or on vacation or if you’re traveling in another town or what have you) for free. You also get to see specialists for free, but only with a recommendation from the GP. In Group 2 you need to pay a portion of the cost of a visit to the doctor, but you have the right to go directly to a specialist.

Denmark has 4,100 general practitioners and 1,200 practicing specialists, which I believe is a way higher GP:specialist ratio than we have in the United States.

Hospitals-wise, Denmark is organized into five regions. The basic idea is that if you need to go to a hospital, you go to one of the ones your region runs. However, certain kinds of services may be so specialized that they’re not available in all regions, so the regions have reciprocity agreements with each other in which you might get sent to an out-of-region hospital. Denmark is also a pretty small country—a population larger than Minnesota but smaller than Wisconsin—so for some rare treatments you may need to go out of the country, and it’s possible to get the state to pay for that.

Denmark also has a private hospital sector. Some of what happens in the private hospitals is that they provide specialized care under contract with the regions. In addition, the ruling center-right coalition introduced a law in 2002 saying that citizens may choose to go to a private hospital or clinic “if the waiting time for treatment exceeds two months and the chosen hospital has an agreement with the regions’ association regarding the offer for treatment.” In 2007 they expanded this initiative by reducing the waiting time to one month.

Denmark spends a relatively large amount on health care, but it’s very close to its fellow small northern European countries. Lately Denmark has been putting more emphasis on preventive health. This is probably a good idea since Denmark’s life expectancy, though slightly higher than America’s, is near the bottom for western Europe.

(cc photo by NicestAlan)

Today I got to go on a bicycle tour of Copenhagen guided by two representatives from the Dansk Cyklist Forbund (Danish Bicycle Federation). It was a great way to learn about Copenhagen’s bike infrastructure by actually riding around and experience it, stopping periodically to have things explained. I’d been to European cities with impressive bicycle infrastructure before—Berlin and Stockholm very recently—but those places seemed like a difference in degree compared to the United States. Copenhagen was a difference in kind. There’s just not—at all—a sense of danger or even competition with the automobile. On streets that are heavily trafficked, there are bike lanes, and the lanes are usually physically separated from the road. On streets where there aren’t bike lanes, there isn’t much traffic. And most of all there are tons of people on bikes wherever you go. Thirty-seven percent of Copenhagen commuters use bikes. And given that presumably some people are walking to work, some people are using the bus, some people are using the Metro, and some people are using the S-Tog the resulting situation is one in which cyclists and drivers are really equals.

It’s actually impressive to a degree that’s somewhat unsettling. Regular bicycle commuting in the United States is, among other things, a somewhat meaningful identity category. Initially it’s thrilling to see so many of “your people” everywhere. But looking closer you start to see exactly what was explained to me—the whole reason you have so many people biking around is that cycling is totally mainstream in Copenhagen and doesn’t constitute an identity at all.

From a policy perspective, what you’re basically seeing in Denmark is path-dependency on steroids. Back in the 1970s there were a substantial number of cyclists in what I guess you would call the “pre car” mode where people ride bikes because the country is too poor for everyone to afford a car. Then came the oil crisis and driving got even more expensive. And alternative policies started to be explored where for the first time the country started consciously trying to encourage bicycling. And the policy was never really dropped. So you have lots of cyclists which creates a constituency for more infrastructure which leads to more cycling which creates a constituency for more infrastructure. Denmark is the country with the highest share of GDP going to taxes, and part of that is very high taxes on cars and on gasoline so even though Denmark is a very rich country today lots of families still have a strong financial incentive to limit car ownership and car use.

I think you can already see embryonic versions of this positive reenforcement cycle in some American cities—New York and Washington to name two—but it still looks very different and I think something dramatic would have to happen to really change the path dependence dynamic. Then again I think that if you look at where oil prices were before the financial crisis hit it’s not all that unlikely that something dramatic will happen, comparable to the oil crisis of the seventies. At any rate, the current center-right government in Denmark hadn’t actually been very interested in bike-promotion over the past eight years (the Copenhagen city government is another matter) but no they’ve changed their tune and are appropriating about $200 million in competitive grants to municipalities for bike projects.

Looks like John Thune took to the Senate floor yesterday to warn that the House health care bill’s surtax—a measure that would only effect 1.3 percent of the population—would lead to “most Americans and most small businesses” paying “fifty cents of every dollar in taxes.”

Pat Garofalo observes that this is all kinds of wrong. The highest-tax country in the world at the moment seems to be Denmark, where government revenue equals 50 percent of GDP. Even there if we assume the tax code is even a little bit progressive, most people will be paying less than 50 percent of their income in taxes.

Meanwhile, Denmark is also a great place! It’s one of the richest countries on earth, and thanks to its much more egalitarian distribution of wealth and income, median living standards are higher than in the United States. Indeed, notwithstanding its high taxes Denmark always rates high on right-wing metrics of “economic freedom” as well as on things like the UN’s Human Development Index. The Danes also happen to be the happiest people on earth and are operating what’s probably the most ecologically sustainable of all the developed economies. I wouldn’t say they owe it all to their high tax rates, but certainly the fact that Danes are willing to to fund public services and public infrastructure at adequate levels is helping them.

The Daily Show did a nice segment the other day exposing the horrors of socialism as practiced in Sweden. Basically, most people are better off than most Americans, but rich Swedish people aren’t nearly as rich as rich Americans:

My sense of things is that, all joking aside, Sweden really has gone too far and if I were Swedish I’d be looking to recalibrate to something more like the model of social democracy on display in Denmark or Finland or the Netherlands which all, like Sweden, are ahead of us in the Human Development Index and would be regarded by Glenn Beck as little better than life in a gulag.

Some links on Denmark all via Justin Fox. First, they have excellent energy policies in Denmark, which I already knew. Second, Denmark combines high taxes and general social welfare benefits with a good climate for business ventures, which I also knew. What I didn’t know what that they also have a smart mortgage finance system described thusly by George Soros:

Second, mortgage originators are required to retain credit risk and to perform the servicing functions, thereby properly aligning the incentives. Third, the mortgage is funded by the issuance of standardized bonds, creating a large and liquid market. Indeed, the spread on Danish mortgage bonds is similar to the option-adjusted spread on bonds issued by the GSEs, although they carry no implicit government guarantees.

Finally, the asymmetric nature of American mortgages is replaced by what the Danes call the Principle of Balance. Every mortgage is instantly converted into a security of the same amount and the two remain interchangeable at all times. Homeowners can retire mortgages not only by paying them off, but also by buying an equivalent face amount of bonds at market price. Because the value of homes and the associated mortgage bonds tend to move in the same direction, homeowners should not end up with negative equity in their homes. To state it more clearly, as home prices decline, the amount that a homeowner must spend to retire his mortgage decreases because he can buy the bonds at lower prices.

To be sure, these policies may be partially responsible for Denmark’s relatively low homeownership rate:

That said, even though it’s become a dogma in American politics that more people owning homes is a sign of economic progress, I don’t see any real reason to believe that to actually be true. Especially in a large country like the United States, it would arguably be beneficial to encourage people to be as flexible as possible in terms of where they live—i.e., to rent and to be prepared to follow labor market opportunities where they may take you.

I’d really like to visit Copenhagen some day. For now, I’ll need to settle for Copenhagen Airport. Extremely elegant architecture and design here at the transfercenter as I’m waiting for my connecting flight to Helsinki to get a gate assignment. Also: A 7-11. Hadn’t realized there were 7-11s abroad.