Did Anders Borg Pursue Austerity in Sweden in 2009 and 2010?

The right wing press is all aglow with paeans to the Swedish finance minister Anders Borg. See these articles:

Veronique de Rugy, “GDP Growth Rates: The Swedish Approach,” Mercatus Center, May 16, 2012.

Fraser Nelson, “Sweden’s Secret Recipe,” The Spectator, 14 April 2012.

The conservatives appear to be asserting that Sweden’s recovery from the 2008–2009 recession was the result of austerity, and the tax cuts Borg passed in 2007. Unfortunately, this nonsense falls apart when we look at the facts.

Anders Borg became finance minister on 6 October 2006. The government passed tax cuts in January 2007, long before financial crisis of 2008 and global recession. But what kind of tax cut did Borg oversee? Apparently, they involved tax cuts for lower income earners as well as upper income earners:

“What even Borg did not expect was that his tax cut for the low-paid would increase economic growth so much that it has almost entirely paid for itself. Borg had created something that Osborne’s critics say does not exist: a self-financing tax cut. ‘There was some criticism at the time that we were borrowing to finance tax cuts,’ he says. But Sweden could do it, because it was expecting to return to surplus soon.”
Fraser Nelson, “Sweden’s Secret Recipe,” The Spectator, 14 April 2012.

If Sweden was borrowing money to finance tax cuts, then there must have been a resulting deficit, but strangely there doesn’t appear to have been a deficit in 2007:

Swedish Government Budget Surplus/Deficit as % of GDP
2005 1.95%
2006 2.22%
2007 3.53%
2008 2.20%
2009 -1.18%
2010 -1.17%

So I do not know exactly what was going on here: whatever fiscal effect the tax cut had is unclear to me, but the crucial point is that this tax cut happened in 2007.

When the global recession struck in 2008, what did Sweden do? It adopted a Keynesian stimulus package, and expansionary fiscal policy in 2009 and 2010. In December 2008, the Swedish government announced an 8 billion kronor (757 million euros, $966 million) stimulus package, implemented in 2009.

The 2010 budget was also expansionary, and Anders Borg, the man himself, said so:

“Sweden’s centre-right government presented on Monday an expansive 2010 budget bill focused on job creation and economic stimulus to lift Sweden out of the crisis a year ahead of general elections. ‘We are trying to limit damage from the crisis by taking forceful action to promote jobs and enterprise and by providing support to everyone who has been severely hit by unemployment,’ Finance Minister Anders Borg said.”
Economic Stimulus to Lift Sweden out of the Crisis, The Swedish Wire, 21 September 2009.

The Swedish economy was lifted out of its recession around the middle of 2009, owing to the stimulus. The belief that tax cuts in 2007 (whose actual fiscal effects are unclear) caused a recovery in mid-2009 is ridiculous beyond words.

Another ridiculous and misleading trick of conservatives to say that Swedish government spending as a percentage of GDP fell from 52.9% in 2006 to 51.8% in 2011, and then imply that this was the reason for the recovery. Yet the actual figures show a large increase in government spending as a percentage of GDP during the recession and economic crisis:

Swedish Government Spending as % of GDP
2006 52.9%
2007 51.0%
2008 51.7%
2009 55.2%
2010 53.0%

Note the huge surge from 2008–2009 (partly, of course, a function of falling GDP from 2008–2009, but also a result of automatic stabilisers and stimulus spending).

Then the percentage falls once the recovery occurred and the stimulus did its work, causing private sector growth, and rising GDP and tax revenues.

All precisely predictable and consistent with Keynesian economics.