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Save or Spend? Norway's Commonsense Example

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OSLO, Norway -- While Washington sinks America deeper and deeper into debt, not only do the Norwegians refuse to run a budget deficit, the government has hundreds of billions of dollars in the bank.

The big spending politicians in Washington, D.C., could learn a thing or two from the Norwegians.

When it comes to whether a government should run budget deficits or budget surpluses, the U.S. and Norway could not be farther apart.

Budget Surplus

While the U.S. government keeps spending money it doesn't have, the Norwegians refuse to spend the huge budget surplus they've gotten from oil, deciding instead to put it in the bank for a rainy day.

Norway struck oil in the North Sea in 1969, transforming what was once the poor cousin in Scandinavia into one of the richest countries in the world.

"What we have in Norway that is extremely lucky is we found oil in the North Sea," Norwegian economist Terje Strøm of NyAnalyse AS told CBN News.

But it's been more than luck. When the oil money started flowing, Norway's government could have gone on a spending binge like Washington is so fond of doing.

Instead, officials in Oslo established The Petroleum Fund, stashing money away in anticipation of a day when Norway might not be so wealthy.

The government also passed a law saying that it can only spend 4 percent a year from the oil fund.

That move has caused the fund to grow to $500 billion, three times the annual government budget. And by using only the interest from the oil fund while adding more principle each year, the fund should be worth about $1 trillion by 2020.

Countries with Surpluses

But if you think Norway only has a budget surplus because of oil, you just might be wrong.

"That's an extremely tricky question. The only thing I can rely upon is that Denmark and Sweden with similar economies and size, have managed quite well," Strøm said.

Neither Denmark or Sweden is awash in Norway's oil. Denmark was running a budget surplus until the current global financial crisis hit.

Sweden, also without Norway's oil, expects a budget surplus this year. And both have lavish cradle-to-grave welfare states like Norway.

Most Expensive Country

So is it oil wealth? Or is it something about Scandinavians?

Economically, Norway is about as healthy as a welfare state can be, with only 3 percent unemployment and economic growth that is twice the current rate of the U.S.

But while some call it paradise, Norway is far from perfect. Norway is one of the most expensive countries in the world.

A fast food meal for one can cost as much as $20, in part because the fast food employee is paid Norway's generous minimum wage of about $25 an hour.

Norwegians also frequently complain that for an oil-rich nation, Norway should have better roads and schools.

But part of the reason is that the government refuses to spend more of its oil wealth.

Welfare Killing Work Ethic?

Another concern is that Norway's generous welfare benefits are killing its people's work ethic because welfare payments can pay more than many jobs.

"We have a welfare state that reduces the incentive to work. For a lot of people, welfare pays more than a job," said Villeman Vinje, an economist with the free market think tank Civita.

There's also free healthcare, free college tuition and up to a year of sick leave with full pay.

As Norway's tiny population of less than 5 million people ages, Vinje believes all those benefits could make the huge surplus evaporate.

"We will have elements of what you have in the States, as well. I don't necessarily think our plan is sustainable. It could be sustainable, but it depends on the choices we make," he explained.

No Common Sense?

The Norwegian economists CBN News talked to were hesitant to criticize the lack of fiscal discipline that seems to reign in Washington, D.C.

But in a nation that believes saving for the future is more important than spending on the present, the cause of the U.S, budget crisis seemed to be a no brainer to Vinje.

"Running unsustainable policies over the long term really makes a big mess," he said.

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CBN News
Dale Hurd

Dale Hurd

CBN News Sr. Reporter
