In defense of the Swedes, let me first say that simple comparisons of income can be deceiving. While I have never been to Sweden (even though I have relatives there), I would think that even the poorest sections of Stockholm and other Swedish cities are more livable and attractive than what one finds in many U.S. cities. Even with the high taxes, I think I would rather live in downtown Stockholm than in downtown Detroit or Newark.

In addition to reforming its pension plan, Sweden has a strong economy that has kept revenue for health care and retirement plans high. Sweden, as most other Scandinavian countries, also has its budget fairly well balanced. "By creating the capacity to absorb future increases in expenditures, they are clearly ahead of Europe," Kraemer says.