Iceland is Hot
By: Staff Thursday, June 14, 2012
REYKJAVIK — President Obama would like Iceland. Geothermal energy, free health care, and high taxes dominate the landscape. Mr. Obama would be in his element, even if the actual elements are a bit harsh. Iceland is definitely worth a look if you want to understand the president's vision for America, which is why I have traveled here.

In 2008, Iceland's three largest banks collapsed after making risky overseas loans. The unemployment rate shot up from less than 2% to more than 8%—tame by some European standards, but a disaster for this nation of about 325,000 people. Even worse, per capita income fell from nearly $60,000 to $33,000.

Icelanders responded by doing little. This is the most isolated nation on earth, and outside of manufacturing aluminum and fishing for cod, there's not much money making activity available. The government makes sure that Icelanders pay for their free health care and retirement entitlements by heavily taxing just about everything. For example, gas is taxed at just under two bucks a gallon.

On the positive side, Icelanders do have cheap heat. This is a volcanic island and geothermal energy means the average Icelandic household pays about $100 a year to keep warm. Heat, of course, is vital. They don't call it Iceland for nothing.

Renewal energy and a pristine environment are Iceland's strong suits. The market economy is its weakness.

Many Icelanders emigrate in order to make more money. There is a shortage of doctors here, frustrating the national health care system. Physicians are paid poorly compared to most of the industrialized world, so some doctors split as soon as they have their certification. The ones who stay do so primarily out of patriotism.

The brain drain continues in business. With a high income tax, a whopping 25% VAT tax (7% on food and alcohol), and levies on most everything else, it is difficult to accumulate wealth. Many Icelanders don't see that as a problem because the government does take care of their essential needs. But if you want a spring break in Bermuda, you have to have cash. Icelanders don't have much to spare.

I did not see much poverty in Iceland or much conspicuous wealth, either. Most folks live in small homes, drive reasonable cars, dress neatly, and speak English (it's compulsory in school). On the weekends, drinking is a national pastime, despite the high cost. But that's not much different from many other places.

Iceland has managed to flatten out its society so most folks have pretty much the same circumstance. The very ambitious leave; the others seem satisfied to live under a security blanket, breathing in the clean air and enjoying a relaxed culture.

President Obama wants to squeeze some of the excess out of America and, to some extent, Iceland can show him the way to make that happen. But, for me, the challenge of life is competing and developing your potential to the fullest.

No way I could ever do that in Iceland. And President Obama couldn't have done it, either.