"The golden years are behind us," said Sweden's prime minister, Ola Ullsten, of the middle-of-the-road Liberal Party. "We have been living above our heads."
The same sober message is being delivered to Swedish voters by his political opponents on both the left and the right as they enter the final two weeks of campaigning for what could be a pivotal national election here Sept. 16.
Public opinion polls show that voters, like many of the politicians, are coming to believe that Sweden, this century's leading social and economic pioneer among Western democracies, may finally be reaching the limits of the welfare state frontier.
"They are reaching the point of no further growth of the welfare state," A diplomatic observer here said of these 8 million Swedes, who still enjoy cradle-to-grave health, social and financial support from the government. "They simply can't afford it."
Sweden, which has long been Europe's most prosperous nation in terms of per capita income, has just made a remarkable recovery from its worst recession in decades. Its growth rate is once again higher and its inflation and unemployment rates lower than most other Western Industrial nations.
But those healthy statistics could prove illusory. Sweden's next government likely will face serious problems. It must keep inflation down in a country where prices already are as high as anywhere in Europe. It must import increasingly expensive oil to supply more than 70 percent of its energy needs. It must depend for economic growth on the export of expensive manufactured products to a world that may have less purchasing power in the years ahead.
And it must payoff the huge debt that nonsocialist coalition and minority governments ran up in the last three years while combating the recession with subsidies for the ailing steel, shipbuilding and forest-products industries.
Those industries no longer keep up with lower-cost competitors abroad. The government has also spent to create jobs for the resultant unemployed.
"We have to be honest about the economic situation in Sweden," said Carl Lidbom, a senior politician in the left of center Social Democratic Party, steadily expanded the social-welfare system for 44 years before being voted out of office in 1976.
"The 1980s will be very difficult for all industrial countries," Lidbom said, "and especially for a smaller one like Sweden depending on energy from imported oil and on income from the sale of exports."
"We are going to face a new situation in which it will not be so natural that the Swedish people do well" while the rest of the world suffers economically, Prime Minister Ullsten said in an interview.
"People may not be able to count on sizable wage increases every year," he said, and may not even be able to keep up with Sweden's relatively low rate of inflation. From a peak well above 10 percent during the worst of the recession in 1977, inflation has fallen to below 5 percent, although it is expected soon to be pushed up again by oil-price increases.
While salaries are roughly comparable to those in the United States, many prices are higher, inflated partly by a standard sales tax of 20 percent included in the price of almost everything. New automobiles cost from $10,000 to two or three times that much. Gasoline costs $2 a gallon.
Dairy products, eggs, chickens, fruits and vegetables cost about as much as in the United States, but steak is $6 to $8 a pound and dinner for two with drinks and wine in a fashionable Stockholm restaurant can easily run over $100.
Meanwhile, maintaining the welfare state costs citizens over half their total earnings in national and local taxes, with many above-average wage earners paying much more than that.
Swedes, especially those with below-average incomes, receive a lot back in health care, birth and child-rearing allowances, free day care and education through college, generous unemployment and sick pay, old-age pensions that increase with inflation, and other benefits. But they are mounting a growing if characteristically discreet tax revolt.
"There is virtually no backlash against the welfare state, for which they are still willing to pay a great deal," said Hans Zettererg, who runs SIFA, Sweden's most respected polling firm. "But our polls show that a majority of the Swedish people now believe for the first time that their taxes can and should be cut."
Many Swedes have taken matters into their own hands. They have found legal loopholes and deductions to avoid paying more money or they have engaged in "black economy" transactions by cash or barter that the tax collectors cannot trace.
Some Swedes simply refuse to work overtime or accept promotion, because they can keep so little of the extra income. Instead, they devote more time to leisure.
The right-wing Moderate Coalition Party, referred to as the Conservatives by most Swedes, has dramatically gained ground in public opinion polls by campaigning hard for large income tax cuts.
Other major parties talk about making at least small cuts in the income tax rates. But they say they must make up the lost revenue by increasing other taxes or inventing new ones.
Economist Gunnar Myrdal, one of the architects of the Swedish welfare state, recently advocated shifting much of the tax burden to consumption (even though the value-added sales tax is already high) because the high tax on extra income is stifling initiative.
"Although the willingness to pay for social welfare services has not really changed," explained pollster Zettererg, "there is growing discontent with the quality of the services." He said Swedes are increasingly hostile toward the big and purportedly arrogant bureaucracy that runs the welfare state and tightly regulates the economy.
There is relatively little government ownership of industry and Sweden is far from a socialist state in the classical sense. But the Social Democrats over the years created what Zettererg calls a "permit state" in which private industry and individuals make contact with the government often to get some kind of permission when doing almost anything of consequence.
"In the 1970s, market forces were considered the root of all evil by Swedes," Zettererg said his polls show. "But in the 1980s, government power will be seen as the root of all evil."
As an example, he said, one consequence of the welfare state has been "a breakdown in generational loyalty. Young people no longer want or have to worry about supporting their aged parents because the state is expected to do it. Their parents don't believe they have to save any money to leave to their children because the state is supposed to take care of them, too."
Conservatives complain because tax laws favor families with only one parent, and those with two working parents, over those with a traditional male head of household and a woman who stays home to care for their children. They also want a special allowance for stay-at-home mothers to equal the free child care provided for working mothers who make it to the top of the long waiting lists.
On the other side of the question, feminist activist and government official Birgitta Wistrand complains that extensive equal rights legislation, considered a model for other nations, gives women more rights but no real power.
Even though there are now five women in the Cabinet and all the major parties are promising places for women in future Cabinets, Wistrand says women still have the least important jobs in government and almost no power in the upper echelons of businesses and unions.
New legislation protecting the rights of children, which makes spanking a crime, also has become a focus for debate over how far the state should go.
"Discipline is now impossible," said Wistrand, who works for the National Board of Social Welfare and Health. "Once Sweden was a very strict society. Now it is a very free society. Without discipline, we have to instill values and socialize our children in difficult new ways through mutual respect."
Truancy and youth unemployment, alcoholism, vandalism, serious crimes and abuse of the welfare system all are being discussed in the election campaign. Both the Conservatives on the right and the Metalworkers' Union on the left have called for a return to strict discipline and the teaching of basic learning skills in the schools.
But a veteran diplomatic observer warns that "the Swedes delude themselves about how bad things are." Because they expect so much of themselves, he said, they fail to realize that Sweden appears very healthy compared to most other nations.
There is still sufficient personal wealth to give one-third of Sweden's families access to a vacation home and boat. New Volvos and Mercedes fill the highways. Real estate prices are so high -- an average suburban home costs $150,000 -- because everyone is buying so eagerly.
Nevertheless, there is a late summer breeze of retrenchment in the air as Swedes prepare to vote with their usual 80 to 90 percent turnout expected later this month. It is expected to be a close contest and may, for the second election in a row, deny a majority in Parliament to any one party. This new phenomenon here signals a subtle change as Swedes reconsider the welfare state.
NEXT: Atomic power and union power.