Why can’t the US be more like Sweden?

As an American, I am used to social infrastructure that pretty much sucks.  The US has an expensive and dysfunctional health care system that leaves 50 million citizens without any insurance coverage.  Our public transportation system is spotty in the best case, and non-existent for much of the country.  Our public schools are underfunded and, except in affluent communities, deliver a substandard education.  I could go on and on… The outcome is greater disparity between rich and poor, and a middle class that is battered and on the decline. 

I have lived in and traveled extensively throughout Europe – including the Nordic countries – and have seen how countries provide for their citizens. I serve on the board of a Canadian technology company, and so have seen "socialized medicen" up close.  So I have often wondered: why can't we do better in the US in terms of social services?  Why can't the US be more like Sweden?

Eric T. Hansen is an American who writes a column for Die Zeit.  He is often quite funny as he tries to explain the "American point of view" to his German readers.  In this recent column, Hansen explains that social inequality in American drives innovation, and that creating a Sweden-like welfare state in the US would be disastrous for the global economy:

In Europa lohnt sich hingegen Risiko kaum: Erstens sind die Bürger so
gut abgesichert, dass man die reiche Belohnung nicht unbedingt braucht.
Zweitens muss man im Falle des Erfolges einen so großen Teil seines
Reichtums abgeben, dass das Risiko sich kaum lohnt. Drittens kann keiner
L'Ennui so feiern wie der europäische Jet-Set. Würde sich hingegen die
ganze Welt dem Kuschelkapitalismus verschreiben, gäbe es kaum noch
Innovation. Sprich: Alle würden ärmer werden.

(In Europe it doesn't pay to take any risk: for one thing, the citizens are quite secure, so there isn't much need for the big rewards. Secondly, you'd have to give up such a huge portion of your success {to taxes} that it's not worth taking the risk. Third, nobody can celebrate L'Ennui like the European jet set. Every every nation subscribe to "cuddly capitalism" there would hardly be any innovation. And we'd all be poorer.)

Hansen gets his dichotomy of the "cuddly capitalism" of the Nordic countries and the "cut-throat capitalism" of the US from the economists Daron Acemoglu and James A. Robinson, who studied the assymetric trends in technology innovation and adoption, and social egaliatarianism in capitalist countries: 

The fact that technological progress requires incentives for workers and
entrepreneurs results in greater inequality and greater poverty (and a
weaker safety net) for a society encouraging more intense innovation.
Crucially, however in a world with technological interdependence, when
one (or a small subset) of societies is at the technological frontier
and contributing disproportionately to its advancement, the incentives
for others to do so will be weaker. In particular, innovation incentives
by economies at the world technology frontier will create higher growth
by advancing the frontier, while strong innovation incentives by
followers will only increase their incomes today since the world
technology frontier is already being advanced by the economies at the
frontier.

It's a neat theory, but I'm not convinced that social inequality drives innovation. I see plenty of innovative start-ups in Canada, but these entrepreneurs lack access to venture capital that would allow them to scale.  Also, the tax burden in the US is not that much less than in many European countries. It's just that we choose to spend the tax revenues on military adventures and weapons of mass destruction instead of investing in our schools, health care, public infrastructure, etc..