I’ve been very critical of big-spending Republicans like Trump for two reasons.
- First, bigger government saps economic vitality by diverting resources from the economy’s productive sector.
- Second, bigger government sooner or later will lead to massive tax increases such as a value-added tax.
I’ve also been critical of big spending Tories in the United Kingdom.
Just as today’s Republicans have forgotten the lessons of Ronald Reagan, the U.K.’s Conservative Party has forgotten the legacy of Margaret Thatcher.
To be more specific, the Tories have allowed spending to increase, particularly during the pandemic.
But rather than undo that mistake, they have opted for big tax increases.
This is a path that is bad policy…and bad politics.
On that topic, Joseph Sternberg of the Wall Street Journal opined last week about the feckless incompetence of the British Conservative Party.
The Tories made a deal with the devil when they won power in 2010. Today they’re paying up. The deal concerned spending. Prime Minister David Cameron and Chancellor George Osborne rode into office in 2010 on the back of a global financial panic that had become a fiscal crisis for the U.K. Government spending had ballooned to just above 46% of gross domestic product in the 2009-10 fiscal year, a level not seen since the mid-1970s… Believe it or not, British voters care about such things and responded well to Tory promises to get a grip on the public purse. But Messrs. Cameron and Osborne weren’t entirely candid… The absolute level of spending in inflation-adjusted terms was roughly 1.4% lower in 2013-14 than it had been when Messrs. Cameron and Osborne took office, but then crept upward to end the decade 3.5% higher than at the start of the Tories’ term. …a dollop of ultracheap money thanks to low interest rates…allowed the Tories to redistribute public spending toward entitlements. Social transfers to the elderly grew as a proportion of total spending to 14.5% from 13.8% between 2009-10 and 2019-20, and health spending grew to 18.5% from 16.2% as the Conservatives shoveled money into the NHS. …This shift has made the Tories the indentured servants of the welfare state. …If they lose the next election, a big part of the reason will be their twin failures to make realistic entitlement pledges and to prevent entitlements from devouring the cash necessary to fulfill their other promises. …When Mr. Trump inveighs against Social Security and Medicare reform, he threatens to ensnare the Republican Party in the same form of fiscal servitude in which British Tories are trapped.
For American readers, the last sentence of the above excerpt is key.
The Trump position on entitlements of kicking the can down the road is a recipe for massive future tax increases.
For British readers, the fecklessness of Tories is producing policies that are definitely bad for the U.K. economy (but almost certainly will be good for the Labour Party when the next election occurs).
The moral of the story is that good policy is not easy, but it beats the alternative.
