A mainstream strand of conservatism that believes that the government’s budget should be balanced over the course of an economic cycle.
"Any Woman Who Understands The Problems Of Running A Home Will Be Nearer To Understanding The Problems Of Running A Country.”
- Margaret Thatcher
Margaret Thatcher presented herself as a down-to-earth housewife and told voters that governments, like homemakers, had to live within their means. Her early governments invested much political capital in reducing government borrowing. Geoffrey Howe, Margaret Thatcher’s first Chancellor of the Exchequer, told voters that post-war Britain had “lived too long on the assumption that the responsibility for paying off the overdraft of today can safely or honourably be placed upon our children.”
In recent times the American Left have played on people’s justified belief that this generation’s excessive borrowing should not burden its children. This powerful ’Child’s Pay’ video from MoveOn.org (part of America’s MooreOn tendency) has targeted George W Bush’s excessive borrowing.
George W Bush’s profligacy goes to show that many otherwise fine conservatives aren’t always fiscal conservatives. Equally some left-wingers aspire to be fiscal conservatives. Throughout the 1980s the Conservative Party owned the label of fiscal prudence. But prudence was a word that Gordon Brown took for himself in his early years as Chancellor. The robes of fiscal conservatism just became another part of the wardrobe that New Labour stole from the Tories.
Fiscal conservatives believe in borrowing during low growth periods
Fiscal conservatives do not believe that government borrowing is always wrong. Compassionate conservatism dictates that governments should borrow in recessionary times in order to pay the extra benefits that are needed by the unemployed and other victims of low growth. Such borrowing is cyclical because it can be repaid when the economy and tax revenues take off again. Some fiscal conservatives will also support borrowing for investment if that investment is likely to either reduce future spending or increase future tax revenues. The danger is that politicians start to define ‘investment’ in too elastic a fashion.
Seeing the economy in dynamic terms
George W Bush’s excessive government borrowing has two acceptable causes and one unacceptable cause.
The unacceptable cause is the level of pork that has fattened the budget. Too much money is being spent on unjustifiable subsidies.
More understandable is war on terror-related expenditures and his tax cuts. The Bush tax cuts eliminated the iniquitous marriage penalty but more importantly (for this definition) they jump-started the economy. The task of balancing the budget should not be seen through the eyes of a zero-sum economist. A ‘bigger cake economist’ will correctly argue that tax cuts can help to restore a budget to health by boosting economic growth. Bush’s tax cuts (although questionably biased towards higher earners) certainly stimulated America’s economy. If his administration had simultaneously cut some of the fat from government the US budget deficit might have looked more fiscally responsible.
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