Wednesday, November 10, 2010

Brits, Americans, and cutting budgets

Can the Brits teach us something about it? Yes, and no:

Lessons from London
The British Tories have demonstrated how a newly elected party can deliver a program of radical spending cuts.
Deficit hawks are flying high in Washington.

With rediscovered virtue, Republicans are vowing to rein in government spending and cut the deficit. Incoming House speaker John Boehner argues that voters want “a smaller, less costly” government, while Republican senator-elect Pat Toomey says that “the government has overreached dramatically. . . . Spending has been wildly excessive.” Even Democrats are singing a new tune, with Senate majority whip Dick Durbin saying that his party will be looking for compromises: “We’re going to be giving on spending, I’m sure.”

But restoring fiscal sanity won’t come easily. The Republicans’ $100 billion in promised spending reductions will hardly make a dent in last year’s $1.29 trillion deficit. To make a difference, would-be cutters will have to convince a skeptical electorate — polls consistently show that most substantial, specific spending cuts are unpopular — and navigate a treacherous two-year electoral cycle.

Across the Atlantic, however, the British Tories have demonstrated how a newly elected party can deliver a program of radical spending cuts. The coalition government, led by Conservatives and supported by Liberal Democrats, aims to cut spending by £81 billion and departmental budgets by 19 percent over five years, eliminating the U.K.’s structural deficit. It is a strikingly bold plan: An estimated 500,000 public-sector jobs will be lost; higher-education spending will be reduced by 40 percent; and departments will be cut by up to 51 percent.

These dramatic cuts illustrate the kind of action the U.S. will eventually have to take. The U.K.’s fiscal context is roughly analogous to America’s: The current budget deficit totals 11 percent of GDP in the U.S and 10 percent in the U.K., while the national debt is 66 percent of GDP in the U.S. and 69 percent in the U.K. (2010 figures). In many ways, however, the Conservatives’ success at tackling the deficit illustrates the roadblocks that Republicans face en route to implementing such policies. [...]

It goes on to describe the reasons why the Brits have a good chance of success... and why some of those reasons will NOT apply to American conservatives, due to differences in political structure and dynamics, and election cycles. It makes for an interesting comparison. America will have to find it's own way.


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