You may have missed the news, but the Trump Administration is planning for the US will be in deficit until 2039. This is the most long-sighted claim made by the White House. Otherwise, the Trump vision for America and the world is incredibly short-sighted.
The Trump tax cuts are a hand out for the super-rich, slashing the corporate tax rate from 35% to 21% and creating a one-off repatriation rate of 15% for companies bringing their cash back to the homeland. But the country is already awash with capital. There is no shortage of cash for business to splurge and use for deals. This money will likely end up fuelling new speculative bubbles and inflationary spirals.
Meanwhile, the Trump Administration is laying out big spending plans for the military-industrial complex and for infrastructure. The fiscal strategy (if it can be called such a thing) goes back to the Reagan years when the US government created vast deficits pouring huge amounts of money into the pockets of rich people. The results were not pretty for most Americans. But there is more to this if we look deeper.
One of the curious differences between the kind of conservatism you find in the US and the equivalent in Britain is down to the extent of optimism in American right-wing politics. This doesn’t exactly fit the British context. The American right invites you to enjoy, to value your freedom and buy into a property-owning democracy.
If we go beyond the surface, we find that the American right often pitches the positive case for negative freedom whereas the British right makes use of the limits of negative liberty and appeals to a sense of negative solidarity. It’s about stomping on others and defending what you’ve got from them. It’s a philosophy of resentment more than anything else.
Although the British right likes to play the same tune on occasion, the core message is really about imposing new restraints – particularly on the poor, on women and on black and brown people. So what you have in the place of the call to enjoy is an open demand for punishment. It’s not so far off of sadomasochistic delight in suffering.
This was what austerity really meant. The right-wing narrative is that the Labour government pissed away billions and billions of taxpayers’ money on benefits and public services, so much so that the country was left sinking under a mountain of debt. Yet the truth is that the level of spending only increased marginally under Labour.
The amount of public debt was the result of the financial curse of Canary Wharf and the government’s bailouts of the banks. Of course, New Labour ran on deficits but so did the past governments going back centuries. Indeed, the Tories have continued to run deficits and the UK’s debt-to-GDP ratio has risen from 70% to 87%.
These questions might be raised in a more open society than the one we have, but they’ve been suppressed instead. Fortunately, the suppression of ideas has created the conditions for the Labour left to capture the party leadership. But this is a story I’ve explored many times in Souciant.
We’re now into the 8th year of Tory underfunding of our NHS – the biggest financial squeeze in its history and as the independent NAO reveals today cash isn’t spent on service inprovment but hospital deficits. We have a year round crisis. We will give NHS long term funding needed pic.twitter.com/V63UQPUVd7
— Jonathan Ashworth (@JonAshworth) January 19, 2018
Reagan was fond of quoting Tom Paine: “We have it in our power to remake the world over again.” He did so on several occasions and even drew the support of several US trade unions. It was impossible to imagine Thatcher saying those words or winning over any unions. Nor would the Iron Lady have wanted to do either.
Whereas Reagan promised to “make America great again”, Thatcher pledged to make us pay for enjoying ourselves a bit too much. It was the logic of Harold MacMillan’s famous comment: “You’ve never had it so good.” Well, now it was our turn to pay apparently.
Another peculiarity of this picture is how British conservatives like to talk about the future, whereas American right-wingers are often more backwards looking. This was certainly true in the case of Reagan when he adopted the language of John Winthrop, describing America as “the shining city on a hill”.
By contrast, the Thatcherites love the idea that the ‘tough choices’ they make today will produce a better tomorrow. The Tories claim that the Thatcher years are what restored growth to the British economy and saved the country from the brink. David Cameron would regularly insist that the austerity measures were necessary to avoid dumping a load of debt on our children.
Of course, it was tied up with all kinds of right-wing fantasies about what the Empire was and how we could get back to it. This was very much on display with the Falklands campaign, where Thatcher even appeared on TV riding in a tank with the Union flag billowing behind her.
Yet the same basic agenda exists on the English right as it does in the United States. Both Thatcher and Reagan were enacting policies based on the ideas of Friedrich Hayek and Milton Friedman. Ironically, this kind of conservative free-market libertarianism required a strong, assertive state to overhaul the post-war mixed economy.
Neoliberalism is the far right economic ideology espoused by Hayek, and which Thatcher, Reagan began putting into practise, albeit in an even more extreme form than Hayek envisioned. /1
— Anton Channing (@antonchanning) January 26, 2018
However, there are subtle differences in how the agenda was pursued. For instance, Thatcher enacted stringent austerity measures upon coming to power – leading to massive riots across Britain in 1981 – which would have brought her government down had it not been for a global economic recovery.
By contrast, the Reagan administration splurged huge amounts of public money on military infrastructure and slashed the top rate of income tax from 70% to 28%, generating vast deficits for the next government to deal with. It was a fantastically short-term strategy of tearing through red tape and boosting growth through supply-side measures.
As right-wing economists like David Stockman and Irwin Stelzer have written, the Reaganites were happy to generate deficits for short-term growth because they knew they could see the next Democratic administration into making harsh cuts. Indeed, this is what would happen with Bill Clinton.
When Thatcher came to power the top rate of income tax was 83%. She first lowered it to 60% and then waited almost a decade before cutting it to 40%. Meanwhile, the corporate rate was gradually chipped down from 52% to 35%. These rates became the new normal in an increasingly sick society.
Conservative governments prefer to cut spending first and then cut taxes later. The Cameron government has slashed public spending and gradually reduced the corporate tax rate from 26% to 19%. Conveniently, the surplus has yet to be produced even though it was promised in 2015 and then 2020 when the corporate rate will be cut to 17%.
Yet the British right might be the more honest of the two right-wings in the end. Austerity is not a means of reducing public debt and introducing restraint, but rather it is a permanent regime for managing and disciplining a class-based society.
This is the devastating reality of Tory austerity for so many communities in our country. You cannot keep our communities safe on the cheap.
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— The Labour Party (@UKLabour) February 14, 2018
Photograph courtesy of Andrew. Published under a Creative Commons license.