Listening to the raging debate, in the United States, about whether to raise the debt-ceiling, one often hears the media refer to the term “fiscal conservative”.
In current American political parlance, a fiscal conservative has come to mean someone who opposes both tax increases and raising the debt ceiling. Perhaps the clearest example is the proliferation of “fiscal conservatism” pledges, such as Grover Norquist’s “Taxpayer Protection Pledge” which binds the candidate to never raise any taxes while in office, or Senator Jim DeMint’s which prohibits raising the debt ceiling. Apparently, the less money you think the Government should be allowed to collect (and the more you mistrust Government), the more fiscally conservative you are.
You know, although I describe myself as a fiscal conservative, I cringe when I hear it described this way. To me, fiscal conservatism is not about bleeding government dry; it’s about ensuring the government is solvent and (fiscally) responsible. Personally, I imbue fiscal conservatism with Burkean traditions of prudence, discipline, and stewardship. In my opinion, someone respecting prudence would put debt-hawkishness before tax-hawkishness, but too many in the GOP put tax-cuts before debt and deficit reduction. I agree with Norquist and DeMint, and other contemporary “fiscal conservatives”, that there any many examples of grandiose spending which are excessive. But once it’s clear that there won’t be any further spending cuts achieved in a particular fiscal cycle, the Norquist and DeMint crowd would deny the government the ability to accumulate a sufficient amount of revenue, such that the allotted spending would actually be paid for. In other words, their deficit-hawk zeal appears to wane once consideration is given to the revenue side of the ledger.
This ostensible misappropriation of fiscal conservatism has been part of the debt-crisis plaguing the United States. The simple mathematical reality is that you can’t reduce both the deficit and taxes without a phenomenal reduction in spending. In order for the US to balance its budget, solely through spending reductions, would require the US to reduce its spending by 43%. This is particularly difficult when much of that is legally or contractually mandated (medicare, social security, interest payments). I don’t doubt that the Norquist/DeMint-group wishes to cut spending 43% (I want to cut spending too), but I fear that the intractable realities of democratic politics mean that they won’t be able to do so fully; so other tools may be necessary.
After all, according to the American Office of Management and Budget (OMB), US taxes are currently equivalent to 14.4% of GDP; the lowest it has been since the early 1950s. In other words, since programs like Medicare were created in the 1960s, never has the US Government collected to little tax, as a share of the economy. By contrast, government spending, as a share of GDP, at 18.1%, is near the historical average for the last 30 years. One wonders if spending honestly ought to be made for culprit for the 43% “gap”, and whether further tax cuts would make that gap easier, or harder, to close.
I have some sympathy for the supply-side argument that tax reductions will spur further economic growth. I believe this was particularly true when the top bracket marginal rates, in the Bretton Woods era, were very high: reducing the top tax rate from 90% to 80% would double take-home pay. However, if the Congress continues to play chicken with the debt-ceiling, supply-side gains will be marginal, because this crisis appears to be greatly affecting consumer confidence, something the CEO of Wal-Mart recently took pains to warn of a few days ago. Supply-side theory predicts that customers would spend the previously taxed amount, that is now in their pockets, and that the money would trickle through the economy. However, if consumers’ marginal ‘willingness to spend’ changes, or their credit is affected by post-default panicked lenders, then that benefit will be moot. Money that could have helped re-balance Washington’s books will instead be lost in the resultant sea of uncertainty.
Some in the Tea Party see this as an opportunity to try bold, new, economic experiments: declaring out-right bankruptcy, reverting to a gold standard, abolishing the Federal Reserve, etc. This is where I return to Burke’s principles of prudence and patience. Burke took pains to caution against the cavalier policy formation that he observed in revolutionary France. Indeed, the root-word of ‘conservatism’ is “conserve”; it reflects an element of caution, and a disdain for recklessness. That is why it appeals to me. And it’s why I cannot understand why there are those who would say “hey, let’s do what everyone, over the last 235 years, thought was moronic; let’s default on our debt, during a time of economic fragility, and let’s see what happens”. It astounds me evem more that these individuals would call themselves conservative.
To me, conservatism also reflects a certain sense of honour, even chivalry. There is no honour, none at all, in choosing to walk away from your debts, or to refuse permission for them to be paid, as the terms do require. There is no chivalry in refusing to budge when compromise is essential. The US has been able to survive as a large debtor because it’s a “reserve currency”, a reflection, in part in the international belief in the honour of the US, and in its willingness to fulfill its legal obligations. I believe that a true fiscal conservative would, with alacrity and sobriety, work to both make America’s financial commitments more manageable and, most crucially, a prudent person would work honestly to increase America’s ability to pay for those commitments. That’s the only prudent path; that is the only path for a true fiscal conservative.