Ted Malloch: A Dose of Fiscal Conservatism
Guest post by Ted Malloch author of Thrift: A Dose of Fiscal Conservatism
Our national debt has now reached 22 trillion dollars.
This is unsustainable.
We pay nearly $400 billion a year in interest alone.
Citizens for a sound economy need to do something about it and get Congress to act.
Fiscal conservatism—the public face of thrift—is a term used to refer to an economic and political policy that advocates restraint of government taxation, government expenditures and deficits, and government debt.
In an earlier era this tendency was known as public thrift, because thrift was said to have both a public and a private side.
A major cause of the American Revolution was “no taxation without representation.”
Americans insisted that their historic rights as Britons entitled them to a voice in setting tax policies, which the government in Britain denied.
The issue was not the tax itself or its size, but the fact that it was imposed without the consent of those it affected.
The Democratic-Republican Party of Thomas Jefferson supported a weak central government and a more laissez- faire approach than that of Alexander Hamilton’s rival party, the Federalists.
They opposed Hamilton’s plan for the federal government to pay off the debts owed by the states for the expense of the American Revolution because some of the debt was held by financiers and speculators (who did not deserve payment) rather than the original holders.
Hamilton got his legislation passed and set taxes to pay the debts.
Jefferson strongly opposed having any national debt, although he relented when the opportunity came in 1803 to purchase the territory of Louisiana.
The Democratic-Republican Party elected James Madison, James Monroe, and John Quincy Adams, but after the fiscal disasters of the War of 1812, they came to support most of the Federalist position, realizing that the nation needed a central bank and a steady income flow from tariffs.
In the mid-1800s, a new fiscal conservative political party emerged, the Republican Party.
Unlike some modern fiscal conservatives, these fiscal conservatives were supporters of more protectionism and tariffs.
In the early 1900s, fiscal conservatives were often at odds with progressive President Theodore Roosevelt, particularly for his support of antitrust laws.
During the 1920s, President Calvin Coolidge’s pro-business economic policies were credited for the successful period of economic growth known as the “roaring twenties.”
After the great crash of 1929, however, Coolidge’s policies, and then Hoover’s, took the blame.
Coolidge not only lowered taxes but also reduced the national debt from World War I.
His actions, however, may have been due more to a sense of federalism than fiscal conservatism:
Many noted that, as governor of Massachusetts, Coolidge supported wages and hours legislation, opposed child labor, imposed economic controls during World War I, and favored safety measures in factories and even worker representation on corporate boards.
If he did not support these measures while president, it was because in the 1920s such matters were considered the responsibilities of state and local governments.
During the 1930s many conservatives opposed Franklin Roosevelt’s new deal because it greatly expanded the scope of the federal government and regulated the economy.
In general, Roosevelt did not raise taxes above the high levels Hoover had set. But he spent liberally to move the country out of its deep economic travail.
Roosevelt’s treasury secretary, Henry Morgenthau, believed in balanced budgets, stable currency, reduction of the national debt, and the need for more private investment.
He accepted Roosevelt’s double budget as legitimate—that is, a balanced regular budget and an “emergency” budget for agencies such as the WPA (Works Projects Administration), the PWA (Public Works Administration), and the CCC (civilian conservative corps) that would be temporary until full recovery was at hand.
He fought against the veterans’ bonus until congress finally overrode Roosevelt’s veto and gave out two billion dollars in 1936.
Morgenthau’s most notable but also controversial achievement was the new social security program: he managed to reverse the proposals to fund it from general revenue and insisted it be funded by new taxes on employees.
In World War II there was broad agreement in favor of heavy taxes, with conservatives insisting that the income tax base be broadened to include the great majority, rather than the 10 percent who before 1942 paid all income taxes.
America was at war, and we had to foot the bill.
Fiscal conservatism was most loudly and rhetorically promoted during the presidency of Ronald Reagan from 1981 to 1989.
During his tenure, Reagan touted economic policies that became known as Reaganomics.
Based on supply-side economics, Reagan’s policies cut income taxes, raised social security taxes, deregulated the economy, and instituted a tight monetary policy to stop inflation.
Reagan favored reducing the size and scope of government, sought a limited government and proposed a balanced federal budget.
Conservatism of the fiscal sort has had its supporters and detractors throughout just about all of American history.
Unfortunately, some of the Republicans who ran on its premises when in office did more to grow the bureaucracy and big government than even their opponents.
Except for Margaret Thatcher’s Britain, few countries have had an ongoing public debate in political circles about public thrift, the size and cost of government or balanced budgets, let alone the rivalry between the individual and the all-powerful state.
On a communal and personal level Americans seem predisposed to policies of thrift in their personal as well as their civic lives.
Behaviorally, however, they often act, spend, and vote quite differently.
And when things are going gangbusters, all focus is on spending and consumerism, not thrift.
But when recession strikes, out from under the floor resurfaces that odd virtue, thrift as in: I should have saved more and consumed less.
Why is my credit card so problematic to pay down?
Was I forced to charge yet more “stuff”?
What is it about thrift, public or private, that makes it so hard to achieve?
Does it necessarily contradict or oppose economic growth?
Where did it originate, anyway?
Is it really a lost and forgotten virtue?
Is that necessarily a bad thing? A paradox?
Democrats love free things and higher taxes.
Republicans need to fight creeping socialism back and spell out the cost of excessive debt — over generations
Will President Trump ever turn to public thrift and curtail government spending and reduce our debt?
Ted Malloch is author of Thrift: A Dose of Fiscal Conservatism