Tea Party time across the pond
This past weekend Americans celebrated a revolution that began with a tea party in Boston Harbor -- and today's Tea Party movement takes its inspiration from those early protests against the economic despotism of George III. So it is ironic that the first Tea Party government seems to have been formed in, of all places, London -- and it is a Tory-led government no less.
Last week, Chancellor of the Exchequer George Osborne unveiled an emergency budget that would be the envy of Tea Partyers here in the former colonies. Osborne announced dramatic spending cuts of 25 percent for all departments of government -- the steepest reductions in eight decades. The austerity measures include a two-year wage freeze for nearly 6 million government employees, and nearly $17 billion in welfare cuts. Only two areas were declared off limits: foreign aid and health care (note to GOP: repeal Obamacare fast -- once created, national health care is a one-way ratchet). Some areas, such as defense and education, will face smaller reductions -- meaning some departments could face cuts upward of 30 percent.
The spending cuts were necessitated by years of Labor profligacy, which produced the second-largest budget deficit in Europe, and a debt that grew on Labor's watch to roughly 799 billion pounds. Now the Conservative-led coalition must undo the damage.
While the budget includes some important pro-growth tax cuts (such as reducing the corporate tax rate to 24 percent, the lowest of any Western economy), it also includes some unfortunate tax increases -- a concession to the Liberal Democrats in exchange for their support for deep spending cuts. For example, the capital gains tax rate will rise from 18 to 28 percent for upper income taxpayers. The Liberal Democrats wanted to raise the rate to 40 percent, but Osborne told parliament a "dynamic analysis showed that this would have resulted in smaller total revenues." The government will also increase the VAT by 2.5 percentage points. Still, the balance of spending cuts to tax increases is 77 to 23 percent. As Osborne put it, "The country has overspent; it has not been under-taxed."
The Osborne budget shares the same objective as the Tea Party movement here in America: to dramatically reduce the size and scope of government. London's Spectator gushes, "The assault proposed on public sector is, quite rightly, massive -- much bigger than anything ever done by Margaret Thatcher." The government's Office of Budget Responsibility estimates the budget changes will eliminate 610,000 public-sector jobs over the next five years (mostly, Osborne insists, from not filling vacant posts), while creating 1.3 million new private-sector jobs -- a massive transfer of workers from government to private employment.
Critics predicted a fierce popular backlash, but a recent poll showed that British voters support the budget by a margin of 57 to 23 percent (the only provision of the budget opposed by a majority of Britons was an increase in the value-added tax). Since the budget was released, Conservatives have risen from 36 percent support on Election Day to 42 percent support today. According to Liam Fox, the first official of the new government to visit Washington, if the election were held today the Tories would be able to form a government on their own.
It seems that fiscal responsibility sells on both sides of the pond. Americans are yearning for leaders like Osborne who are willing to make these kinds of hard choices and end the fiscal recklessness in Washington. Polls show that Americans want candidates for Congress who support spending cuts and consider the national debt the greatest threat to our country, on par with the threat of terrorism. This is why President Obama is trying to recast himself as a champion of fiscal responsibility. Last week in Wisconsin, he declared "We've got to get this debt and our deficit under control." This from the man who rammed an $877 billion stimulus bill and a $1 trillion government health-care bill through Congress. In just 17 months, Obama and the Democrats have increased the national debt by 23 percent, and have put the country on track for another decade of red ink. According to the Congressional Budget Office, before the year is out, the debt will account for 62 percent of the economy -- the highest percentage since the end of World War II -- and by 2020 it will reach 90 percent.
In other words, Obama and the Democrats are now creating the same mess for American taxpayers that Gordon Brown and Labor Party created for British taxpayers. The Tea Party movement has risen up to stop him. Two hundred and thirty-four years after we fought a bloody war for independence, Tories and Tea Partyers are finally united in common purpose. Who says bipartisanship is out of style?