What can the U.S. learn from the Spending Review?

October 25, 2010

Watching George Osborne present the results of the Government’s Comprehensive Spending Review last week, two thoughts went through my mind.

On a personal level, how could I have been so wrong about Cameron and Osborne? A pre-election blog of mine was titled “A Pair of Lightweights”. Both have already done enough to assure even the most cynical observer (which probably doesn’t mean me) that they are every bit as serious as the job they face.

The other thought was: are they watching in Washington?

America is in a hole every bit as deep as Britain.  The Federal budget deficit is yawning (9 percent of GDP compared with 10 percent in the UK in 2010). The Obama healthcare plan is going to add trillions of dollars to the already-crippling cost of Medicare and Medicaid, and there is the prospect of having to bail out many states and cities, especially those which rely on property taxes for their major source of revenue. The USA needs its Osborne moment before it is too late.

Yet, before anything like it could happen, the situation will have to get far far worse, so bad that the air of crisis is palpable to every American from sea to shining sea. Could the Federal Government cut spending drastically when the unemployment rate is near 10 percent? Could it reduce the defence budget while the GI’s were in action in Iraq and Afghanistan? Could it tell insolvent states to tighten their belts?

And again, how could the President – it would presumably have to be Mr Obama or his successor, not the Treasury Secretary – actually deliver the cuts he (or she) proposed? Whereas in the UK, even with a coalition government, George Osborne can announce measures which are more or less certain to be implemented, the US President could only ever tell the world what proposals he is going to send to Congress, then spend weeks and months arm-twisting, flattering and bribing its members to endorse them.

What would emerge at the end of this process would be a bill containing some of the original ideas intact, some modified to varying degrees and some totally eliminated, and the whole thing larded with billions of dollars of pork (some of which may get attached to other bills as a quid pro quo).

In its clarity, brevity and sheer poetry, the US Constitution is a masterpiece, by far the greatest document of its kind ever written, but it remains to be seen whether the political system which has grown out of it can restore the country to solvency. Nobody should doubt the ability of the Americans to save themselves and their economy, once they make their minds up to do it, but so far the majority are in denial – hence the giggling at Britain’s Prime Minister flying into Washington in Business Class, when the truth is that by now Americans should be asking themselves whether their President ought not to be making similar gestures towards thrift.

It’s not that Americans are unperturbed by the deficit – far from it! Many profess to be extremely worried, notably the Tea Party, a loose coalition of folk who are united by…………well, by their commitment to Small Government (I think). Three cheers for that!

But how is this to be achieved? Tea Party spokesmen seem to believe it’s simply a matter of cutting taxes, but on the expenditure side……beyond cutting foreign aid (I assume), I’m not aware of any specifics endorsed by a majority of the movement’s members. Instead, Wikipedia lists slogans like “Demand a balanced federal budget” and “Simplify the tax system”. Any reasonable person would support both of these objectives, but the question is: how do you balance the budget? Scrap Medicaid? Halve the size of the armed forces? Shut down the space program? I get the impression that, not only is there no agreement on these questions, but they have never given them much thought either. Instead, they have their slogans, and seem convinced these add up to a program for government.

If it has nothing more than an agenda that is 90 percent Motherhood and Apple Pie, the Tea Party will remain not so much Boston as Mad Hatter.


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