Let me come right out and say it. I don’t love George Osborne. He’s the UK’s Chancellor of the Exchequer, the number two guy in the government after the Prime Minister (who I also don’t love), and he’s responsible for writing the UK’s budget every year and presenting it to Parliament. (He also happens to have spent a semester at Davidson College as an undergraduate, so there’s that NC connection.) As a general rule, his budgets tax too much, spend too much, and regulate too much for my liking.
However, he’s written an opinion piece in today’s Wall Street Journal in which he says some really good things about Britain’s economic recovery and how they got there. Osborne and his Conservative Party came to power in 2010, and inherited an economy in absolute shambles. In fairness, pretty much every economy in the world was in pretty bad shape at the time. And Osborne had to start making really tough decisions about how Britain would try to pull itself out of that mess. I don’t agree with everything he’s done, but he has made some progress, and in this piece he talks about some of the key principles by which he’s brought that about, principles the US would do well to consider.
First, we are not going to get richer by borrowing more from others in the world just so that we can buy the things they make. We have to earn our own way in the world, by making our countries attractive to overseas investment, better educating our workforces, and providing a climate in which our businesses are able to produce goods and services of sufficient quality that the rest of the world wants to buy them.
Second, our governments have to live within their means, and not pile up deficits and debts that will burden future generations with the taxes to pay for them. We have to reduce entitlements and drive value for money through government, so we can focus public spending on areas likely to enhance our productivity.
When the coalition government came to power 3½ years ago, the United Kingdom’s deficit was forecast to be higher than any other country in the G-20. The International Monetary Fund estimates that the government has since achieved a 4.4% reduction in the structural deficit over three years, larger than any other major advanced economy. We’ve done it with a balanced program: 80% of the consolidation will come from cutting spending and welfare, and 20% from raising mainly sales taxes…
…That doesn’t mean we can let up. While the deficit is coming down more quickly, stronger economic growth alone cannot be relied upon to solve what is a structural budget deficit. So the government will continue making difficult decisions, from reducing welfare entitlements and increasing the state pension age, to controlling public-sector pay. The aim is to run surpluses in good years to pay down debt. In other words, we’re going to fix the roof when the sun is shining.
And he goes on, talking about lowering corporate and personal income tax rates and reducing barriers to trade. It’s good stuff, and from people who most on the right in America would dismiss as socialists. Indeed, the British Conservatives share much of Obama’s ideology. However, they’ve recognized the reality of the situation they face. Ever higher taxes, spending, and entitlements will never fix the problem. They’ll make things worse. The solution is to reduce taxes and make the economy more competitive, thereby increasing jobs and allowing people to keep more of what they make. It’s working in the UK, and it will work here, too.