Keep Calm and Carry On: Britain Slashes Federal Spending; What Path Will the US Take?

The news is awash right now with the implications of the massive federal spending cuts announced in the UK. In discussing with Peter Smith, our UK correspondent, (who live blogged the review as it happened and wrote this article on how the cuts will affect government suppliers), about the quick-cut "take action now!" approach, he suggested that the reasoning was really quite simple. He cites fear around a repeat of what happened in Greece as an indicator, and "recognition that the government can't spend 30% more money than it took in from tax for too long without facing an increase in borrowing costs and spiraling interest payments. Something had to be done."

Something was done indeed. Boasting an £81 bn cut from public spending over four years, including 19% average department cuts, £7 bn extra welfare cuts, £3.5 bn increase in public sector pension employee contributions, a rise in the state pension age, 7% cut for local councils from April next year, and a 3% raise in rail fares, Osborne's plan calls for the biggest spending cut in decades. Of course the BBC is now whipped into an analytical frenzy, but according to a KPMG study released today, 59% of the British public approves of the cuts. "We had to persuade the world we were serious about it," Smith says.

There are of course millions of potential repercussions that can be ascribed to the cuts. Smith wonders where all the private sector jobs to replace those snipped from the public sector will come from, given the dubious task of hiring as a small business owner. In taking on staff, you must take into consideration "Health and Safety, Equalities legislation, increasing maternity/paternity benefits, unfair dismissal, bullying cases, and the employer rarely wins: the bureaucracy of tax, NI, etc."

Repercussions aside, I have to admire a government that takes action. I asked Peter if he thought the cuts went through because of Britain's current coalition government (implying an undertone of forced conciliatory action), and his opinion was actually that "the Tories would have done exactly the same in terms of cuts...having a coalition does build more support though -- perhaps why we're not out burning cars a la France!" The old Blitz mantra "Keep calm and carry on" resonates once again amongst the British populace.

So -- in the midst of midterm elections here in the US -- what is our lame-duck congress going to propose for us? From the looks of things: not much.

Many Republicans are running on the ticket of slashing US spending, but "the campaign rhetoric has been largely general if not simplistic," according to this article in the NYT. To me it seems that here in the states, we're focused more on a blame game than action at this point, but one positive aspect is that our country's fiscal situation is finally screaming onto the radar for the general public, with lots of beeping and blinking lights to boot.

I have to agree with Ms. MacGuinness, Senator John McCain's 2000 campaign advisor in saying that "the partisan campaign rhetoric could impede the bipartisan cooperation needed to impose tough policy changes. And both sides, she said, bear responsibility." Smith also says of the US, "if your government starts talking about efficiency savings from procurement with no clarity on the measurement methodology, no baselining of prices, no auditing of claimed savings -- then huge savings will be declared and at least 50% will be [unprintable word]."

In my view, it's time to stop pointing fingers and start taking action here in the US, party affiliation aside. Whether Republican, Democrat, or even a member of The Rent is Too Damn High party, cast your vote in this midterm election for smart spending no matter which direction our government ends up going (large or small). We could probably all learn a lesson from this guy as well.

Sheena Moore

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