Prime Minister David Cameron wears a stern face and begins his term as Great Britain’s chief executive with solemn — maybe scary is a better adjective — words.
The financial situation “is even worse than we thought.” The country will have to make savage spending cuts to stave off fiscal collapse, he told his countrymen just days after moving into Number 10 Downing Street.
“How we deal with these things will alter our economy, our society — indeed, our whole way of life,” he said in a speech last week.
“The decisions we make will affect every single person in our country. And the effects of those decisions will stay with us for years, perhaps decades, to come.”
Britain’s desperate situation is worth attention in the United States for two reasons. First, what must happen in London must also happen in Washington, D.C. While the U.S. debt and deficit are not at Britain’s level, they are uncomfortably close. Deficit spending has been the pattern for far too long in both nations and must be brought down and then eliminated.
While Prime Minister Cameron is focusing on spending cuts in his reports to the people, he must soon include tax increases. Both will be needed to clear the fiscal picture. The spending cuts in his first proposals amount to only 1 percent of the deficit. He can’t achieve balance with budget cuts alone and keep the lights on.
He has made it clear that his proposals will be “savage.” The consequence will be a lower standard of living for Brits. And the impact of lower public and private spending in the British economy will slow economic recovery in Europe and in the United States: our two nations have been important trading partners for generations.
The plus side of this equation is that what Cameron appears determined to do in Britain will set an example. If the British can summon up the discipline to get its budget heading back toward balance, the other nations of Europe may be encouraged — and shamed — into following suit. President Barack Obama should also be grateful that Cameron is going first.
BECAUSE THE recession the world is still struggling to overcome was caused, at least in part, by out-of-control fiscal pillaging by investment banks and other huge financial firms, and because the public spending undertaken to restore injured economies accounts for a very large percentage of the deficit in Great Britain, the United States and many other nations, it is critically important that those deficits be brought under control without doing further damage to representative government and capitalism.
Both are under threat.
Democracies always face the risk of destroying themselves by creating benefits they are not willing or able to afford. The unions of public employees in England have already served notice that they won’t allow the budget there to be balanced on their backs. Workers in Greece riot because their perks are being slashed. Wealthy Greeks continue to evade being taxed. Here in the U.S., the AARP rejects the idea of increasing the retirement age or reducing benefits to the well-to-do.
And the financial industry in the U.S. is mounting an all-out campaign against a tax being proposed to pay for regulating them and establishing bail-out slush funds so that the taxpayers don’t have to pick up the tab for the next collapse. As those lobbyists roam the capitol hallways, those who hire them should stop and think. If the public comes to believe that capitalism cannot be trusted to give the good of all of the people a high priority, they will continue to increase public controls over private business until it is no longer perceived as a threat.
The alternative to tough-as-nails fiscal reform is to print money and surrender to an inflation holocaust that will make the recession of the last three years look like well-ordered prosperity.
— Emerson Lynn, jr.
