A lesson from ‘Reaganomics’: The collision of theory and reality could prove fatal for PM Liz Truss and Tory party | Politics News

In Ronald Reagan’s book on the failure of the economic revolution, one-time US Presidential expert David Stockman wrote that the only thing worse than short-termism in politics is ideological arrogance. in government.

The so-called “father of Reaganomics”, Stockman is a key part of an economic overhaul that bears some uncanny echoes of the British government’s current strategy – not least tax cuts, supply-side reforms, and more. and cut spending.

But during his posthumous 1986 tenure in office, Stockman concluded that such a revolution could not happen – partly because of politicians and their need to please voters – and he attacked “the mistakenly believes that in a capitalist democracy we can peer deep into the veil of the future and string the ship of state into a precise blueprint”.

A former UK Cabinet minister appeared to echo this view earlier this week saying that while they understand the “theory” of Liz Truss’ plan “you can do it when you don’t have to compete with inflationary”.

This is the head-and-heart conundrum that many Conservative MPs are currently grappling with.

But along with the controversial policies announced by Kwasi Kwarteng last Friday, the Tories heading to their conference in Birmingham this weekend are also looking for the prospect of what one newspaper has called the “century.” new austerity”.

In an attempt to calm the volatile market, cabinet ministers are now talking about “strict spending discipline” and “cutting fat” in government.

Amid double-digit inflation and expensive tax cuts, economists remain skeptical whether such talk will stabilize the situation and warn that austerity will be needed. similar to the early years of austerity.

This raises a host of problems both fiscal and political in their nature.

First, where will this fat be removed from?

Given previous commitments to the NHS and security, any tightening of the health or defence seems unfathomable. But other parts are barely ripe for a snip.

Is it possible to squeeze the Justice Department during a huge court backlog? Can education really thrive after two years of COVID turmoil and a time of soaring prices?

Promotions Minister Simon Clarke has suggested some of the capital spending commitments made during Boris Johnson’s time at Number 10 could be targeted.

But is it reasonable to stop building when the government’s sole focus is growth?

Political problems stem from all of this.

Tory MPs will be the ones left on the doorstep justifying the difficult landscape of tax cuts for the super-rich, as opposed to potentially under-inflationary benefit increases for the poorest. in social.

Even worse for middle-class Tory voters is that rising mortgage rates wipe out any gains from the tax cuts.

Then there was the promised supply-side reform.

While some measures on child care and financial services may easily win, others around planning and migration may be more contentious.

Since Liz Truss has worked so hard for growth, she’ll need to take most of these measures to give her the best chance of turning short-term pain into long-term gain.

Allies say the government has a large enough majority to make these radical reforms a reality.

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Truss admits ‘some disruption’

But remember, this is the bulk of 2019 wins on a very different platform.

Tory MPs worry that the prospectus for the leveling has suddenly turned into rising mortgage rates and cuts to public spending.

Returning to America, David Stockman wrote that a year into the Reagan presidency, he realized that the revolution he had helped usher in was an impossibility.

“It is a metaphor that has no anchor in political and economic reality… It is simply not operationally appropriate in the real world of democracy, where politicians have a say,” he said. last and last,” he said.

Two years on from an election, a similar clash between theory and practice here could be fatal for the Prime Minister and her party.


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