Opinion The Tax Cut Cult May Be Coming to an End HEAD TOPICS

Opinion The Tax Cut Cult May Be Coming to an End

10/21/2022 2:01:00 PM

British Prime Minister Liz Truss stunning fall is a huge blow to the conservative idea that just won t die

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POLITICO

OPINION For years now, it has been clear that there’s no strong evidence that tax cuts fuel economic growth. But Republican politicians in the United States kept trying it anyway — it was the idea that wouldn’t die. British Prime Minister Liz Truss stunning fall is a huge blow to the conservative idea that just won t die Link Copied.a bookWhat does this head-spinning series of events mean for American would-be tax cutters? Republican politicians ignore economists who argue against tax cuts, because it’s a policy that no one in the Republican coalition objects to. Even low-income Republican voters who don’t stand to gain much from tax cuts like tax cuts, which helped make George W. Bush the president whose policies At the same time, the British debacle comes at a time when the American right has been edging slowly away from free market orthodoxy. The GOP is embracing a more populist edge and is eager to be seen as a working-class party, criticizing trade and “woke” businesses. Read more:
POLITICO » U.K. Prime Minister Liz Truss vows to stay, but is on brink as minister quits Embattled British Prime Minister Liz Truss warned she has hours to save her job CNN British Prime Minister Liz Truss resigns, ending 6-week term after policies trigger economic turmoil Liz Truss Quits as British Prime Minister After Just 44 Days in Office

Who will replace Truss as UK prime minister Sunak Mordaunt Johnson

Liz Truss quit on Thursday after the shortest, most chaotic tenure of any British prime minister, forced out after her economic programme shattered the country's reputation for financial stability and left many people poorer. Read more >> U.K. Prime Minister Liz Truss vows to stay, but is on brink as minister quitsBritish Home Secretary Suella Braverman becomes the second senior minister in a week to leave embattled government led by Prime Minister Liz Truss. Ding dong the racist witch is dead! Embattled British Prime Minister Liz Truss warned she has hours to save her job CNNLiz Truss is fighting to save her job as Britain's prime minister after more of her own lawmakers called for her to quit, incensed by a shambolic parliamentary vote and the resignation of her home secretary late on Wednesday. What an absolute joke of a political system. American exceptionalism is proven daily. she iz not Thatcher Wow this is serious..! British Prime Minister Liz Truss resigns, ending 6-week term after policies trigger economic turmoilTruss left Thursday after she was forced to abandon many of her economic policies and lost control of Conservative Party discipline. Liz Truss Quits as British Prime Minister After Just 44 Days in OfficeIt’s official—Liz Truss had the shortest tenure of any prime minister in British history. 4.4 Scaramuccis...not bad! The Queen died on her watch. That is her only legacy! Damn. Liz Truss resigns as British prime ministerBritish Prime Minister Liz Truss announced Thursday that she is resigning as head of the Conservative Party just over six weeks after she became the head of the United Kingdom’s government. British Prime Minister Liz Truss resigns after ‘disastrous’ economic plan, NBC News reportsBritish Prime Minister Liz Truss announced Thursday that she would resign after just six weeks in office, following a rapidly reversed economic plan that sent the pound plunging and her government into chaos. liztruss kprc2 Liz Truss talks at a press conference in 10 Downing Street after sacking her former Chancellor, Kwasi Kwarteng, on October 14, 2022 in London, England.hostile opposition and fury from her own Conservative Party over her botched economic plan.Liz Truss is fighting to save her job as Britain’s prime minister after more of her own lawmakers called for her to quit, incensed by a shambolic parliamentary vote and the resignation of her home secretary late on Wednesday.Her departure leaves a divided party seeking a leader who can unify its warring factions. Daniel Leal/Getty Images Opinion by 10/21/2022 04:30 AM EDT Link Copied Monica Prasad is a professor of sociology and faculty fellow at the Institute for Policy Research at Northwestern University. She is the author of Starving the Beast: Ronald Reagan and the Tax Cut Revolution . A senior member of the government left her post with a fusillade of criticism at Truss, and a House of Commons vote descended into acrimony and accusations of bullying. Behind the implosion of British Prime Minister Liz Truss lurks a question. The government initially presented the vote as a confidence motion in Truss’s government, but confusion remains about whether it was. If her insistence on huge tax cuts doomed her, does that mean the era of the tax cut zombie is finally coming to an end? For years now, it has been clear that there’s no strong evidence that tax cuts fuel economic growth. She used her resignation letter to lambaste Truss, saying she had “concerns about the direction of this government. But Republican politicians in the United States kept trying it anyway — it was the idea that wouldn’t die. The event at Downing Street comes after Truss held a hastily arranged meeting with a Conservative official tasked with assessing whether the prime minister still has the support of Tory members of Parliament. One economist even wrote a book on the matter called “Zombie Economics. “Pretending we haven’t made mistakes, carrying on as if everyone can’t see that we have made them and hoping that things will magically come right is not serious politics. “The business of government relies upon people accepting responsibility for their mistakes.” Liz Truss and her first Chancellor of the Exchequer, Kwasi Kwarteng, embraced the tax cut ideology and advertised it over the summer during the campaign for the leadership contest in the Tory Party. They won — so far so good — and they implemented the policy they had campaigned on. Braverman was replaced as home secretary, the minister responsible for immigration and law and order, by former Cabinet minister Grant Shapps. Almost immediately, the British economy was hammered with high interest rates and a plunge in the value of the pound. “Not only have we broken key pledges that were promised to our voters, but I have serious concerns about this Government’s commitment to honoring manifesto commitments. Truss’ poll numbers nosedived, and she quickly backed down. Truss faced more turmoil in Parliament Wednesday evening on a vote over fracking for shale gas — a practice that Truss wants to resume despite opposition from many Conservatives. "Nobody has a route plan. But this only made those who had voted for her wonder why they should still support her. She lost everyone’s confidence, and the end was clear.K. “And if she doesn’t understand that then I would be astonished,” Blunt said. What does this head-spinning series of events mean for American would-be tax cutters? Republican politicians ignore economists who argue against tax cuts, because it’s a policy that no one in the Republican coalition objects to. Even low-income Republican voters who don’t stand to gain much from tax cuts like tax cuts, which helped make George W. With a large Conservative majority in Parliament, an opposition call for a fracking ban was easily defeated by 326 votes to 230, but some lawmakers were furious that Conservative Party whips said the vote would be treated as confidence motion, meaning the government would fall if the motion passed. Bush the president whose policies most closely matched what the American public, even the poor, wanted. Brady is tasked with assessing whether the prime minister still has the support of Tory members of Parliament. Cutting taxes was also the signature domestic economic accomplishment of the Donald Trump presidency. Labor lawmaker Chris Bryant said he “saw members being physically manhandled . At the same time, the British debacle comes at a time when the American right has been edging slowly away from free market orthodoxy. The GOP is embracing a more populist edge and is eager to be seen as a working-class party, criticizing trade and “woke” businesses.. Does Truss’ fate show that big tax cuts, particularly for the rich, just aren’t a credible option anymore? Have the markets finally wised up to what economists have been saying? Would the next American politician proposing big tax cuts meet Truss’ fate? Truss cut taxes at a time when interest rates are edging higher, fueling worry among investors. When Trump cut taxes, interest rates were lower.” Some lawmakers reported that that Conservative Chief Whip Wendy Morton, who is responsible for party discipline, and her deputy had resigned." Legislator Ruth Edwards said "it is not responsible for the party to allow her to remain in power. On the other hand, interest rates were at similar levels under George W. Bush, and they were significantly higher when Ronald Reagan was cutting taxes, suggesting that something else is going on. Conservative officials denied there had been manhandling, but in the chaos Truss herself failed to vote, according to the official record. The ways of financial markets are inscrutable, even to the people who constitute those markets, but there do seem to be big differences between Britain and the U.S. Conservative lawmaker Charles Walker said it was “a shambles and a disgrace. that suggest the United States may not face a similar crisis the next time its government proposes big tax cuts.. One factor is that the U. “I hope it was worth it to sit around the Cabinet table, because the damage they have done to our party is extraordinary.K. — even under Margaret Thatcher — did not actually manage to cut taxes the way previous conservative U. 23 spooked financial markets and triggered an economic and political crisis.S. presidents did.K. Hours later, Truss' office said both remained in their jobs. Thatcher is Truss’ idol. When she was 7 years old, Truss played Thatcher in her school’s mock election. The Bank of England was forced to intervene to prevent the crisis from spreading to the wider economy and putting pension funds at risk. During this summer’s campaign for the leadership, Truss adopted Thatcher’s blouses with bow ties and repeatedly proclaimed her Thatcherite credentials. But when Thatcher took office in 1979, were about 30 percent of GDP, and when she left office in 1992 they were about 30 percent of GDP; Thatcher had actually raised taxes considerably in her first term, only bringing them back down later. He said the government will need to save billions of pounds and there are “many difficult decisions” to be made before he sets out a medium-term fiscal plan on Oct. In fact, the argument that tax cuts would automatically bring economic growth had not gained much credibility in the U. "At the moment, I think that's the case," she said. K. Speaking to lawmakers for the first time since the U-turn, Truss apologized Wednesday and admitted she had made mistakes during her six weeks in office, but insisted that by changing course she had “taken responsibility and made the right decisions in the interest of the country’s economic stability. at the time, as Thatcher’s Chancellor Geoffrey Howe later noted: “My Treasury team and I had never succumbed — never seriously anyway — to the mistaken interpretations of Lafferism, which have led some U.S. Asked by opposition Labor Party leader Keir Starmer, “Why is she still here?” Truss retorted: “I am a fighter and not a quitter. policymakers so far astray.” Supply-side economics was never a big part of Thatcher’s economic policies, which were about privatization and council house sales instead.” Official figures released Wednesday showed U. A national election doesn't have to be held until 2024, and under Conservative Party rules, Truss technically is safe from a leadership challenge for a year. Truss’ attempts to pass off her tax cut folly as Thatcherism show not only that Truss did not understand economics, but also that she did not understand Thatcherism. The other difference between the U. inflation rose to 10.S. and the U. While inflation is high around the world — driven up by Russia’s invasion of Ukraine and its effect on energy supplies — polls show most Britons blame the government for the country’s economic pain.K." "The business of government relies upon people accepting responsibility for their mistakes," she said in a thinly veiled dig at Truss. is that the U. But she insists she is not stepping down, and legislators are divided about how to get rid of her.S. may simply be more able to finance its large debt — or at least has been so far. Truss on Wednesday appeared to rule out calling an early election, saying that “what is important is we work together . Until the 2008 financial crisis, general government debt stood at around 100 percent of GDP in the U.S..K. , but only 50 percent of GDP in the U.K.” Under Conservative Party rules, Truss technically is safe from a leadership challenge for a year, but the rules can be changed if enough lawmakers want it. After that period, debt rose in both countries, but was still considerably higher in the U.S. As yet, there is no front-runner. than the U. 31. K. Some even favor the return of Boris Johnson, who was ousted in the summer after becoming enmeshed in ethics scandals. Only in the last few years, since the pandemic, has the U.K. started to close the gap, with general government debt around 150 percent of GDP in both countries. It took and repeated incremental increases in the deficit and the debt to bring the U." He said that amid a worsening a cost-of-living crisis, "Britain cannot afford the chaos of the Conservatives anymore. S. to a point where investors are calm about these numbers. American officials are nervously examining whether the U.S. could face its own turmoil after the U. K. calamity, and no one knows what will happen next. But examining the recent past suggests one reason markets reacted so badly to Truss’ policy is that investors have not gotten used to the idea that the U.K. is now a country with permanently high debt, just like the U. S. John Maynard Keynes taught us that deficits and debts are not necessarily bad. In America, both the left and the right have rediscovered this, at different times and in their own ways. In the 1980s, the extreme right in the U.S. argued that deficits don’t matter if the economy is growing faster than the cost of servicing the resultant debts — and they thought tax cuts would cause the economy to grow very fast. Ironically, the extreme left, in embracing “modern monetary theory,” now argues the same thing — that as long as we use borrowed money in ways that make the economy grow faster, we can finance the cost and not worry about borrowing too much. Of course, they identify different policies for making the economy grow, but the resultant casualness about deficits and debt is the same. Neither the British right, nor the British left, has fully gone through these intellectual revolutions. There are some fundamental reasons for this divergence between the two countries, including the different role that the United States plays in the world economy, but the bottom line is that the U. S. has been able to maintain high debt for decades without frightening markets. This means that markets may not panic in the U.S. at the idea of incrementally higher deficits the next time an American president tries big tax cuts. All this said, the tax cut zombie was on its last legs in the U.S. even before all this happened. The GOP’s turn toward Trumpism has the party far more focused on waging culture war or simply suppressing the vote. Republican politicians aren’t really running on tax cuts anymore, because .