Fiscal conservatism
Encyclopedia
Fiscal conservatism is a political term used to describe a fiscal policy
that advocates avoiding deficit spending
. Fiscal conservatives often consider reduction of overall government spending
and national debt as well as ensuring balanced budget
of paramount importance. Free trade
, deregulation
of the economy, lower taxes
, and other conservative policies are also often but not necessarily affiliated with fiscal conservatism.
supported a weak central government and a more laissez-faire
approach than that of the Federalist Party of Jefferson's rival Alexander Hamilton
. They opposed Hamilton's plan to pay off the debts owed by the states for the expense of the American Revolution, because some of the debt was held by financiers and speculators (rather than the original holders) and because most of the debt was held by northern states. Hamilton passed his legislation and set up taxes to pay the debts. In exchange, he agreed to let Jefferson move the nation's capital to Washington, D.C.
. James Madison
and James Monroe
were elected by the Democratic-Republican Party, but after the fiscal disasters of the War of 1812
, they came to support most Federalist positions and decided that the nation needed a central bank and a steady income flow from tariffs.
. Unlike the modern fiscal conservatives, these fiscal conservatives were paleoconservative
supporters of protectionism
and tariffs, similar in some ways to today's Reform Party
.
They were also generally supporters of big business and (internally) laissez-faire economics, although by 1890 they had been convinced into supporting Sherman Anti-Trust Act and the Interstate Commerce Commission
following massive complaints.
During the 1920s President Calvin Coolidge
's pro-business economic policy were credited for the successful period of economic growth known as the "Roaring Twenties." His actions, however, may have been due more to a sense of federalism than fiscal conservatism: Robert Sobel
notes that "[a]s Governor of Massachusetts, Coolidge supported wages and hours legislation, opposed child labor, imposed economic controls during World War I, favored safety measures in factories, and even worker representation on corporate boards."
(1981–1989). During Reagan's tenure, income tax rates of the top personal tax bracket
dropped from 70% to 28% in 7 years, while payroll taxes increased as well as the effective tax rates on the lower two income quintiles. Real Gross domestic product
(GDP) growth recovered strongly after the 1982 recession and grew during Reagan's remaining years in office at an annual rate of 3.4% per year, slightly lower than the post-World War II
average of 3.6%. Unemployment peaked at over 10.7% percent in 1982 then dropped during the rest of Reagan's terms, and inflation significantly decreased. Federal tax receipts nearly doubled from $517 billion in 1980 to $1,032 billion in 1990. A net job increase of about 16 million also occurred (about the rate of population growth).
According to a United States Department of the Treasury
non-partisan economic study, the major tax bills enacted under Reagan, as a whole, significantly reduced (~-1% of GDP) government tax receipts. The Economic Recovery Tax Act of 1981 was a massive (~-3% of GDP) decrease in revenues (the largest tax cuts ever enacted) By the end of Reagan's second term the national debt held by the public ballooned from 26 percent of the GDP in 1980 to 41 percent in 1989. By 1988, the debt totaled $2.6 trillion, in part because of both increased military spending at the end of the Cold War
and according to some, the tax cuts. The country owed more to foreigners than it was owed, and the United States moved from being the world's largest international creditor to the world's largest debtor nation.
, a successful American businessman, ran as a third-party candidate. Despite significant campaign stumbles, and the uphill struggles involved in mounting a third-party candidacy, Perot received 18.9% of the popular vote (the largest percentage of any third-party candidate in modern history), largely on the basis of his central platform plank of limited-government, balanced-budget fiscal conservatism.
and Libertarians, it is also claimed by many centrist or moderate Democrats
who often refer to themselves as "New Democrats
". Former President Bill Clinton
, who was a New Democrat and part of the fiscally conservative Third Way
advocating Democratic Leadership Council
, is a prime example of this as his administration along with the Democratic-majority congress of 1993 passed on a party-line vote the Omnibus Budget Reconciliation Act of 1993
which cut government spending, created a 36% individual income tax bracket, raised the top tax bracket, which encompassed the top 1.2% earning taxpayers, from 31% to 39.6%, and created a 35% income tax rate for corporations. The 1993 Budget Act also cut taxes for fifteen million low-income families and 90% of small businesses. Additionally, during the Clinton years, the PAYGO
(pay-as-you-go) system originally introduced with the passing of the Budget Enforcement Act of 1990
(which required that all increases in direct spending or revenue decreases be offset by other spending decreases or revenue increases and was very popular with deficit hawk
s) had gone into effect, and was used regularly until the system's expiration in 2002.
In the 1994 midterm elections, Republicans ran on a platform that included fiscal responsibility drafted by then-Congressman Newt Gingrich
called the Contract with America
, which advocated such things as balancing the budget
, providing the president with a line-item veto
, and welfare reform
. After the elections
gave the Republicans a majority in the House of Representatives
, newly minted Speaker of the House
Gingrich pushed aggressively for reduced government spending, which created a confrontation with the White House that climaxed in the 1995–1996 government shutdown. After Clinton's re-election in 1996, they were able to cooperate and pass the Taxpayer Relief Act of 1997
, which lowered the top capital gains tax rate
from 28% to 20% and the 15% rate to 10%.
After this combination of tax hikes and spending reductions, the United States was able to reduce the $3.8 trillion public debt by $360 billion and create the largest federal budget surplus ($236 billion in fiscal year 2000) as well as the longest period of sustained economic growth
in United States history. However, the claimed surplus was only recorded against public debt which was calculated with the exclusion of intragovernmental holdings. This meant that the administration was able to record loans deducted from the social security trust fund as revenue on budget reports, which accounted for the bulk of the surplus money. The total national debt (gross federal debt) rose every year of the Clinton Administration from $4.3 trillion to $5.6 trillion and from $5.4 trillion to $5.6 trillion over the years where the surplus was claimed.
. They believe strongly in free trade
and are committed to lowering the federal budget
, paying off national debt, and acquiring a balanced budget
. Where fiscal conservatism gets more diverse in ideals is what steps should be taken to balance the budget. Deficit hawk
s are more willing to increase taxes in addition to cutting spending to balance the budget than libertarians
, who want to "starve the beast
" by cutting taxes for the purpose of decreasing tax revenue which they hope will cause the government to spend less, and supply-siders
, who believe the best way to gain tax revenue is through deep across-the-board tax cut
s that they believe will end up completely paying for themselves through the economic growth
they cause.
American businessman, politician, and current Mayor of New York City
, Michael Bloomberg
, considers himself a fiscal conservative and expressed his definition of the term at the 2007 United Kingdom Conservative Party
Conference.
, who, after a number of years of deficit spending under the previous Labour
government, advocated spending cuts and selective tax increases to balance the budget.
More recently, in reaction to the Late-2000s recession, the subsequent deterioration in the UK's public finances, and to a lesser degree the 2010 European sovereign debt crisis
, the Liberal Democrat-Conservative Coalition
embarked on an austerity programme in an attempt to halve the deficit, and completely eliminate the structural deficit
over the five-year parliament.
US specific:
Fiscal policy
In economics and political science, fiscal policy is the use of government expenditure and revenue collection to influence the economy....
that advocates avoiding deficit spending
Deficit spending
Deficit spending is the amount by which a government, private company, or individual's spending exceeds income over a particular period of time, also called simply "deficit," or "budget deficit," the opposite of budget surplus....
. Fiscal conservatives often consider reduction of overall government spending
Government spending
Government spending includes all government consumption, investment but excludes transfer payments made by a state. Government acquisition of goods and services for current use to directly satisfy individual or collective needs of the members of the community is classed as government final...
and national debt as well as ensuring balanced budget
Balanced budget
A balanced budget is when there is neither a budget deficit or a budget surplus – when revenues equal expenditure – particularly by a government. More generally, it refers to when there is no deficit, but possibly a surplus...
of paramount importance. Free trade
Free trade
Under a free trade policy, prices emerge from supply and demand, and are the sole determinant of resource allocation. 'Free' trade differs from other forms of trade policy where the allocation of goods and services among trading countries are determined by price strategies that may differ from...
, deregulation
Deregulation
Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.Deregulation is the removal or...
of the economy, lower taxes
Tax cut
A tax cut is a reduction in taxes. The immediate effects of a tax cut are a decrease in the real income of the government and an increase in the real income of those whose tax rate has been lowered. Due to the perceived benefit in growing real incomes among tax payers politicians have sought to...
, and other conservative policies are also often but not necessarily affiliated with fiscal conservatism.
Late 18th century
The Democratic-Republican Party of Thomas JeffersonThomas Jefferson
Thomas Jefferson was the principal author of the United States Declaration of Independence and the Statute of Virginia for Religious Freedom , the third President of the United States and founder of the University of Virginia...
supported a weak central government and a more laissez-faire
Laissez-faire
In economics, laissez-faire describes an environment in which transactions between private parties are free from state intervention, including restrictive regulations, taxes, tariffs and enforced monopolies....
approach than that of the Federalist Party of Jefferson's rival Alexander Hamilton
Alexander Hamilton
Alexander Hamilton was a Founding Father, soldier, economist, political philosopher, one of America's first constitutional lawyers and the first United States Secretary of the Treasury...
. They opposed Hamilton's plan to pay off the debts owed by the states for the expense of the American Revolution, because some of the debt was held by financiers and speculators (rather than the original holders) and because most of the debt was held by northern states. Hamilton passed his legislation and set up taxes to pay the debts. In exchange, he agreed to let Jefferson move the nation's capital to Washington, D.C.
Washington, D.C.
Washington, D.C., formally the District of Columbia and commonly referred to as Washington, "the District", or simply D.C., is the capital of the United States. On July 16, 1790, the United States Congress approved the creation of a permanent national capital as permitted by the U.S. Constitution....
Early 19th century
Jefferson strongly opposed having any national debt, but he relented in 1803 for the sake of the Louisiana PurchaseLouisiana Purchase
The Louisiana Purchase was the acquisition by the United States of America of of France's claim to the territory of Louisiana in 1803. The U.S...
. James Madison
James Madison
James Madison, Jr. was an American statesman and political theorist. He was the fourth President of the United States and is hailed as the “Father of the Constitution” for being the primary author of the United States Constitution and at first an opponent of, and then a key author of the United...
and James Monroe
James Monroe
James Monroe was the fifth President of the United States . Monroe was the last president who was a Founding Father of the United States, and the last president from the Virginia dynasty and the Republican Generation...
were elected by the Democratic-Republican Party, but after the fiscal disasters of the War of 1812
War of 1812
The War of 1812 was a military conflict fought between the forces of the United States of America and those of the British Empire. The Americans declared war in 1812 for several reasons, including trade restrictions because of Britain's ongoing war with France, impressment of American merchant...
, they came to support most Federalist positions and decided that the nation needed a central bank and a steady income flow from tariffs.
Mid-to-late 19th century
In the mid-19th century, a new fiscal conservative political party emerged, the Republican PartyRepublican Party (United States)
The Republican Party is one of the two major contemporary political parties in the United States, along with the Democratic Party. Founded by anti-slavery expansion activists in 1854, it is often called the GOP . The party's platform generally reflects American conservatism in the U.S...
. Unlike the modern fiscal conservatives, these fiscal conservatives were paleoconservative
Paleoconservatism
Paleoconservatism is a term for a conservative political philosophy found primarily in the United States stressing tradition, limited government, civil society, anti-colonialism, anti-corporatism and anti-federalism, along with religious, regional, national and Western identity. Chilton...
supporters of protectionism
Protectionism
Protectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow "fair competition" between imports and goods and services produced domestically.This...
and tariffs, similar in some ways to today's Reform Party
Reform Party of the United States of America
The Reform Party of the United States of America is a political party in the United States, founded in 1995 by Ross Perot...
.
They were also generally supporters of big business and (internally) laissez-faire economics, although by 1890 they had been convinced into supporting Sherman Anti-Trust Act and the Interstate Commerce Commission
Interstate Commerce Commission
The Interstate Commerce Commission was a regulatory body in the United States created by the Interstate Commerce Act of 1887. The agency's original purpose was to regulate railroads to ensure fair rates, to eliminate rate discrimination, and to regulate other aspects of common carriers, including...
following massive complaints.
Early 20th century
In the early 20th century fiscal conservatives were often at odds with progressiveProgressivism
Progressivism is an umbrella term for a political ideology advocating or favoring social, political, and economic reform or changes. Progressivism is often viewed by some conservatives, constitutionalists, and libertarians to be in opposition to conservative or reactionary ideologies.The...
During the 1920s President Calvin Coolidge
Calvin Coolidge
John Calvin Coolidge, Jr. was the 30th President of the United States . A Republican lawyer from Vermont, Coolidge worked his way up the ladder of Massachusetts state politics, eventually becoming governor of that state...
's pro-business economic policy were credited for the successful period of economic growth known as the "Roaring Twenties." His actions, however, may have been due more to a sense of federalism than fiscal conservatism: Robert Sobel
Robert Sobel
Robert Sobel was an American professor of history at Hofstra University, and a well-known and prolific writer of business histories.- Biography :...
notes that "[a]s Governor of Massachusetts, Coolidge supported wages and hours legislation, opposed child labor, imposed economic controls during World War I, favored safety measures in factories, and even worker representation on corporate boards."
Reagan era
Fiscal Conservatism was rhetorically promoted during the presidency of Ronald ReaganRonald Reagan
Ronald Wilson Reagan was the 40th President of the United States , the 33rd Governor of California and, prior to that, a radio, film and television actor....
(1981–1989). During Reagan's tenure, income tax rates of the top personal tax bracket
Tax bracket
Tax brackets are the divisions at which tax rates change in a progressive tax system . Essentially, they are the cutoff values for taxable income — income past a certain point will be taxed at a higher rate.-Example:Imagine that there are three tax brackets: 10%, 20%, and 30%...
dropped from 70% to 28% in 7 years, while payroll taxes increased as well as the effective tax rates on the lower two income quintiles. Real Gross domestic product
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
(GDP) growth recovered strongly after the 1982 recession and grew during Reagan's remaining years in office at an annual rate of 3.4% per year, slightly lower than the post-World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
average of 3.6%. Unemployment peaked at over 10.7% percent in 1982 then dropped during the rest of Reagan's terms, and inflation significantly decreased. Federal tax receipts nearly doubled from $517 billion in 1980 to $1,032 billion in 1990. A net job increase of about 16 million also occurred (about the rate of population growth).
According to a United States Department of the Treasury
United States Department of the Treasury
The Department of the Treasury is an executive department and the treasury of the United States federal government. It was established by an Act of Congress in 1789 to manage government revenue...
non-partisan economic study, the major tax bills enacted under Reagan, as a whole, significantly reduced (~-1% of GDP) government tax receipts. The Economic Recovery Tax Act of 1981 was a massive (~-3% of GDP) decrease in revenues (the largest tax cuts ever enacted) By the end of Reagan's second term the national debt held by the public ballooned from 26 percent of the GDP in 1980 to 41 percent in 1989. By 1988, the debt totaled $2.6 trillion, in part because of both increased military spending at the end of the Cold War
Cold War
The Cold War was the continuing state from roughly 1946 to 1991 of political conflict, military tension, proxy wars, and economic competition between the Communist World—primarily the Soviet Union and its satellite states and allies—and the powers of the Western world, primarily the United States...
and according to some, the tax cuts. The country owed more to foreigners than it was owed, and the United States moved from being the world's largest international creditor to the world's largest debtor nation.
Ross Perot
In the 1992 Presidential election, Ross PerotRoss Perot
Henry Ross Perot is a U.S. businessman best known for running for President of the United States in 1992 and 1996. Perot founded Electronic Data Systems in 1962, sold the company to General Motors in 1984, and founded Perot Systems in 1988...
, a successful American businessman, ran as a third-party candidate. Despite significant campaign stumbles, and the uphill struggles involved in mounting a third-party candidacy, Perot received 18.9% of the popular vote (the largest percentage of any third-party candidate in modern history), largely on the basis of his central platform plank of limited-government, balanced-budget fiscal conservatism.
Clinton era
While the mantle of fiscal conservatism is most commonly claimed by RepublicansRepublican Party (United States)
The Republican Party is one of the two major contemporary political parties in the United States, along with the Democratic Party. Founded by anti-slavery expansion activists in 1854, it is often called the GOP . The party's platform generally reflects American conservatism in the U.S...
and Libertarians, it is also claimed by many centrist or moderate Democrats
Democratic Party (United States)
The Democratic Party is one of two major contemporary political parties in the United States, along with the Republican Party. The party's socially liberal and progressive platform is largely considered center-left in the U.S. political spectrum. The party has the lengthiest record of continuous...
who often refer to themselves as "New Democrats
New Democrats
New Democrats, in the politics of the United States, are an ideologically centrist faction within the Democratic Party that emerged after the victory of Republican George H. W. Bush in the 1988 presidential election. They are identified with centrist social/cultural/pluralist positions and...
". Former President Bill Clinton
Bill Clinton
William Jefferson "Bill" Clinton is an American politician who served as the 42nd President of the United States from 1993 to 2001. Inaugurated at age 46, he was the third-youngest president. He took office at the end of the Cold War, and was the first president of the baby boomer generation...
, who was a New Democrat and part of the fiscally conservative Third Way
Third way (centrism)
The Third Way refers to various political positions which try to reconcile right-wing and left-wing politics by advocating a varying synthesis of right-wing economic and left-wing social policies. Third Way approaches are commonly viewed from within the first- and second-way perspectives as...
advocating Democratic Leadership Council
Democratic Leadership Council
The Democratic Leadership Council was a non-profit 501 corporation that, upon its formation, argued the United States Democratic Party should shift away from the leftward turn it took in the late 1960s, 1970s, and 1980s...
, is a prime example of this as his administration along with the Democratic-majority congress of 1993 passed on a party-line vote the Omnibus Budget Reconciliation Act of 1993
Omnibus Budget Reconciliation Act of 1993
The Omnibus Budget Reconciliation Act of 1993 was federal law that was enacted by the 103rd United States Congress and signed into law by President Bill Clinton. It has also been referred to, unofficially, as the Deficit Reduction Act of 1993...
which cut government spending, created a 36% individual income tax bracket, raised the top tax bracket, which encompassed the top 1.2% earning taxpayers, from 31% to 39.6%, and created a 35% income tax rate for corporations. The 1993 Budget Act also cut taxes for fifteen million low-income families and 90% of small businesses. Additionally, during the Clinton years, the PAYGO
PAYGO
PAYGO is the practice in the United States of financing expenditures with funds that are currently available rather than borrowed.-Budgeting:The PAYGO compels new spending or tax changes not to add to the federal deficit. Not to be confused with pay-as-you-go financing, which is when a government...
(pay-as-you-go) system originally introduced with the passing of the Budget Enforcement Act of 1990
Budget Enforcement Act of 1990
The Budget Enforcement Act of 1990 was enacted by the United States Congress as title XIII of the Omnibus Budget Reconciliation Act of 1990 to enforce the deficit reduction accomplished by that law and revise the budget control process of the Federal Government...
(which required that all increases in direct spending or revenue decreases be offset by other spending decreases or revenue increases and was very popular with deficit hawk
Deficit hawk
Deficit hawk is an American political slang term for people who place great emphasis on keeping the federal budget under control. Deficit hawks believe the best way to reduce the deficit, pay off national debt, and balance the budget is by a combination of increasing taxes and cutting government...
s) had gone into effect, and was used regularly until the system's expiration in 2002.
In the 1994 midterm elections, Republicans ran on a platform that included fiscal responsibility drafted by then-Congressman Newt Gingrich
Newt Gingrich
Newton Leroy "Newt" Gingrich is a U.S. Republican Party politician who served as the House Minority Whip from 1989 to 1995 and as the 58th Speaker of the U.S. House of Representatives from 1995 to 1999....
called the Contract with America
Contract with America
The Contract with America was a document released by the United States Republican Party during the 1994 Congressional election campaign. Written by Larry Hunter, who was aided by Newt Gingrich, Robert Walker, Richard Armey, Bill Paxon, Tom DeLay, John Boehner and Jim Nussle, and in part using text...
, which advocated such things as balancing the budget
Balanced budget
A balanced budget is when there is neither a budget deficit or a budget surplus – when revenues equal expenditure – particularly by a government. More generally, it refers to when there is no deficit, but possibly a surplus...
, providing the president with a line-item veto
Line-item veto
In United States government, the line-item veto, or partial veto, is the power of an executive authority to nullify or cancel specific provisions of a bill, usually a budget appropriations bill, without vetoing the entire legislative package...
, and welfare reform
Personal Responsibility and Work Opportunity Act
The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 is a United States federal law considered to be a fundamental shift in both the method and goal of federal cash assistance to the poor. The bill added a workforce development component to welfare legislation, encouraging...
. After the elections
Republican Revolution
The Republican Revolution or Revolution of '94 is what the media dubbed Republican Party success in the 1994 U.S. midterm elections, which resulted in a net gain of 54 seats in the House of Representatives, and a pickup of eight seats in the Senate...
gave the Republicans a majority in the House of Representatives
United States House of Representatives
The United States House of Representatives is one of the two Houses of the United States Congress, the bicameral legislature which also includes the Senate.The composition and powers of the House are established in Article One of the Constitution...
, newly minted Speaker of the House
Speaker of the United States House of Representatives
The Speaker of the United States House of Representatives, or Speaker of the House, is the presiding officer of the United States House of Representatives...
Gingrich pushed aggressively for reduced government spending, which created a confrontation with the White House that climaxed in the 1995–1996 government shutdown. After Clinton's re-election in 1996, they were able to cooperate and pass the Taxpayer Relief Act of 1997
Taxpayer Relief Act of 1997
The Taxpayer Relief Act of 1997 reduced several federal taxes in the United States.Subject to certain phase-in rules, the top capital gains rate fell from 28% to 20%. The 15% bracket was lowered to 10%....
, which lowered the top capital gains tax rate
Capital gains tax
A capital gains tax is a tax charged on capital gains, the profit realized on the sale of a non-inventory asset that was purchased at a lower price. The most common capital gains are realized from the sale of stocks, bonds, precious metals and property...
from 28% to 20% and the 15% rate to 10%.
After this combination of tax hikes and spending reductions, the United States was able to reduce the $3.8 trillion public debt by $360 billion and create the largest federal budget surplus ($236 billion in fiscal year 2000) as well as the longest period of sustained economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...
in United States history. However, the claimed surplus was only recorded against public debt which was calculated with the exclusion of intragovernmental holdings. This meant that the administration was able to record loans deducted from the social security trust fund as revenue on budget reports, which accounted for the bulk of the surplus money. The total national debt (gross federal debt) rose every year of the Clinton Administration from $4.3 trillion to $5.6 trillion and from $5.4 trillion to $5.6 trillion over the years where the surplus was claimed.
Bush/Obama era
The combination of lower revenue due to an economic recession and massive tax breaks, increased domestic spending on social welfare programs, and increased defense spending in the wake of 9/11 caused the U.S. to slip back to deficits in the early 21st century. The subsequent Obama administration, dealing with decreasing revenues, further increased government spending during the recession, increasing U.S. budget deficits.Modern fiscal conservatism in the United States
Modern fiscal conservatives remain wary of government spendingGovernment spending
Government spending includes all government consumption, investment but excludes transfer payments made by a state. Government acquisition of goods and services for current use to directly satisfy individual or collective needs of the members of the community is classed as government final...
. They believe strongly in free trade
Free trade
Under a free trade policy, prices emerge from supply and demand, and are the sole determinant of resource allocation. 'Free' trade differs from other forms of trade policy where the allocation of goods and services among trading countries are determined by price strategies that may differ from...
and are committed to lowering the federal budget
Government budget
A government budget is a legal document that is often passed by the legislature, and approved by the chief executive-or president. For example, only certain types of revenue may be imposed and collected...
, paying off national debt, and acquiring a balanced budget
Balanced budget
A balanced budget is when there is neither a budget deficit or a budget surplus – when revenues equal expenditure – particularly by a government. More generally, it refers to when there is no deficit, but possibly a surplus...
. Where fiscal conservatism gets more diverse in ideals is what steps should be taken to balance the budget. Deficit hawk
Deficit hawk
Deficit hawk is an American political slang term for people who place great emphasis on keeping the federal budget under control. Deficit hawks believe the best way to reduce the deficit, pay off national debt, and balance the budget is by a combination of increasing taxes and cutting government...
s are more willing to increase taxes in addition to cutting spending to balance the budget than libertarians
Libertarianism
Libertarianism, in the strictest sense, is the political philosophy that holds individual liberty as the basic moral principle of society. In the broadest sense, it is any political philosophy which approximates this view...
, who want to "starve the beast
Starve the beast
"Starving the beast" is a fiscal-political strategy of some American conservatives to cut taxes in order to deprive the government of revenue in a deliberate effort to create a fiscal budget crisis that would then force the federal government to reduce spending...
" by cutting taxes for the purpose of decreasing tax revenue which they hope will cause the government to spend less, and supply-siders
Supply-side economics
Supply-side economics is a school of macroeconomic thought that argues that economic growth can be most effectively created by lowering barriers for people to produce goods and services, such as lowering income tax and capital gains tax rates, and by allowing greater flexibility by reducing...
, who believe the best way to gain tax revenue is through deep across-the-board tax cut
Tax cut
A tax cut is a reduction in taxes. The immediate effects of a tax cut are a decrease in the real income of the government and an increase in the real income of those whose tax rate has been lowered. Due to the perceived benefit in growing real incomes among tax payers politicians have sought to...
s that they believe will end up completely paying for themselves through the economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...
they cause.
American businessman, politician, and current Mayor of New York City
Mayor of New York City
The Mayor of the City of New York is head of the executive branch of New York City's government. The mayor's office administers all city services, public property, police and fire protection, most public agencies, and enforces all city and state laws within New York City.The budget overseen by the...
, Michael Bloomberg
Michael Bloomberg
Michael Rubens Bloomberg is the current Mayor of New York City. With a net worth of $19.5 billion in 2011, he is also the 12th-richest person in the United States...
, considers himself a fiscal conservative and expressed his definition of the term at the 2007 United Kingdom Conservative Party
Conservative Party (UK)
The Conservative Party, formally the Conservative and Unionist Party, is a centre-right political party in the United Kingdom that adheres to the philosophies of conservatism and British unionism. It is the largest political party in the UK, and is currently the largest single party in the House...
Conference.
United Kingdom
Fiscal conservatism in the UK was arguably most popular during the premiership of Margaret ThatcherMargaret Thatcher
Margaret Hilda Thatcher, Baroness Thatcher, was Prime Minister of the United Kingdom from 1979 to 1990...
, who, after a number of years of deficit spending under the previous Labour
Labour Party (UK)
The Labour Party is a centre-left democratic socialist party in the United Kingdom. It surpassed the Liberal Party in general elections during the early 1920s, forming minority governments under Ramsay MacDonald in 1924 and 1929-1931. The party was in a wartime coalition from 1940 to 1945, after...
government, advocated spending cuts and selective tax increases to balance the budget.
More recently, in reaction to the Late-2000s recession, the subsequent deterioration in the UK's public finances, and to a lesser degree the 2010 European sovereign debt crisis
2010 European sovereign debt crisis
From late 2009, fears of a sovereign debt crisis developed among investors concerning some European states, intensifying in early 2010 and thereafter.....
, the Liberal Democrat-Conservative Coalition
United Kingdom coalition government (2010–present)
The ConservativeLiberal Democrat coalition is the present Government of the United Kingdom, formed after the 2010 general election. The Conservative Party and the Liberal Democrats entered into discussions which culminated in the 2010 coalition agreement, setting out a programme for government...
embarked on an austerity programme in an attempt to halve the deficit, and completely eliminate the structural deficit
Structural deficit
Structural deficit forms part of the public sector deficit. Structural deficit differs from cyclical deficit in that structural deficit exists even when the economy is at its potential....
over the five-year parliament.
Howard Government
Fiscal conservatism become popular during the Howard government where large importance was placed on first balancing the budget and then running consistent surpluses to pay down the debt that had been taken on by Keating Government in response to the early 1990s recession. In first term of government Howard made large cuts to government expenditure by laying off employees, and reducing social spending. Throughout his term of office Howard used the surplus budgets that he achieved as an example of his good economic credentials and that referring to the deficits that had been run under the previous labor government as an example of bad economic management.See also
- AusterityAusterityIn economics, austerity is a policy of deficit-cutting, lower spending, and a reduction in the amount of benefits and public services provided. Austerity policies are often used by governments to reduce their deficit spending while sometimes coupled with increases in taxes to pay back creditors to...
- Balance of paymentsBalance of paymentsBalance of payments accounts are an accounting record of all monetary transactions between a country and the rest of the world.These transactions include payments for the country's exports and imports of goods, services, financial capital, and financial transfers...
- Balance of tradeBalance of tradeThe balance of trade is the difference between the monetary value of exports and imports of output in an economy over a certain period. It is the relationship between a nation's imports and exports...
- CapitalismCapitalismCapitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...
- Criticisms of welfareCriticisms of welfareThe notion, and the extent of, the modern welfare state has been criticised on both economic and social grounds, from both the Left and the Right of the political spectrum.- Libertarian & Conservative criticisms :...
- Economic FreedomEconomic freedomEconomic freedom is a term used in economic and policy debates. As with freedom generally, there are various definitions, but no universally accepted concept of economic freedom...
- Economic LiberalismEconomic liberalismEconomic liberalism is the ideological belief in giving all people economic freedom, and as such granting people with more basis to control their own lives and make their own mistakes. It is an economic philosophy that supports and promotes individual liberty and choice in economic matters and...
- Market economyMarket economyA market economy is an economy in which the prices of goods and services are determined in a free price system. This is often contrasted with a state-directed or planned economy. Market economies can range from hypothetically pure laissez-faire variants to an assortment of real-world mixed...
- MinarchismMinarchismMinarchism has been variously defined by sources. It is a libertarian capitalist political philosophy. In the strictest sense, it maintains that the state is necessary and that its only legitimate function is the protection of individuals from aggression, theft, breach of contract, and fraud, and...
- Right-wing politicsRight-wing politicsIn politics, Right, right-wing and rightist generally refer to support for a hierarchical society justified on the basis of an appeal to natural law or tradition. To varying degrees, the Right rejects the egalitarian objectives of left-wing politics, claiming that the imposition of equality is...
US specific:
- Concord CoalitionConcord CoalitionThe Concord Coalition is a political advocacy group in the United States, formed in 1992. A bipartisan organization, it was founded by former U.S. Senator Warren Rudman, former Secretary of Commerce Peter George Peterson, and the late U.S. Senator Paul Tsongas. The Concord Coalition's advocacy...
- Citizens Against Government WasteCitizens Against Government WasteCitizens Against Government Waste is a 501 non-profit organization in the United States. It functions as a think-tank, 'government watchdog', and advocacy group for fiscally conservative causes...
- Democratic Leadership CouncilDemocratic Leadership CouncilThe Democratic Leadership Council was a non-profit 501 corporation that, upon its formation, argued the United States Democratic Party should shift away from the leftward turn it took in the late 1960s, 1970s, and 1980s...
- Republican Main Street PartnershipRepublican Main Street PartnershipThe Republican Main Street Partnership is a group of moderate members of the United States Republican Party. They tend away from the dominant social conservatism of many Republicans and towards a moderate fiscal conservatism and limited government to a degree. The group is the rough equivalent of...
Further reading
- Barber, William J. From New Era to New Deal: Herbert Hoover, the economists, and American economic policy. Cambridge University Press. (1985)
- Beito, David. Taxpayers in revolt: Tax resistance during the Great Depression. University of North Carolina Press. (1989)
- Brownlee, W. Elliot. Federal taxation in America: A short history. Cambridge University Press. 1996.
- Kimmel, Lewis. Federal budget and fiscal policy, 1789–1958. Brookings Institution Press. 1959.
- Left, Mark. 1983. Taxing the "forgotten man": The politics of Social Security finance in the New Deal. Journal of American History 70 (September): 359-81. online in JSTOR
- Morgan, Iwan W. Deficit government: Taxing and spending in modern America. Ivan Dee. 1995.
- Sargent, James E. "Roosevelt's Economy Act: Fiscal conservatism and the early New Deal." Congressional Studies 7 (winter 1980): 33–51.
- Savage, James D. Balanced budgets & American politics. Cornell University Press. 1988.
- Herbert Stein. Presidential Economics, 3rd Edition: The Making of Economic Policy From Roosevelt to Clinton (1994)
- Julian E. Zelizer; "The Forgotten Legacy of the New Deal: Fiscal Conservatism and the Roosevelt Administration, 1933–1938." Presidential Studies Quarterly. 30#2. (2000). pp 331+. online