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America Needs Its Own Thatcher

America Needs Its Own Thatcher

By Robert Robb - April 10, 2013

The tributes to Margaret Thatcher in this country upon her passing were nice. But what America really needs is its own Margaret Thatcher.

In Republican circles there’s great nostalgia for Ronald Reagan. Thatcher is seen as sort of Reagan’s sidekick, an ally in promoting democratic capitalism and taking a firm stance against Soviet expansionism. Not to diminish Reagan, who transformed American politics in ways that reverberate today, Thatcher actually had the tougher task.

Reagan had to restore the health of the American economy, which was plagued by high inflation and sluggish growth. But he had some fiscal headroom within which to operate. When Reagan became president, federal debt was just 33 percent of GDP. So, Reagan could cut tax rates without having to cut spending as well. The combination of supporting Fed Chairman Paul Volcker’s monetary tightening and the rate reductions got the economy moving again and on a healthy platform of sound money and a growth-oriented tax structure.

Reagan had ambitions to rein in federal spending and reform the federal government by devolving certain functions, principally welfare, to the states. He failed. But he didn’t have to succeed on all fronts to succeed on any.

Thatcher did. When she became prime minister in 1979, Britain had no fiscal headroom. She had to simultaneously implement growth-oriented tax changes and constrain government spending. And she had to fundamentally change the structure of Britain’s political economy.

In 1979, the sinews of the industrial economy in Britain were controlled by government: energy, transportation and telecommunications. She engaged in political trench warfare to get them into the private sector.

Britain was also hampered by loose monetary policy. At the time, the country didn’t have an independent central bank. So, Thatcher’s government had to tighten the screws directly.

Thatcher implemented a discipline-first approach. The early results were unpleasant and political pressure to relent mounted. She famously responded: “The lady’s not for turning.”

The British political economy was ultimately put on solid footing: sound money, growth-oriented taxation, an economy led by the private sector, and a government the economy could afford. The ultimate results were so unarguable that the Labor Party basically pledged not to tinker much with Thatcher’s formula in its quest to regain power in the 1990s.

The domestic challenge facing the United States today more closely resembles that of Thatcher’s Britain than Reagan’s America.

We have a sluggish economy that has become unmoored from sound fundamentals. We have no fiscal headroom with federal debt already exceeding 100 percent of GDP. (When Reagan left office it was just 52 percent.) Some conservative economists believe that a discipline-first fiscal policy will produce immediate economic gains. But that’s no sure thing.

Despite loose talk on the right about President Barack Obama being a socialist, the sinews of our economy remain in the private sector. However, we do have a government too big for the economy to support and a welfare state whose finances are unsustainable. Fundamental government reform is inevitable.

Reagan was the amiable uncle cajoling the country into giving his approach a shot. Thatcher was the disciplinarian, saying to her electorate: you have no choice; take your medicine and stop your sniveling.

Reagan was liked; Thatcher was accepted as necessary.

Although economics provided the necessity, Thatcher also made a persuasive moral case to British voters that they shouldn’t be the dependent people excessive government reliance was turning them into.

The United States needs someone like that, who levels with the American people about the tough steps it will take to get the country’s economy back to sound fundamentals and shrink the welfare state to a size the economy can afford. Who won’t flinch – on the campaign trail or in office.

I don’t know that we’d elect such a leader if given the choice. But a Thatcher is what we need.

Robert Robb is a columnist for the Arizona Republic and a RealClearPolitics contributor. Reach him at robert.robb@arizonarepublic.com

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