Fiscal conservatism
In American political theory, fiscal conservatism or economic conservatism is a political and economic philosophy regarding fiscal policy and fiscal responsibility with an ideological basis in capitalism, individualism, limited government, and laissez-faire economics. Fiscal conservatives advocate tax cuts, reduced government spending, free markets, deregulation, privatization, free trade, and minimal government debt. Fiscal conservatism follows the same philosophical outlook as classical liberalism. This concept is derived from economic liberalism and later neoliberalism.
The term has its origins in the era of the American New Deal during the 1930s as a result of the policies initiated by modern liberals, when many classical liberals started calling themselves conservatives as they did not wish to be identified with what was being called liberalism in the United States. In the United States, the term liberalism has become associated with the welfare state and expanded regulatory policies created as a result of the New Deal and its offshoots from the 1930s onwards.
Fiscal conservatives formed one of the three legs of the traditional American conservative movement that had emerged during the 1950s, together with social conservatism and national defense conservatism. Many Americans who are classical liberals also tend to identify as libertarian, holding more culturally liberal views and advocating a non-interventionist foreign policy while supporting lower taxes and less government spending. As of 2020, 39% of Americans polled considered themselves "economically conservative".
Because of its proximity to the United States, the term has entered the lexicon in Canada. In many other countries, economic liberalism or simply liberalism is used to describe what Americans call fiscal conservatism.
Overview
Principles
Fiscal conservatism is the economic philosophy of prudence in government spending and debt. The principles of capitalism, limited government, and laissez-faire economics form its ideological foundation. Fiscal conservatives advocate the avoidance of deficit spending, the lowering of taxes, and the reduction of overall government spending and national debt whilst ensuring balanced budgets. In other words, fiscal conservatives are against the government expanding beyond its means through debt, but they will usually choose debt over tax increases. They strongly believe in libertarian principles such as individualism and free enterprise, and advocate deregulation, privatization, and free trade.In his Reflections on the Revolution in France, Edmund Burke argued that a government does not have the right to run up large debts and then throw the burden on the taxpayer, writing "it is to the property of the citizen, and not to the demands of the creditor of the state, that the first and original faith of civil society is pledged. The claim of the citizen is prior in time, paramount in title, superior in equity. The fortunes of individuals, whether possessed by acquisition or by descent or in virtue of a participation in the goods of some community, were no part of the creditor's security, expressed or implied.... he public, whether represented by a monarch or by a senate, can pledge nothing but the public estate; and it can have no public estate except in what it derives from a just and proportioned imposition upon the citizens at large".
Factions or subgroups
Although all fiscal conservatives generally agree on a smaller and less expensive government, there are disagreements over priorities. There are three main factions or subgroups, each advocating for a particular emphasis. Deficit hawks emphasize balancing government budgets and reducing the size of government debt, viewing government debt as economically damaging and morally dubious since it passes on obligations on to future generations who have played no part in present-day tax and spending decisions. Deficit hawks are willing to consider tax increases if the additional revenue is used to reduce debt rather than increase spending.A second group put their main emphasis on tax cuts rather than spending cuts or debt reduction. Many embrace supply-side economics, arguing that as high taxes discourage economic activity and investment, tax cuts would result in economic growth, leading in turn to higher government revenues. According to them, these additional government revenues would reduce the debt in the long term. They also argue for reducing taxes even if it were to lead to short-term increases in the deficit. Some supply-siders have advocated that the increases in revenue through tax cuts make drastic cuts in spending unnecessary. However, the Congressional Budget Office has consistently reported that income tax cuts increase deficits and debt and do not pay for themselves. For example, the CBO estimated that the Bush tax cuts added about $1.5 trillion to deficits and debt from 2002 to 2011 and it would have added nearly $3 trillion to deficits and debt over the 2010–2019 decade if fully extended at all income levels.
A third group makes little distinction between debt and taxes. This group emphasizes reduction in spending rather than tax policy or debt reduction. They argue that the true cost of government is the level of spending, not how that spending is financed. Every dollar that the government spends is a dollar taken from workers, regardless of whether it is from debt or taxes. Taxes simply redistribute purchasing power; it does so in a particularly inefficient manner, reducing the incentives to produce or hire, and borrowing simply forces businesses and investors to anticipate higher taxes later on.
History
Classical liberalism
forms the historical foundation for modern fiscal conservatism. Kathleen G. Donohue argues that classical liberalism in the 19th-century United States was distinct from its counterpart in Britain:t the center of classical liberal theory was the idea of laissez-faire. To the vast majority of American classical liberals, however, laissez-faire did not mean no government intervention at all. On the contrary, they were more than willing to see the government provide tariffs, railroad subsidies, and internal improvements, all of which benefited producers. What they condemned was intervention on behalf of consumers.
Economic liberalism owes its ideological creation to the classical liberalism tradition in the vein of Adam Smith, Friedrich Hayek, Milton Friedman, Ayn Rand, and Ludwig von Mises. They provided moral justifications for free markets. Liberals of the time, in contrast to modern ones, disliked government authority and preferred individualism. They saw free market capitalism as the preferable means of achieving economic ends.
Early to mid 20th century
In the early 20th century, fiscal conservatives were often at odds with progressives who desired economic reform. During the 1920s, Republican President Calvin Coolidge's pro-business economic policies were credited for the successful period of economic growth known as the Roaring Twenties. However, his actions may have been due more to a sense of federalism than fiscal conservatism as Robert Sobel notes: "As 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".Contrary to popular opinion, then-Republican President Herbert Hoover was not a fiscal conservative. He promoted government intervention during the early Great Depression, a policy that his successor, Democratic President Franklin D. Roosevelt, continued and increased despite campaigning to the contrary. Coolidge's economic policies are often popularly contrasted with the New Deal deficit spending of Roosevelt and Republican Party opposition to Roosevelt's government spending was a unifying cause for a significant caucus of Republicans through even the presidencies of Harry S. Truman and Dwight D. Eisenhower. Barry Goldwater was a famous champion of both the socially and fiscally conservative Republicans.
In 1977, Democratic President Jimmy Carter appointed Alfred E. Kahn, a professor of economics at Cornell University, to be chair of the Civil Aeronautics Board. He was part of a push for deregulation of the industry, supported by leading economists, leading think tanks in Washington, a civil society coalition advocating the reform, the head of the regulatory agency, Senate leadership, the Carter administration and even some in the airline industry. This coalition swiftly gained legislative results in 1978.
The Airline Deregulation Act was signed into law by President Carter on October 24, 1978. The main purpose of the act was to remove government control over fares, routes, and market entry of new airlines from commercial aviation. The CAB's powers of regulation were to be phased out, eventually allowing market forces to determine routes and fares. The Act did not remove or diminish the Federal Aviation Administration's regulatory powers over all aspects of airline safety.
In 1979, Carter deregulated the American beer industry by making it legal to sell malt, hops, and yeast to American home brewers for the first time since the effective 1920 beginning of Prohibition in the United States. This Carter deregulation led to an increase in home brewing over the 1980s and 1990s that by the 2000s had developed into a strong craft microbrew culture in the United States, with 3,418 micro breweries, brewpubs and regional craft breweries in the United States by the end of 2014.
File:JimmyCarterPortrait2.jpg|thumb|upright|Jimmy Carter, who reduced the debt-to-GDP ratio in the 1970s
Public debt as a percentage of GDP fell rapidly in the post-World War II period and reached a low in 1974 under Richard Nixon. Debt as a share of GDP has consistently increased since then, except under Carter and Bill Clinton. The United States national debt rose during the 1980s as Ronald Reagan cut tax rates and increased military spending. The numbers of public debt as a percentage of GDP are indicative of the process:
raw data