What should the Tories learn from the US debt crisis?

Late on Tuesday, the US finally agreed on a deal to raise the country’s debt ceiling, avoiding a catastrophic default and consequences that would have been felt around the world. The old saying that ‘when America sneezes, the rest of the world catches a cold’ would almost certainly have been proved right, and a global recession was a serious possibility.

However, at the last minute the two sides managed to come to an arrangement, and the bill was passed. Crisis over – for now.

What’s particularly interesting about the details of the Bill – not all of which are clear yet – is that the whole debate process has ended with what is essentially a victory for small government. There are no tax rises at all, a massive coup for the Republicans, and something that the Conservatives should take note of.

Whilst the financial situations in the UK and the US are inherently different, and there is no sense in simply replicating the American solution, the details of the negotiation and the will of the American people that tax rises are not always the best solution should be encouraging for the Tories. The traditional pattern of ‘raise taxes to create money’ is not necessarily the case, especially with the fragile state of economies worldwide.

Another key part of the deal is that there will be $900bn worth of domestic cuts over the next ten years. Rather than carrying on with Obama’s failed fiscal stimulus package, this deal put in place rules for serious cuts to spending, in a genuine attempt to reduce America’s debt rather than keep on spending in the hope that the economy will recover.

There is encouragement that the Tories can take from all of this. They can look at the change in opinion in American, and see the shift towards a small-government movement. Whilst there are big differences between what that means in America and in Britain, the principles are the same. David Cameron is keen to give more power to local communities, and have less coming from Whitehall.

There is also a lesson in standing up for your political principles. Whilst there is an argument that says the American debt crisis was mostly political posturing (which is not entirely wrong), the flip side is that both sides stood up for what they believed in. Granted, they were playing with the biggest hot live grenade that the world had to offer, but the basic tenet of sticking to your plan and knowing what you want is invaluable.

It would be especially helpful for the Tories to grasp some of that ‘stick-to-your-guns’ mentality. The Coalition has had a tough time, and has been accused of flip-flopping and being unsure of where it stands. Cameron has been accused of pandering too much to the Lib Dems, which is true. Rather than sticking to what he believes in, he has spent too much time worrying about perceptions and the approval of Nick Clegg and his party. Were he to learn from the Republicans, who have (generally) stuck to their plan and refused to move, he might see himself rising in the opinion polls again. People won’t always agree with him, but the electorate do admire a politician who is strong and sticks to what he believes in.

Whilst Parliament breaks over the summer, David Cameron should take the opportunity and do some reevaluating. During that process, he could do a lot worse than look at the last few weeks in Washington, and take some of those events on board. A rejuvenated Cameron in the autumn could be incredibly good. Only time will tell.

Related posts:

1. As Obama Tours Europe – What Can We Learn From His Candidacy?
2. Are the Tories playing with fire with their reform agenda?
3. Is this another institutional crisis?
4. Can anything ‘new’ in Cameron’s Conservatism survive the fiscal crisis?
5. Drowning in debt?