Fiscal conservatism is a
political
Politics (from , ) is the set of activities that are associated with making decisions in groups, or other forms of power relations among individuals, such as the distribution of resources or status. The branch of social science that studies ...
and
economic philosophy
An economic ideology is a set of views forming the basis of an ideology on how the economy should run. It differentiates itself from economic theory in being normative rather than just explanatory in its approach, whereas the aim of economic theo ...
regarding
fiscal policy
In economics and political science, fiscal policy is the use of government revenue collection (taxes or tax cuts) and expenditure to influence a country's economy. The use of government revenue expenditures to influence macroeconomic variab ...
and
fiscal responsibility
A balanced budget (particularly that of a government) is a budget in which revenues are equal to expenditures. Thus, neither a budget deficit nor a budget surplus exists (the accounts "balance"). More generally, it is a budget that has no budge ...
with an ideological basis in
capitalism
Capitalism is an economic system based on the private ownership of the means of production and their operation for Profit (economics), profit. Central characteristics of capitalism include capital accumulation, competitive markets, pric ...
,
individualism
Individualism is the moral stance, political philosophy, ideology and social outlook that emphasizes the intrinsic worth of the individual. Individualists promote the exercise of one's goals and desires and to value independence and self-reli ...
,
limited government
In political philosophy, limited government is the concept of a government limited in power. It is a key concept in the history of liberalism.Amy Gutmann, "How Limited Is Liberal Government" in Liberalism Without Illusions: Essays on Liberal Th ...
, and ''
laissez-faire
''Laissez-faire'' ( ; from french: laissez faire , ) is an economic system in which transactions between private groups of people are free from any form of economic interventionism (such as subsidies) deriving from special interest groups. ...
'' economics.
[''Modern Political Philosophy'' (1999), Richard Hudelson, pp. 37–38](_blank)
/ref>[M. O. Dickerson et al., ''An Introduction to Government and Politics: A Conceptual Approach'' (2009) p. 129.] Fiscal conservatives advocate tax cut
A tax cut represents a decrease in the amount of money taken from taxpayers to go towards government revenue. Tax cuts decrease the revenue of the government and increase the disposable income of taxpayers. Tax cuts usually refer to reductions i ...
s, reduced government spending, free market
In economics, a free market is an economic system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of government or any ot ...
s, deregulation
Deregulation is the process of removing or reducing state regulations, typically in the economic sphere. It is the repeal of governmental regulation of the economy. It became common in advanced industrial economies in the 1970s and 1980s, as a ...
, privatization
Privatization (also privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when ...
, free trade
Free trade is a trade policy that does not restrict imports or exports. It can also be understood as the free market idea applied to international trade. In government, free trade is predominantly advocated by political parties that hold econ ...
, and minimal government debt
A country's gross government debt (also called public debt, or sovereign debt) is the financial liabilities of the government sector. Changes in government debt over time reflect primarily borrowing due to past government deficits. A deficit oc ...
. Fiscal conservatism follows the same philosophical outlook of classical liberalism
Classical liberalism is a political tradition
Political culture describes how culture impacts politics. Every political system is embedded in a particular political culture.
Definition
Gabriel Almond defines it as "the particular patt ...
. This concept is derived from economic liberalism and can also be referred to as fiscal liberalism outside the United States.
The term has its origins in the era of the American New Deal
The New Deal was a series of programs, public work projects, financial reforms, and regulations enacted by President Franklin D. Roosevelt in the United States between 1933 and 1939. Major federal programs agencies included the Civilian Cons ...
during the 1930s as a result of the policies initiated by modern liberals, when many classical liberals started calling themselves conservatives
Conservatism is a cultural, social, and political philosophy that seeks to promote and to preserve traditional institutions, practices, and values. The central tenets of conservatism may vary in relation to the culture and civilization in ...
as they did not wish to be identified with what was passing for liberalism in the United States. In the United States, the term ''liberalism
Liberalism is a political and moral philosophy based on the rights of the individual, liberty, consent of the governed, political equality and equality before the law."political rationalism, hostility to autocracy, cultural distaste for c ...
'' has become associated with the welfare state
A welfare state is a form of government in which the state (or a well-established network of social institutions) protects and promotes the economic and social well-being of its citizens, based upon the principles of equal opportunity, equitabl ...
and expanded regulatory
Regulation is the management of complex systems according to a set of rules and trends. In systems theory, these types of rules exist in various fields of biology and society, but the term has slightly different meanings according to context. For ...
policies created as a result of the New Deal and its offshoots from the 1930s onwards.
Fiscal conservatives form one of the three legs of the traditional American conservative movement that emerged during the 1950s together with social conservatism and national defense
National security, or national defence, is the security and defence of a sovereign state, including its citizens, economy, and institutions, which is regarded as a duty of government. Originally conceived as protection against military attac ...
conservatism. Many Americans who are classical liberals also tend to identify as libertarian
Libertarianism (from french: libertaire, "libertarian"; from la, libertas, "freedom") is a political philosophy that upholds liberty as a core value. Libertarians seek to maximize autonomy and political freedom, and minimize the state's e ...
, holding more cultural liberal
Cultural liberalism is a social philosophy which expresses the social dimension of liberalism and advocates the freedom of individuals to choose whether to conform to cultural norms. In the words of Henry David Thoreau, it is often expressed a ...
views and advocating a non-interventionist
Non-interventionism or non-intervention is a political philosophy or national foreign policy doctrine that opposes interference in the domestic politics and affairs of other countries but, in contrast to isolationism, is not necessarily opposed t ...
foreign policy while supporting lower taxes and less government spending. As of 2020, 39% of Americans polled considered themselves "economically conservative".
Because of its close proximity to the United States, the term has entered the lexicon in Canada. In many other countries, economic liberalism or simply liberalism
Liberalism is a political and moral philosophy based on the rights of the individual, liberty, consent of the governed, political equality and equality before the law."political rationalism, hostility to autocracy, cultural distaste for c ...
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
Capitalism is an economic system based on the private ownership of the means of production and their operation for Profit (economics), profit. Central characteristics of capitalism include capital accumulation, competitive markets, pric ...
, limited government
In political philosophy, limited government is the concept of a government limited in power. It is a key concept in the history of liberalism.Amy Gutmann, "How Limited Is Liberal Government" in Liberalism Without Illusions: Essays on Liberal Th ...
, and ''laissez-faire
''Laissez-faire'' ( ; from french: laissez faire , ) is an economic system in which transactions between private groups of people are free from any form of economic interventionism (such as subsidies) deriving from special interest groups. ...
'' economics form its ideological foundation. Fiscal conservatives advocate the avoidance of deficit spending
Within the budgetary process, deficit spending is the amount by which spending exceeds revenue over a particular period of time, also called simply deficit, or budget deficit; the opposite of budget surplus. The term may be applied to the budget ...
, 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
Libertarianism (from french: libertaire, "libertarian"; from la, libertas, "freedom") is a political philosophy that upholds liberty as a core value. Libertarians seek to maximize autonomy and political freedom, and minimize the state's e ...
principles such as individualism
Individualism is the moral stance, political philosophy, ideology and social outlook that emphasizes the intrinsic worth of the individual. Individualists promote the exercise of one's goals and desires and to value independence and self-reli ...
and free enterprise
In economics, a free market is an economic system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of government or any ...
, often advocating deregulation
Deregulation is the process of removing or reducing state regulations, typically in the economic sphere. It is the repeal of governmental regulation of the economy. It became common in advanced industrial economies in the 1970s and 1980s, as a ...
, privatization
Privatization (also privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when ...
, and free trade
Free trade is a trade policy that does not restrict imports or exports. It can also be understood as the free market idea applied to international trade. In government, free trade is predominantly advocated by political parties that hold econ ...
.
In his ''Reflections on the Revolution in France
''Reflections on the Revolution in France'' is a political pamphlet written by the Irish statesman Edmund Burke and published in November 1790. It is fundamentally a contrast of the French Revolution to that time with the unwritten British Const ...
'', Edmund Burke
Edmund Burke (; 12 January NS.html"_;"title="New_Style.html"_;"title="/nowiki>New_Style">NS">New_Style.html"_;"title="/nowiki>New_Style">NS/nowiki>_1729_–_9_July_1797)_was_an_ NS.html"_;"title="New_Style.html"_;"title="/nowiki>New_Style"> ...
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. ... e 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 agree generally 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 hawk
Deficit hawk is a political slang term in the English speaking world for people who place great emphasis on keeping government budgets under control. 'Hawk' can be used to describe someone calling for harsh or pain-inducing measures (alluding to ...
s 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
A tax cut represents a decrease in the amount of money taken from taxpayers to go towards government revenue. Tax cuts decrease the revenue of the government and increase the disposable income of taxpayers. Tax cuts usually refer to reductions in ...
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
The Congressional Budget Office (CBO) is a federal agency within the legislative branch of the United States government that provides budget and economic information to Congress.
Inspired by California's Legislative Analyst's Office that manages ...
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
The phrase Bush tax cuts refers to changes to the United States tax code passed originally during the presidency of George W. Bush and extended during the presidency of Barack Obama, through:
* Economic Growth and Tax Relief Reconciliation Act o ...
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, doing 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
Classical liberalism in the United States 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:
the center of classical liberal theory n Europe
N, or n, is the fourteenth letter in the Latin alphabet, used in the modern English alphabet, the alphabets of other western European languages and others worldwide. Its name in English is ''en'' (pronounced ), plural ''ens''.
History
...
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 government provide tariffs, railroad subsidies, and internal improvements, all of which benefited producers. What they condemned was intervention in behalf of consumers.
Economic liberalism owes its ideological creation to the classical liberalism
Classical liberalism is a political tradition
Political culture describes how culture impacts politics. Every political system is embedded in a particular political culture.
Definition
Gabriel Almond defines it as "the particular patt ...
tradition in the vein of Adam Smith
Adam Smith (baptized 1723 – 17 July 1790) was a Scottish economist and philosopher who was a pioneer in the thinking of political economy and key figure during the Scottish Enlightenment. Seen by some as "The Father of Economics"——— ...
, Friedrich Hayek
Friedrich August von Hayek ( , ; 8 May 189923 March 1992), often referred to by his initials F. A. Hayek, was an Austrian–British economist, legal theorist and philosopher who is best known for his defense of classical liberalism. Haye ...
, Milton Friedman
Milton Friedman (; July 31, 1912 – November 16, 2006) was an American economist and statistician who received the 1976 Nobel Memorial Prize in Economic Sciences for his research on consumption analysis, monetary history and theory and the ...
, Ayn Rand, and Ludwig von Mises
Ludwig Heinrich Edler von Mises (; 29 September 1881 – 10 October 1973) was an Austrian School economist, historian, logician, and Sociology, sociologist. Mises wrote and lectured extensively on the societal contributions of classical liberali ...
. They provided moral justifications for free markets. Liberals of the time, in contrast to modern ones, disliked government authority and preferred individualism
Individualism is the moral stance, political philosophy, ideology and social outlook that emphasizes the intrinsic worth of the individual. Individualists promote the exercise of one's goals and desires and to value independence and self-reli ...
. They saw free market capitalism
Capitalism is an economic system based on the private ownership of the means of production and their operation for Profit (economics), profit. Central characteristics of capitalism include capital accumulation, competitive markets, pric ...
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
Progressivism holds that it is possible to improve human societies through political action. As a political movement, progressivism seeks to advance the human condition through social reform based on purported advancements in science, techno ...
who desired economic reform. During the 1920s, Republican
Republican can refer to:
Political ideology
* An advocate of a republic, a type of government that is not a monarchy or dictatorship, and is usually associated with the rule of law.
** Republicanism, the ideology in support of republics or agains ...
President
President most commonly refers to:
*President (corporate title)
*President (education), a leader of a college or university
*President (government title)
President may also refer to:
Automobiles
* Nissan President, a 1966–2010 Japanese ful ...
Calvin Coolidge
Calvin Coolidge (born John Calvin Coolidge Jr.; ; July 4, 1872January 5, 1933) was the 30th president of the United States from 1923 to 1929. Born in Vermont, Coolidge was a History of the Republican Party (United States), Republican lawyer ...
's pro-business economic policies were credited for the successful period of economic growth known as the Roaring Twenties
The Roaring Twenties, sometimes stylized as Roaring '20s, refers to the 1920s decade in music and fashion, as it happened in Western society and Western culture. It was a period of economic prosperity with a distinctive cultural edge in the ...
. However, his actions may have been due more to a sense of federalism
Federalism is a combined or compound mode of government that combines a general government (the central or "federal" government) with regional governments (Province, provincial, State (sub-national), state, Canton (administrative division), can ...
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
Herbert Clark Hoover (August 10, 1874 – October 20, 1964) was an American politician who served as the 31st president of the United States from 1929 to 1933 and a member of the Republican Party, holding office during the onset of the Gr ...
was not a fiscal conservative. He promoted government intervention during the early Great Depression
The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...
, a policy that his successor, Democratic President Franklin D. Roosevelt
Franklin Delano Roosevelt (; ; January 30, 1882April 12, 1945), often referred to by his initials FDR, was an American politician and attorney who served as the 32nd president of the United States from 1933 until his death in 1945. As the ...
, continued and increased despite campaigning to the contrary. Coolidge's economic policies are often popularly contrasted with the New Deal
The New Deal was a series of programs, public work projects, financial reforms, and regulations enacted by President Franklin D. Roosevelt in the United States between 1933 and 1939. Major federal programs agencies included the Civilian Cons ...
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
Harry S. Truman (May 8, 1884December 26, 1972) was the 33rd president of the United States, serving from 1945 to 1953. A leader of the Democratic Party, he previously served as the 34th vice president from January to April 1945 under Franklin ...
and Dwight D. Eisenhower
Dwight David "Ike" Eisenhower (born David Dwight Eisenhower; ; October 14, 1890 – March 28, 1969) was an American military officer and statesman who served as the 34th president of the United States from 1953 to 1961. During World War II, ...
. Barry Goldwater was a famous champion of both the socially and fiscally conservative Republicans.
In 1977, Democratic President Jimmy Carter
James Earl Carter Jr. (born October 1, 1924) is an American politician who served as the 39th president of the United States from 1977 to 1981. A member of the Democratic Party (United States), Democratic Party, he previously served as th ...
appointed Alfred E. Kahn, a professor of economics at Cornell University
Cornell University is a private statutory land-grant research university based in Ithaca, New York. It is a member of the Ivy League. Founded in 1865 by Ezra Cornell and Andrew Dickson White, Cornell was founded with the intention to teach an ...
, to be chair of the Civil Aeronautics Board
The Civil Aeronautics Board (CAB) was an agency of the federal government of the United States, formed in 1938 and abolished in 1985, that regulated aviation services including scheduled passenger airline serviceStringer, David H."Non-Skeds: T ...
(CAB). He was part of a push for deregulation
Deregulation is the process of removing or reducing state regulations, typically in the economic sphere. It is the repeal of governmental regulation of the economy. It became common in advanced industrial economies in the 1970s and 1980s, as a ...
of the industry, supported by leading economists, leading think tanks in Washington, a civil society coalition advocating the reform (patterned on a coalition earlier developed for the truck-and-rail-reform efforts), 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
The Airline Deregulation Act is a 1978 United States federal law that deregulated the airline industry in the United States, removing federal control over such areas as fares, routes, and market entry of new airlines. The Civil Aeronautics Boa ...
( Pub.L.br>95–504
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
Commercial aviation is the part of civil aviation that involves operating aircraft for remuneration or hire, as opposed to private aviation.
Definition
Commercial aviation is not a rigorously defined category. All commercial air transport and ae ...
. 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
The Federal Aviation Administration (FAA) is the largest transportation agency of the U.S. government and regulates all aspects of civil aviation in the country as well as over surrounding international waters. Its powers include air traffic m ...
's regulatory powers over all aspects of airline safety.
In 1979, Carter deregulated the American beer industry by making it legal to sell malt
Malt is germinated cereal grain that has been dried in a process known as " malting". The grain is made to germinate by soaking in water and is then halted from germinating further by drying with hot air.
Malted grain is used to make beer, wh ...
, hops
Hops are the flowers (also called seed cones or strobiles) of the hop plant ''Humulus lupulus'', a member of the Cannabaceae family of flowering plants. They are used primarily as a bittering, flavouring, and stability agent in beer, to whi ...
and yeast
Yeasts are eukaryotic, single-celled microorganisms classified as members of the fungus kingdom. The first yeast originated hundreds of millions of years ago, and at least 1,500 species are currently recognized. They are estimated to constitut ...
to American home brewers for the first time since the effective 1920 beginning of Prohibition in the United States
In the United States from 1920 to 1933, a Constitution of the United States, nationwide constitutional law prohibition, prohibited the production, importation, transportation, and sale of alcoholic beverages. The alcohol industry was curtai ...
. 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
Craft beer is a beer that has been made by craft breweries. They produce smaller amounts of beer, typically less than large breweries, and are often independently owned. Such breweries are generally perceived and marketed as having an emphasis o ...
culture in the United States, with 3,418 micro breweries, brewpubs and regional craft breweries in the United States by the end of 2014.
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
Richard Milhous Nixon (January 9, 1913April 22, 1994) was the 37th president of the United States, serving from 1969 to 1974. A member of the Republican Party, he previously served as a representative and senator from California and was ...
. Debt as a share of GDP has consistently increased since then, except under Carter and Bill Clinton
William Jefferson Clinton ( né Blythe III; born August 19, 1946) is an American politician who served as the 42nd president of the United States from 1993 to 2001. He previously served as governor of Arkansas from 1979 to 1981 and agai ...
. The United States national debt
The national debt of the United States is the total national debt owed by the federal government of the United States to Treasury security holders. The national debt at any point in time is the face value of the then-outstanding Treasury s ...
rose during the 1980s as Ronald Reagan
Ronald Wilson Reagan ( ; February 6, 1911June 5, 2004) was an American politician, actor, and union leader who served as the 40th president of the United States from 1981 to 1989. He also served as the 33rd governor of California from 1967 ...
cut tax rates and increased military spending. The numbers of public debt as % of GDP are indicative of the process:
Reagan era
Fiscal conservatism was rhetorically promoted during the presidency of Republican Ronald Reagan
Ronald Wilson Reagan ( ; February 6, 1911June 5, 2004) was an American politician, actor, and union leader who served as the 40th president of the United States from 1981 to 1989. He also served as the 33rd governor of California from 1967 ...
(1981–1989). During Reagan's tenure, the top personal income tax bracket
Tax brackets are the divisions at which tax rates change in a progressive tax system (or an explicitly regressive tax system, though that is rarer). Essentially, tax brackets are the cutoff values for taxable income—income past a certain poin ...
dropped from 70% to 28% while payroll taxes and the effective tax rates on the lower two income quintiles increased. Reagan cut the maximum capital gains tax from 28% to 20%, though in his second term he raised it back up to 28%. He successfully increased defense spending, but conversely liberal Democrats blocked his efforts to cut domestic spending. Real GDP growth
Economic growth can be defined as the increase or improvement in the inflation-adjusted market value of the goods and services produced by an economy in a financial year. Statisticians conventionally measure such growth as the percent rate of ...
recovered strongly after the 1982 recession, growing at an annual rate of 3.4% for the rest of his time in office. Unemployment dropped after peaking at over 10.7% percent in 1982, and inflation decreased significantly. Federal tax receipts nearly doubled from $517 billion in 1980 to $1,032 billion in 1990. Employment grew at about the same rate as population.
According to a United States Department of the Treasury
The Department of the Treasury (USDT) is the national treasury and finance department of the federal government of the United States, where it serves as an executive department. The department oversees the Bureau of Engraving and Printing and t ...
nonpartisan economic study, the major tax bills enacted under Reagan caused federal revenue to fall by an amount equal to roughly 1% of GDP.[Revised September 2006 edition]
Although Reagan did not offset the increase in federal government spending or reduce the deficit, his accomplishments are more notable when expressed as a percent of the gross domestic product. Federal spending fell from 22.2% of the GDP to 21.2%. By the end of Reagan's second term, the national debt held by the public increased by almost 60% and the total debt equalled $2.6 trillion. In fewer than eight years, the United States went from being the world's largest creditor nation to the world's largest debtor nation.
Ross Perot
In the 1992 presidential election, Ross Perot
Henry Ross Perot (; June 27, 1930 – July 9, 2019) was an American business magnate, billionaire, politician and philanthropist. He was the founder and chief executive officer of Electronic Data Systems and Perot Systems. He ran an inde ...
, 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 Republicans and libertarians
Libertarianism (from french: libertaire, "libertarian"; from la, libertas, "freedom") is a political philosophy that upholds liberty as a core value. Libertarians seek to maximize autonomy and political freedom, and minimize the state's enc ...
, it is also claimed in some ways by many centrist
Centrism is a political outlook or position involving acceptance or support of a balance of social equality and a degree of social hierarchy while opposing political changes that would result in a significant shift of society strongly to Left-w ...
or moderate
Moderate is an ideological category which designates a rejection of radical or extreme views, especially in regard to politics and religion. A moderate is considered someone occupying any mainstream position avoiding extreme views. In American ...
Democrats who often refer to themselves as New Democrats
New Democrats, also known as centrist Democrats, Clinton Democrats, or moderate Democrats, are a centrist ideological faction within the Democratic Party in the United States. As the Third Way faction of the party, they are seen as culturall ...
. Although not supportive of the wide range tax cut policies that were often enacted during the Reagan and Bush administrations, the New Democrat coalition's primary economic agenda differed from the traditional philosophy held by liberal Democrats and sided with the fiscal conservative belief that a balanced federal budget should take precedence over some spending programs.
Former President Bill Clinton
William Jefferson Clinton ( né Blythe III; born August 19, 1946) is an American politician who served as the 42nd president of the United States from 1993 to 2001. He previously served as governor of Arkansas from 1979 to 1981 and agai ...
, who was a New Democrat and part of the somewhat fiscally conservative Third Way
The Third Way is a centrist political position that attempts to reconcile right-wing and left-wing politics by advocating a varying synthesis of centre-right economic policies with centre-left social policies. The Third Way was born from ...
advocating Democratic Leadership Council
The Democratic Leadership Council (DLC) was founded in 1985 and closed in 2011. Founded and directed by Al From, prominent members include Arkansas Governor Bill Clinton (who was elected president in 1992 and 1996), Delaware Senator Joe Biden ( ...
, 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
The Omnibus Budget Reconciliation Act of 1993 (or OBRA-93) was a federal law that was enacted by the 103rd United States Congress and signed into law by President Bill Clinton on August 10, 1993. It has also been unofficially referred to as the Def ...
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 The Budget Enforcement Act of 1990 (BEA) (, title XIII; ; codified as amended at scattered sections of 2 U.S.C. & ) was enacted by the United States Congress as title XIII of the Omnibus Budget Reconciliation Act of 1990, to enforce the deficit re ...
(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 is a political slang term in the English speaking world for people who place great emphasis on keeping government budgets under control. 'Hawk' can be used to describe someone calling for harsh or pain-inducing measures (alluding to ...
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
The Contract with America was a legislative agenda advocated for by the Republican Party during the 1994 congressional election campaign. Written by Newt Gingrich and Dick Armey, and in part using text from former President Ronald Reagan's 19 ...
which advocated such things as balancing the budget, providing the President with a line-item veto
The line-item veto, also called the partial veto, is a special form of veto power that authorizes a chief executive to reject particular provisions of a bill enacted by a legislature without vetoing the entire bill. Many countries have different ...
and welfare reform. After the elections
An election is a formal group decision-making process by which a population chooses an individual or multiple individuals to hold Public administration, public office.
Elections have been the usual mechanism by which modern representative ...
gave the Republicans a majority in the House of Representatives
House of Representatives is the name of legislative bodies in many countries and sub-national entitles. In many countries, the House of Representatives is the lower house of a bicameral legislature, with the corresponding upper house often c ...
, newly minted Speaker of the House
The speaker of a deliberative assembly, especially a legislative body, is its presiding officer, or the chair. The title was first used in 1377 in England.
Usage
The title was first recorded in 1377 to describe the role of Thomas de Hungerf ...
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
The Taxpayer Relief Act of 1997 () reduced several federal taxes in the United States.
Starting in 1998, a $400 tax credit for each child under age 17 was introduced, which was later increased to $500 in 1999. This credit was phased out for h ...
which lowered the top capital gains tax
A capital gains tax (CGT) is the tax on profits realized on the sale of a non-inventory asset. The most common capital gains are realized from the sale of stocks, Bond (finance), bonds, precious metals, real estate, and property.
Not all count ...
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 create budget surpluses from fiscal years 1998–2001 (the first time since 1969) and the longest period of sustained economic growth
Economic growth can be defined as the increase or improvement in the inflation-adjusted market value of the goods and services produced by an economy in a financial year. Statisticians conventionally measure such growth as the percent rate of ...
in United States history.
Modern fiscal conservatism
American businessman, politician and former Mayor of New York City
The mayor of New York City, officially Mayor of the City of New York, is head of the executive branch of the government of New York City and the chief executive of New York City. The mayor's office administers all city services, public property ...
Michael Bloomberg considers himself a fiscal conservative and expressed his definition of the term at the 2007 British Conservative Party
The Conservative Party, officially the Conservative and Unionist Party and also known colloquially as the Tories, is one of the two main political parties in the United Kingdom, along with the Labour Party. It is the current governing party, ...
Conference, stating:
To me, fiscal conservatism means balancing budgets – not running deficits that the next generation can't afford. It means improving the efficiency of delivering services by finding innovative ways to do more with less. It means cutting taxes when possible and prudent to do so, raising them overall only when necessary to balance the budget, and only in combination with spending cuts. It means when you run a surplus, you save it; you don't squander it. And most importantly, being a fiscal conservative means preparing for the inevitable economic downturns – and by all indications, we've got one coming.
While the term "fiscal conservatism" would imply budget deficits would be lower under conservatives (i.e., Republicans), this has not historically been the case. Economists Alan Blinder
Alan Stuart Blinder (, born October 14, 1945) is an American economics professor at Princeton University and is listed among the most influential economists in the world according to IDEAS/RePEc. He is a leading macroeconomist, politically liber ...
and Mark Watson reported in 2016 that budget deficits since WW2 tended to be smaller under Democratic Party presidents, at 2.1% potential GDP versus 2.8% potential GDP for Republican presidents, a difference of about 0.7% GDP. They wrote that higher budget deficits should theoretically have boosted the economy more for Republicans, and therefore cannot explain the greater GDP growth under Democrats.
Rest of the world
As a result of the expansion of the welfare state and increased regulatory policies by the Roosevelt administration beginning in the 1930s, in the United States the term liberalism has today become associated with modern rather than classical liberalism. In Western Europe, the expanded welfare states created after World War II were created by socialist
Socialism is a left-wing economic philosophy and movement encompassing a range of economic systems characterized by the dominance of social ownership of the means of production as opposed to private ownership. As a term, it describes the e ...
or social-democratic parties such as the British Labour Party rather than liberal parties. Many liberal parties in Western Europe tend to adhere to classical liberalism
Classical liberalism is a political tradition
Political culture describes how culture impacts politics. Every political system is embedded in a particular political culture.
Definition
Gabriel Almond defines it as "the particular patt ...
, with the Free Democratic Party in Germany being one example. The Liberal Democrats in the United Kingdom have a classical liberal
Classical liberalism is a political tradition and a branch of liberalism that advocates free market and laissez-faire economics; civil liberties under the rule of law with especial emphasis on individual autonomy, limited government, econom ...
and a social liberal
Social liberalism (german: Sozialliberalismus, es, socioliberalismo, nl, Sociaalliberalisme), also known as new liberalism in the United Kingdom, modern liberalism, or simply liberalism in the contemporary United States, left-liberalism ...
wing of the party. In many countries, liberalism
Liberalism is a political and moral philosophy based on the rights of the individual, liberty, consent of the governed, political equality and equality before the law."political rationalism, hostility to autocracy, cultural distaste for c ...
or economic liberalism
Economic liberalism is a political and economic ideology that supports a market economy based on individualism and private property in the means of production. Adam Smith is considered one of the primary initial writers on economic liberali ...
is used to describe what Americans call fiscal conservatism.
Fiscal conservatism in the United Kingdom was arguably most popular during the premiership of Conservative
Conservatism is a cultural, social, and political philosophy that seeks to promote and to preserve traditional institutions, practices, and values. The central tenets of conservatism may vary in relation to the culture and civilization i ...
Margaret Thatcher
Margaret Hilda Thatcher, Baroness Thatcher (; 13 October 19258 April 2013) was Prime Minister of the United Kingdom from 1979 to 1990 and Leader of the Conservative Party (UK), Leader of the Conservative Party from 1975 to 1990. S ...
. After a number of years of deficit spending under the previous Labour government, Thatcher advocated spending cuts and selective tax increases to balance the budget. As a result of the deterioration in the United Kingdom's public finances—according to fiscal conservatives caused by another spate of deficit spending under the previous Labour government, the late-2000s recession and by the European sovereign debt crisis
The European debt crisis, often also referred to as the eurozone crisis or the European sovereign debt crisis, is a multi-year debt crisis that took place in the European Union (EU) from 2009 until the mid to late 2010s. Several eurozone membe ...
—the Cameron–Clegg coalition
The Cameron–Clegg coalition was formed by David Cameron and Nick Clegg when Cameron was invited by Queen Elizabeth II to form a new administration, following the resignation of Prime Minister Gordon Brown on 11 May 2010, after the gene ...
(Conservative–Liberal Democrats) embarked on an austerity programme featuring a combination of spending cuts and tax rises in an attempt to halve the deficit and eliminate the structural deficit over the five-year parliament.
In Canada, the rise of the socialist Co-operative Commonwealth Federation pushed the Liberal Party
The Liberal Party is any of many political parties around the world. The meaning of ''liberal'' varies around the world, ranging from liberal conservatism on the right to social liberalism on the left.
__TOC__ Active liberal parties
This is a li ...
to create and expand the welfare state before and after World War II. Fiscal conservatism in Canada is generally referred to as blue Toryism when it is present within the Conservative Party of Canada
The Conservative Party of Canada (french: Parti conservateur du Canada), colloquially known as the Tories, is a federal political party in Canada. It was formed in 2003 by the merger of the two main right-leaning parties, the Progressive Con ...
. In Alberta, fiscal conservatism is represented by the United Conservative Party
The United Conservative Party of Alberta (UCP) is a conservative political party in the province of Alberta, Canada. It was established in July 2017 as a merger between the Progressive Conservative Association of Alberta and the Wildrose Party ...
. In Ontario, fiscal conservatism is represented by the Progressive Conservative Party of Ontario
The Progressive Conservative Party of Ontario (french: Parti progressiste-conservateur de l'Ontario), often shortened to the Ontario PC Party or simply the PCs, colloquially known as the Tories, is a centre-right political party in Ontario, Canada ...
.
See also
* Balance of payments
In international economics, the balance of payments (also known as balance of international payments and abbreviated BOP or BoP) of a country is the difference between all money flowing into the country in a particular period of time (e.g., a ...
* Balance of trade
The balance of trade, commercial balance, or net exports (sometimes symbolized as NX), is the difference between the monetary value of a nation's exports and imports over a certain time period. Sometimes a distinction is made between a balance ...
* Capitalism
Capitalism is an economic system based on the private ownership of the means of production and their operation for Profit (economics), profit. Central characteristics of capitalism include capital accumulation, competitive markets, pric ...
* Citizens Against Government Waste
* Classical liberalism
Classical liberalism is a political tradition
Political culture describes how culture impacts politics. Every political system is embedded in a particular political culture.
Definition
Gabriel Almond defines it as "the particular patt ...
* Concord Coalition
* Criticism of welfare
The modern welfare state has been criticized on economic and moral grounds from all ends of the political spectrum. Many have argued that the provision of Taxation, tax-funded Service (economics), services or transfer payments reduces the incent ...
* Economic freedom
Economic freedom, or economic liberty, is the ability of people of a society to take economic actions. This is a term used in economic and policy debates as well as in the philosophy of economics. One approach to economic freedom comes from the l ...
* Economic liberalism
Economic liberalism is a political and economic ideology that supports a market economy based on individualism and private property in the means of production. Adam Smith is considered one of the primary initial writers on economic liberali ...
* Market economy
* Minarchism
A night-watchman state, or minarchy, whose proponents are known as minarchists, is a model of a state that is limited and minimal, whose functions depend on libertarian theory. Right-libertarians support it only as an enforcer of the non-aggr ...
* Republican Main Street Partnership
The Republican Main Street Partnership is a 501(c)(4) organization that was allied with the congressional Republican Main Street Caucus. The Partnership continues to exist, while the Caucus was dissolved by its members in February 2019.
Hist ...
* Right-wing politics
Right-wing politics describes the range of political ideologies that view certain social orders and hierarchies as inevitable, natural, normal, or desirable, typically supporting this position on the basis of natural law, economics, author ...
* Trickle-down economics
Trickle-down economics is a term used in critical references to economic policies that favor the upper income brackets, corporations, and individuals with substantial wealth or capital. In recent history, the term has been used by critics of ...
Notes
References
*
*
*
*
*
*
*
Further reading
* Barber, William J. (1985). ''From New Era to New Deal: Herbert Hoover, the Economists, and American Economic Policy''. Cambridge University Press.
* Beito, David (1989). ''Taxpayers in Revolt: Tax Resistance During the Great Depression.'' University of North Carolina Press.
* Brownlee, W. Elliot (1996). ''Federal Taxation in America: A Short History.'' Cambridge University Press.
*
* Kimmel, Lewis (1959). ''Federal Budget and Fiscal Policy, 1789–1958''. Brookings Institution Press.
* Left, Mark (September 1983). "Taxing the "forgotten man": The politics of Social Security finance in the New Deal". ''Journal of American History''. 70: 359–81. Online in JSTOR.
* Morgan, Iwan W. (1995) ''Deficit Government: Taxing and Spending in Modern America''. Ivan Dee.
* Sargent, James E. (Winter 1980) "Roosevelt's Economy Act: Fiscal conservatism and the early New Deal". ''Congressional Studies''. 7: 33–51.
* Savage, James D. (1988) ''Balanced Budgets and American Politics.'' Cornell University Press.
* Herbert Stein (1994). ''Presidential Economics, 3rd Edition: The Making of Economic Policy From Roosevelt to Clinton''.
* Julian E. Zelizer (2000). "The Forgotten Legacy of the New Deal: Fiscal Conservatism and the Roosevelt Administration, 1933–1938". ''Presidential Studies Quarterly''. 30 (2): pp. 331
Online
{{economic liberalism
Capitalism
Classical liberalism
Conservatism
Conservative liberalism
Conservatism in the United States
Criticisms of welfare
Economic liberalism
Conservatism
Conservatism is a cultural, social, and political philosophy that seeks to promote and to preserve traditional institutions, practices, and values. The central tenets of conservatism may vary in relation to the culture and civilizati ...
Political theories