It’s been well said that, if the parties of the right stand for anything, they stand for
economic competence in national affairs. Not for them the easy road of compassion and spending
other people’s money on vaguely defined “needs.” When you stand for compassion and sensitivity
you always have the excuse when things go south that you meant well. When you stand for
common sense and balanced budgets and good management, then you have to deliver. If you can’t
deliver, who needs you?
In this season of discontent the Bush administration had better make sure that its economic
policy delivers, as Larry Kudlow warns.
That means spending restraint and keeping tax rates low. American conservatives know all about the
importance of low marginal tax rates. But government spending restraint delivers big dividends too.
Four nations have undertaken a policy of spending
restraint in recent years, Chile, Ireland, Canada, and New Zealand. In three
of the four cases, the spending
restraint focused mainly not on spending cuts but just keeping year-on-year increases under control.
But any way it was done, the result was a vibrant, growing economy that suprised everyone.
If you really want a big payoff, then real spending cuts are the way to go. That’s what Ireland
did in the late 1980s, reducing government spending from 53.2 percent of GDP in 1987 to 40.6 percent
in 1990, according to William W. Lewis in The Power of Productivity.
The Irish economy, once a basket case, is now the toast of Europe (er, make that the envy of Europe). Irish GDP per head
in 2004 was $26,890, well ahead of the United Kingdom at $23,920. The surge has all taken place
in the last 15 years since the Irish cut government spending and lowered tax rates.