What Can We Learn From The British Elections?

The Labour Party and the Tory Party are heading into the final stages of the British elections in a dead heat.  The public loves the idea of fiscal responsibility so both parties are telling the electorate that they will keep the government from going broke.  The public likes that idea because most of them live pretty close to the fiscal edge and they understand how easy it is to go broke.  They don't distinguish between governments and households, and they don't understand the logic behind Keynesian economic theory.  The Labour Party has come up with some ideas that have helped it to gain some leverage in their campaign.  It has proposed tax hikes on some groups with high incomes.  For example, the Party proposed a "mansion tax" that would raise money from wealthy foreigners who have purchased expensive residences in which they do not live.  That has been a popular idea.  The Labour Party has also added a new twist to the income redistribution argument.  It is telling the public how it will spend the money that it will collect with the new taxes.  Each new tax will be used to fund specific programs that are popular with most of the electorate.  Instead of "soaking the rich" they are providing new programs with tax revenues.  They are not borrowing money and running budget deficits to fund the programs.

Most people don't like to pay taxes.  Ronald Reagan and George Bush took advantage of this.  They both cut taxes, primarily for the rich, and they borrowed freely to fund government programs that they liked.  Deficits increased substantially during their terms in office.  Neither party in the US scolded them about budget deficits and fiscal responsibility.  The Republican Party only preaches fiscal responsibility when Democrats are in office.  The Tories do the same thing in Britain.  The Cameron government ended its austerity program when it observed its impact on the economy.  That is not common knowledge in Britain.  The government is claiming that its austerity policies were responsible for the slight recovery that occurred.