Conservative Models
American conservatives should eschew David Cameron’s example.

Australia’s Liberal party leader, Tony Abbott


John O’Sullivan

Again, why?

A desire to conciliate his Lib-Dem partners? Perhaps.

A fear that spending cuts would depress demand and delay any tentative recovery? Possibly — if cutting expenditure were the whole of the policy. But the idea is to cut spending in order to finance a tax cut in order to stimulate the economy. When the public sector is half of the economy, it should be easy to find cuts whose recessionary impact would be modest compared to a tax stimulus of about the same size. Yet no such search will be undertaken.

That suggests a more direct political motive. George Osborne enjoys the reputation of being a shrewd political strategist because his steering of the last election campaign did not result in an outright Tory defeat. Looking ahead, he may calculate that the Tories cannot afford to cut spending at all if they are to win the Middle Ground next time. Thus they cannot cut taxes for the rich, however sensibly and profitably, unless they hike taxes on the rich at the same time. Thus the Sunday Times headline.

Or, to borrow the logic of Angela Lansbury in the movie The Manchurian Candidate: “Are they asking, ‘Shall we levy new taxes on the rich?’ No, they are asking, ‘Which new taxes shall we levy on the rich?’”

This sets the scene for an elegant tax quadrille in which the Lib-Dems advance, kneel, and proffer a new tax on the rich; the Tories bow, indicate reluctance, and retreat; whereupon the Lib-Dems return with an alternative tax on the rich, at which the Tories quibble, turn on their heels, and . . .  you get the idea.

In the last ten days the Lib-Dem proposals have included a “mansion tax” of 1 percent annually on homes worth $3 million and above; a cut in tax relief for the pensions of those in the higher tax brackets; a new and higher rate of council tax for those with homes worth more than about $500,000; and a so-called “tycoon tax” that would require millionaires who legally avoid the highest tax rates — by, for instance, giving large sums to charity — to pay not less than 20 percent of their income in tax.

Unfortunately for Mr. Osborne and the Tories, almost all these proposed taxes would hit not only “the rich” (however broadly defined) but people living in large houses (often purchased from the highly taxed incomes of the pre-Thatcher years) in the south of England, many of whom are retired and dependent on fixed incomes far lower than those they enjoyed in employment. Most of these are Tory voters, at least for the moment.

So perhaps it is not surprising that the latest twist in this saga may be that Cameron has decided a cut in the 50 percent tax rate is simply not worth all this trouble.

The Cameron Tories have got themselves into such trouble because of a decision they made in opposition: namely, that they would not challenge the fundamental premises of Gordon Brown’s socialist economics. They assumed, as Mr. Massie points out, that the boom would continue indefinitely. So they would not seriously challenge Labour’s spending plans lest they be asked the embarrassing question: “Which schools and hospitals would you therefore cut?” They would not argue that “exit” was at least equal to “voice” — and maybe superior to it — as a strategy for improving public services, lest they be accused of wholesale privatization. They would not maintain that tax cuts were a more efficient form of economic stimulus than increases in public spending, in case they were suspected of wanting to starve the public sector. They would not incorporate the incentive effects of marginal-tax-rate cuts in their tax-and-spend calculations, for fear of being called Reaganites or Republicans. And having abandoned the intellectual tools of anti-socialist economics, they now find themselves fighting on enemy territory and calling for tax hikes on the rich to pay for tax cuts for the rich.

This passivity on economic policy was a subset of the larger decision of the Cameron Tories not to challenge the cultural assumptions of modern metropolitan liberalism across the board. To be sure, there were areas of policy, notably education and welfare, where serious thinking produced effective, sensible, and distinctively Tory policies. But on crime, immigration, public order, human rights, the European Union, national sovereignty, and much else, there was a climate of reluctance to adopt policies, even to think thoughts, that might clash with the prevailing opinions in the governing elites. In government, this climate has worsened, because the Liberal Democrats in the coalition are usually in agreement, often fiercely, with the elites, institutions, and policies that most Tories see as foolish, damaging, or even hostile. This produces confusion and paralysis in official policy.

As a result, almost every day there is a crisis or a serious embarrassment. In the last week there have been three such events in addition to the comedy over taxes on the rich.