Fiscal conservatism is a political phrase term used in North America to describe advocacy of lower governmental spending practices and a lower federal debt; It is used to define someone who is an advocates of less government, fewer entitlement programs,earmarks, and lower taxes.
Early United States
The Democratic-Republican Party of Thomas Jefferson supported a weak central government and a more laissez-faire approach than that of Hamilton's rival party, the Federalists. They opposed Hamilton's plan to pay off the debts owed by the states for the expense of the American Revolution, because some of the debt was held by financiers and speculators (rather than the original holders) and because most of the debt was held by northern states. Hamilton passed his legislation and set up taxes to pay the debts (in exchange, he agreed to let Jefferson move the nation's capital to Washington, DC). Jefferson in particular strongly opposed having any national debt, although he relented when the opportunity came in 1803 of purchasing Louisiana.
James Madison, James Monroe, John Quincy Adams were elected by the Democratic-Republican Party, but after the fiscal disasters of the War of 1812, they came to support most of the Federalist position, deciding the nation needed a central bank and a steady income flow from tariffs.
Mid-to-late 1800s
In the mid-1800s, a new fiscal conservative political party emerged, the Republican Party. Unlike the modern fiscal conservatives, these fiscal conservatives were paleoconservative supporters of protectionism and tariffs, similar in some ways to today's Reform Party.
They were also generally supporters of big business and (internally) laissez-faire economics, although by 1890 they had been convinced into supporting Sherman Anti-Trust Act and the Interstate Commerce Commission following massive complaints.
Early 20th century
In the early 1900s fiscal conservatives were often at odds with progressive President Theodore Roosevelt, particularly for his support of antitrust laws.
During the 1920s President Calvin Coolidge's pro-business economic policy were credited for the successful period of economic growth known as the "Roaring Twenties." After the great crash of 1929, Coolidge not only lowered taxes but also reduced the national debt from World War I. His actions, however, may have been due more to a sense of federalism than fiscal conservatism: Robert Sobel notes that "[a]s 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. Did he support these measures while president? No, because in the 1920s, such matters were considered the responsibilities of state and local governments." [1]
The Reagan Era
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Main article: Reaganomics
Fiscal Conservatism was rhetorically promoted during the presidency of Ronald Reagan (1981-1989). During Reagan's tenure, income tax rates of the top personal tax bracket dropped from 70% to 28% in 7 years,[1] while payroll taxes increased as well as the effective tax rates on the lower two income quintiles.[2][3] Real Gross Domestic Product (GDP) growth recovered strongly after the 1982 recession and grew during Reagan's remaining years in office at an annual rate of 3.4% per year,[4] slightly lower than the post-World War II average of 3.6%.[5] Unemployment peaked at over 10.7% percent in 1982 then dropped during the rest of Reagan's terms, and inflation significantly decreased.[6] Federal tax receipts nearly doubled from $517 billion in 1980 to $1,032 billion in 1990. A net job increase of about 16 million also occurred (about the rate of population growth). According to a United States Department of the Treasury non-partisan economic study,[7] the major tax bills enacted under Reagan, as a whole, significantly reduced (~-1% of GDP) government tax receipts. The Economic Recovery Tax Act of 1981 was a massive (~-3% of GDP) decrease in revenues (the largest tax cuts ever enacted)[8].
By the end of Reagan's second term the national debt held by the public ballooned from 26 percent of the GDP in 1980 to 41 percent in 1989. By 1988, the debt totaled $2.6 trillion, due in part to both increased military spending at the end of the Cold War and according to some, the tax cuts. The country owed more to foreigners than it was owed, and the United States moved from being the world's largest international creditor to the world's largest debtor nation. [9]
See also
Further reading
- Barber, William J. From New Era to New Deal: Herbert Hoover, the economists, and American economic policy. Cambridge University Press. (1985)
- Beito, David. Taxpayers in revolt: Tax resistance during the Great Depression. University of North Carolina Press. (1989)
- Brownlee, W. Elliot. Federal taxation in America: A short history. Cambridge University Press. 1996.
- Kimmel, Lewis. Federal budget and fiscal policy, 1789-1958. Brookings Institution Press. 1959.
- Left, Mark. 1983. Taxing the "forgotten man": The politics of Social Security finance in the New Deal. Journal of American History 70 (September): 359-81. online in JSTOR
- Morgan, Iwan W. Deficit government: Taxing and spending in modern America. Ivan Dee. 1995.
- Sargent, James E. "Roosevelt's Economy Act: Fiscal conservatism and the early New Deal." Congressional Studies 7 (winter 1980): 33-51.
- Savage, James D. Balanced budgets & American politics. Cornell University Press. 1988.
- Herbert Stein. Presidential Economics, 3rd Edition: The Making of Economic Policy From Roosevelt to Clinton (1994)
- Julian E. Zelizer; "The Forgotten Legacy of the New Deal: Fiscal Conservatism and the Roosevelt Administration, 1933-1938." Presidential Studies Quarterly. 30#2. (2000). pp 331+. online
References
External links
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