Fiscal Conservatism- A Failure or A Road to Better Economics?
Fiscal conservatism is a political-economic viewpoint regarding fiscal responsibility and fiscal policy which advocate for reduced taxes. These philosophies also advocate for reduced government expenditure plus government debt. Some of the defining qualities of fiscal conservatism are privatization, reduced taxes, and economic deregulation.
It advocates for the avoidance of negative spending, maintenance of balanced budgets and total reduction of government expenditure. Economic conservatism is usually against the expansion of the government’s expenditure beyond what it can sustain without debts. In case the government chooses to expand its expenditure, it should do so via debt as a priority as opposed to increasing taxes.
- Three types of conservatives
Generally, the conservatives have different priorities. There exist three main subgroups under economic conservatives.
The first subgroup is the deficit hawks. They emphasize the balancing of budget and reduction of government expenditure. They have a view that the national debt is morally dubious. They are willing to consider tax increase over national debt for funding the economy.
The second group emphasizes tax reduction rather than debt reduction and spending cuts. They argue that increased tax halts economic growth by discouraging investments. They also argue that reduced tax encourages increased investments and generation of more revenue that is used to pay off the debts.
The third group puts its emphasis on spending reduction but not on debt reduction or tax policy. Their view is that the real cost of running the nation is at the spending level and not at the financing of the spending. For example, every $1 spent is taken from the citizens, regardless of whether it was a debt or tax revenue.
Fiscal conservatism and the economy
Economic growth is the foundation through which the economy gets to grow, and closing of the deficit gaps becomes possible. Increasing tax rates and increasing government debts plus expenditures may be the only way to start driving trade and industry growth and sustainability.
Even though the conservatives maintain their views regardless of the circumstances, sometimes they have to respond to the economic downturn. Natural disasters are not planned for. They have to act in response to natural calamities and wars. These are crucial times when the government has to respond with the needed amount of money, whether from tax revenue or from debts. Even though conservatives maintain their stand, it is tough for them to go through such phases without changing their stand.
With the cutting down of the government’s expenditure, tax reduction and debt reduction, sustaining the economy is quite hard. Running of new projects will be difficult. Employment opportunities will reduce and so will the number of people generating revenue. Due to the stalled economy, attracting investors will be hard.
A majority of the Republicans believe that one has to spend money to generate more. The high-priced undertakings and the huge budgets will create more employment opportunities. This will, in turn, increase the number of taxpayers, increase revenue and reduce government expenditure. The government will be able to fund its activities through controlled spending. As a result of the economic growth, most countries will agree to loan the country and it keeps boosting its economy.
A couple of years ago, limited government spending and balanced budgets formed the basis of government operations. Current trends in a number of developed nations show that fiscal conservatism is deteriorating. The once regarded political and intellectual force is dying over time. There is no doubt that it needs serious resuscitation.
Racking up of debts, not in favor of the dollar has weakened the buying supremacy of a dollar with time. The number of people who are jobless and yet have the right qualifications is also increasing over time. Leaders are advocating for increased tax rates and this is contributing to the rise in the price of commodities and services. All these trends show that economic conservatism is declining with time.