Tag: Cameron

A ‘Special’ Relationship?

When President Obama meets with British Prime Minister David Cameron in London, they should focus on the two wars that involve both the U.S. and British militaries (Afghanistan and Libya). But these discussions will take place in the context of diminishing British military capability.

At a time when the United States should be shedding some of the burdens of policing the globe, and encouraging other countries to step forward to defend themselves, the British are moving in the opposite direction. They are cutting their military, and tacitly becoming more dependent upon U.S. power. The end result will be a United Kingdom that is less able to assist us in the future.

The United States today spends far more on its military than does the United Kingdom, and the gap is likely to grow. This is sure to have an impact on the U.S.-UK relationship.

The number of British troops, ships and planes that are available for missions has dropped and will continue to if Cameron pushes through significant cuts in British military spending. He has proposed actual cuts, not the slowing in the rate of growth that Obama and Defense Secretary Gates have presided over so far.

The special relationship has been cemented by the numerous occasions in which British and American leaders have cooperated to address common security challenges. The most important of these involve U.S. and British troops fighting side by side.

But shrinking British defense spending could strain the relationship.  The goodwill that has prevailed between the two countries could be in jeopardy, and Americans may find it harder to look upon the Brits as the “good” ally, the one that sticks by us through thick and thin. And if the American public grows disenchanted with British contributions to U.S.-led military missions, the British public may then hold less generally positive opinions of the United States.

A version of this post originally appeared in The National Interest Online.

The G-20 Fiscal Fight: A Pox on Both Their Houses

Barack Obama and Angela Merkel are the two main characters in what is being portrayed as a fight between American “stimulus” and European “austerity” at the G-20 summit meeting in Canada. My immediate instinct is to cheer for the Europeans. After all, “austerity” presumably means cutting back on wasteful government spending. Obama’s definition of “stimulus,” by contrast, is borrowing money from China and distributing it to various Democratic-leaning special-interest groups.
 
But appearances can be deceiving. Austerity, in the European context, means budget balance rather than spending reduction. As such, David Cameron’s proposal to boost the U.K.’s value-added tax from 17.5 percent to 20 percent is supposedly a sign of austerity even though his Chancellor of the Exchequer said a higher tax burden would generate “13 billion pounds we don’t have to find from extra spending cuts.”
 
Raising taxes to finance a bloated government, to be sure, is not the same as Obama’s strategy of borrowing money to finance a bloated government. But proponents of limited government and economic freedom understandably are underwhelmed by the choice of two big-government approaches.
 
What matters most, from a fiscal policy perspective, is shrinking the burden of government spending relative to economic output. Europe needs smaller government, not budget balance. According to OECD data, government spending in eurozone nations consumes nearly 51 percent of gross domestic product, almost 10 percentage points higher than the burden of government spending in the United States.
 
Unfortunately, I suspect that the “austerity” plans of Merkel, Cameron, Sarkozy, et al, will leave the overall burden of government relatively unchanged. That may be good news if the alternative is for government budgets to consume even-larger shares of economic output, but it is far from what is needed.
 
Unfortunately, the United States no longer offers a competing vision to the European welfare state. Under the big-government policies of Bush and Obama, the share of GDP consumed by government spending has jumped by nearly 8-percentage points in the past 10 years. And with Obama proposing and/or implementing higher income taxes, higher death taxes, higher capital gains taxes, higher payroll taxes, higher dividend taxes, and higher business taxes, it appears that American-style big-government “stimulus” will soon be matched by European-style big-government “austerity.”
 
Here’s a blurb from the Christian Science Monitor about the Potemkin Village fiscal fight in Canada:

This weekend’s G-20 summit is shaping up as an economic clash of civilizations – or at least a clash of EU and US economic views. EU officials led by German chancellor Angela Merkel are on a national “austerity” budget cutting offensive as the wisest policy for economic health, ahead of the Toronto summit of 20 large-economy nations. Ms. Merkel Thursday said Germany will continue with $100 billion in cuts that will join similar giant ax strokes in the UK, Italy, France, Spain, and Greece. EU officials say budget austerity promotes the stability and market confidence that are prerequisites for their role in overall recovery. Yet EU pro-austerity statements in the past 48 hours are also defensive – a reaction to public statements from US President Barack Obama and G-20 chairman Lee Myung-bak, South Korea’s president, that the overall effect of national austerity in the EU will harm recovery. They are joined by US Treasury Secretary Tim Geithner, investor George Soros, and Nobel laureate and columnist Paul Krugman, among others, arguing that austerity works against growth, and may lead to a recessionary spiral.