Tomorrow Prime Minister David Cameron, who heads a coalition government, is expected to announce the results of a Comprehensive Spending Review of all government expenditures — a review that will result in unprecedented cuts. The goal is to slash the budget deficit from over 10 percent of GDP to almost zero in five years — and in the process to (a) reduce the “crowding out” effect of big government, (b) restore market confidence in government finances, and (c) encourage private business to invest and hire people, which will in turn fuel economic growth.
The cuts in public spending will probably exceed anything either Prime Minister Margaret Thatcher or President Reagan ever attempted.
In the past, David Cameron was chided by some American conservatives for being a faux conservative because of his stands on the environment, the National Health Service, and social issues like gay rights (see David Frum’s fine commentary here). But facing the preeminent domestic threat to the West these days — unsustainable budget deficits and the amassing debt – Cameron is wielding a budget axe. Unlike, say, David Stockman, it’s not something Cameron seemed terribly eager to do; he envisioned himself in a different role. But to Cameron’s credit, he is facing reality in a far more responsible manner than the president of the United States, who has made things considerably worse with his spending agenda (President Obama has added $3 trillion to the debt in his first two years in office).
In the end, the truest measure of how serious American conservatives are about governing will be how they address the entitlement crisis. Will they follow the path charted by David Cameron (with the caveat that the UK’s fiscal problems are somewhat different in scope and nature from ours)? Or will they wilt when it comes to reforming entitlement programs by raising the retirement age (for people under 55), tying benefits to prices rather than to wages, means-testing Social Security and Medicare, and turning Medicare into a defined contribution (instead of a defined benefit) program (see here).
Having served in three different administrations, I realize that dealing with entitlements is not an easy task. Republicans need to put forward plans that are gradual, responsible, and prudent. Impaling itself on entitlement reform is not a reasonable demand to make of a political party. Nevertheless, there needs to be a governing strategy that gets America from where we are (an unsustainable fiscal path) to where we need to be (reconfiguring entitlements).
That will need to be done incrementally rather than all at once. But what the Republican Party cannot do is to speak endlessly about the virtues of limited government and the need to cut spending in the abstract — but avoid the hard choices in the particulars. Sooner rather than later, the GOP is going to have to address head on this issue of entitlements (as Representative Paul Ryan has done). Failing to do so would damage its credibility, its cause (conservatism), and its claim that it is serious about fiscal responsibility.