Watching the United Kingdom Wrestle with its Deficit

( newsletter - John Shelby Spong , 27 January, 2011 )


All economic downturns have political ramifications. What the actual effect will be is determined to some degree by the psyche of the nation itself. In the Great depression of the 1930's Germany turned to Adolph Hitler to lead them out, while America turned to Franklin D. Roosevelt. One must admit those were two radically different responses to the same reality.

With that political insight in mind, I went to the United Kingdom early this year to examine the way our closest ally, under a newly-elected Tory, that is, conservative, government has decided to tackle the economic crises in that country, in order to compare it with the approach of the newly-elected Democratic, that is, liberal government of the United States. The comparison was instructive.

Today, David Cameron is the occupant of 10 Downing Street as the Prime Minister of a coalition government. He did not win a majority in the last election and had to patch together a ruling coalition by entering an alliance with the Liberal Democrats, a perennial minority party that represents a position somewhat to the left of the Tories, but to the right of the Labor Party. Labor, you recall, led first by Tony Blair and later by Gordon Brown, was in power when the economic crisis of 2008 rattled the stability of both Great Britain and the entire developed world. The political reality is that if you are in power when a crisis comes, you get credit for the crisis. So Labor, i.e. liberals, were blamed for the economic collapse in England, while Republicans, i.e. conservatives, who controlled the White House in America, were blamed for the collapse in this land. David Cameron's election thus represents a reaction to Blair and Brown while Barack Obama's election represents a reaction to the presidency of George W. Bush

There is not as much of "the blaming of big government" in Great Britain as there is in the United States for government there has not been demonized in recent years as it has been here. The UK's National Health Service, for example, is hailed by both the conservatives and liberals as an asset not a liability. The NHS does provide universal health care for all its citizens and is not even debated politically today except wherever the tension between quality care and cost efficiency appears. Even the well established English conservatives with whom I spoke simply do not understand why the United States will not move to a single payer government-run system. The people of Great Britain cannot comprehend the fear of government that permeates America's national political debate. They simply do not understand why privately owned health care companies should make profits for their shareholders on peoples' health. Health care is a right of citizenship in the UK; it is not a privilege of wealth. Great Britain's health care system has cut costs by developing well trained ancillary health care professionals to treat routine sicknesses, while quickly referring the serious illnesses to the supervising MDs. Despite the political propaganda one hears in America about the shortcomings of "socialized medicine" in Great Britain, the fact is that the overwhelming majority of their citizens are almost completely satisfied with the NHS. As I listened to and engaged their comments, the one thing that I found to be incomprehensible to the English was the way money manipulates public opinion in the United States by employing fear as a major force in creating public policy. The United States has the most expensive health care in the developed world and yet in every measure of health care effectiveness from life expectancy to infant mortality, the United States ranks near the bottom among the developed nations of the world. These statistics violate our national self-image so deeply that we find them hard to believe and seek to explain away their reality. The facts are, however, that there are enormous profits in our health care system and those who are the recipients of these profits defend their vested interests both passionately and expensively. If one will trace the money that fuels various aspects of the political debate in America, from the Tea Party movement to the Religious Right, to the campaign directed against the recent health care bill, one will discover that it comes from the same source, rooting ultimately in Texas Oil. Texas, once an independent republic and still distrustful of any national authority, spews more venom against the national government and spends more money to do so than any other state in the Union. They call this passion a commitment to "States Rights," but, as everyone who grew up in the South knows, that is little more than a respectable cover for not wanting to pay minimum wages and not allowing people of color to be treated with equality and fairness. The role of money in politics in America is quite frankly beyond the imagination of most Europeans.

Great Britain is a more highly-taxed nation than the United States. One cannot, however, compare the tax rates in the two countries until one reckons with the fact that the English people all have access to free medical care and until recently paid almost nothing for the education of their children and young people from kindergarten through the university. Health care and university educations are major costs in the average American family.

The citizens of Great Britain, for example, have an income tax that is graduated according to income levels with 10% at the low end rising to over 50% for incomes above £450,000 ($725,000). The inheritance tax, dubbed the death tax by American conservatives, is also much higher in the UK than in the United States being 40% on estates over £350,000 ($500,000.) The English were amazed to discover that Americans can shelter the first $5,000,000 in every family from any inheritance tax. They also pay taxes to local governments that are generally not as high as property taxes are in America. They do not have state income taxes because they do not have that level of government.

The other major source of government funding in the UK is called the "Value Added Tax" or the VAT, which is collected on any purchase people make except for food and children's clothing. This is a national sales tax. Until very recently the VAT was pegged at 17.5%. In terms of our dollars this meant that for every $10 purchase, the Brits would pay $11.75.

Given this British tax structure, in order to rein in the current deficit, the Cameron government has done two things. First, they tripled university fees from about £3,000 ($4,500) a year per student to about £9,000 ($13,000) a year per student, a figure that would still be a bargain when compared to American university charges. It was this provision that was blamed for the recent student riots and even the widely-reported attack on the automobile carrying Prince Charles and Camilla. Second the Cameron government raised the VAT - national sales tax - from 17.5% to 20%. Now every $10 purchase will cost $12.00 and big ticket items like automobiles and large appliances will be significantly higher. A £30,000 ($50,000) automobile in the UK, for example, will now cost £36,000 ($68,000). We were in England when these increases became operative. A highway toll of £4.50 (about $8.00) on one day became £5.00 (about $9.00) the next. A cup of coffee in England averages between $4.50 and $5.00. Yet so far as I could tell from individual citizens, the public press and television news there was little more than resignation to this tax hike. No one suggested that these higher taxes might sink the weak economic recovery now going on. The UK also taxes gasoline heavily with the cost of a gallon of "petrol," as they call it, now in the $6-$7.00 per gallon range.

Compare that response with the tactics of our government. With the deficit soon scheduled to be equal to the gross national product (GNP), our congress and president agreed on a "compromise" that saved the top two per cent of wealthy Americans from facing the elimination of the Bush tax cuts that were written to expire on December 31, 2010. This extension was successfully championed by the Republicans. In the compromise additional benefits for the unemployed and low income Americans were added to guarantee Democratic support. Not one thing was done to address the deficit. Instead this extension of tax advantages will add about a trillion dollars to the national debt over the next decade. The joy ride of spending beyond this country's means is thus destined to roll like a boulder down the side of a mountain, headed for a disaster that seems inevitable. Both of our political parties seem intent on protecting their political bases at all costs, but at the expense of the well-being of our nation.

One of the principle teachings of our religion is that of personal sacrifice for the well-being of the whole. That religious principle must find a political expression. Ours is a great nation, worthy of our sacrifices to maintain the gifts we treasure - freedom, liberty, justice and opportunity for all. Health Care and Education should be our birthright not a privilege enjoyed only by those who can afford it. That will never be possible unless we find a way to pay for it. The government is the corporate expression of us all; it is not a sinister power. It exists to carry out the purposes of the nation. All Americans want to have a strong national defense; government protection for our savings; assurance that our businesses are honest and run fairly; that our monetary system is secure; our food is safe; our veterans, wounded in the service of this nation, are properly cared for; our drugs are pure, and our highways are built and maintained. These things are worthy of the taxation it takes to provide them. Fairness in the tax code is essential and those who have been made wealthy by the opportunity they have had in this country need to stop seeking special tax privileges and offshore havens and pay a fair share of the burden a great nation requires.

This is not a call to class warfare as some right-wing politicians claim. It is rather a call to basic fairness. Class warfare is present when the wealthy in power require heavier taxes on the poor than they do on themselves.

We have had that kind of class warfare for too long. America can do better than that.


~John Shelby Spong