Published October 24, 2010
The British government this past week announced the steepest set of spending cuts in decades, vowing to slash department budgets by close to 20 percent and eliminate a half-million public sector jobs -- all in the name of closing the country's stubborn deficit.
The sweeping proposal has given way to bickering in London, but it already has observers on this side of the pond wondering, what if?
Britain's austerity program would surely shock U.S. senses, at a time when the Obama administration has taken a slow-and-steady approach to closing the deficit. To replicate in the United States what Prime Minister David Cameron's government is doing in Britain, an economy one-fifth the size of America's, Washington would have to propose a set of cuts well above anything proposed so far on Capitol Hill. But the exercise shows just how drastic an effort may be needed to keep the United States from going broke.
"The Obama administration is showing no appetite whatsoever to do what the British are doing," said Nile Gardiner, director of the Margaret Thatcher Center for Freedom at the conservative Heritage Foundation. But, he said, the U.S. has to "at the very least do what the British are doing" to avoid a fiscal calamity.
Gardiner said congressional Republicans will be paying close attention as they craft their agenda should they end up with a majority in either chamber come Nov. 3. "I do think what Cameron is doing is going to be seen as inspirational by many conservatives on Capitol Hill," Gardiner said.
Cameron is calling for $130 billion in cuts from his country's budget by 2015. If Washington were to cut a similar percentage from its federal budget, it would need to carve out more than $450 billion. Gardiner estimated that, based on the size of the United States' economy, Washington would need to find more like $650 billion to excise by 2015.
Though some agencies have been spared, the average hit each department would take under Cameron's plan amounts to about 19 percent.
Applied in the United States, that would mean a $4.9 billion hit to the Department of Agriculture; a $5.6 billion hit to the Department of Justice; a $5.4 billion hit to the Department of Energy; and a whopping $11.5 billion hit to the Department of Veterans Affairs. Britain's military got away with just an 8 percent reduction -- but for the U.S. Department of the Defense, that would translate to more than $56 billion from its proposed 2011 budget.
To put the potential backlash to such a move in context, look at how Defense Secretary Robert Gates' latest spending cut proposal was received. Gates in August called for Joint Forces Command in Norfolk, Va. -- a $240 million-a-year operation -- to be eliminated and was met with bipartisan backlash from regional lawmakers. Gates nevertheless says he wants to find $100 billion in savings over five years.
Obama has said he wants to halve the federal budget deficit by the end of his first term, a move that would likely mean hundreds of billions of dollars in savings from somewhere. But he's still awaiting a report from his debt and deficit commission on how best to accomplish those goals. One of Obama's first fiscal exercises as president was to call for $100 million in cuts from his Cabinet secretaries.
The prebuttal has already begun, lest Washington consider going the route of the British government.
The New York Times called the proposal an "austerity overdose" in its Saturday editorial. Liberal economist Paul Krugman wrote that such measures would further "depress" the economy by slashing the federal workforce when there's not enough room in the private sector to absorb those employees. He equated the cutback to a 3-million-person mass layoff in the United States.
While the federal workforce in the United States is actually less than 3 million, even an 8 percent cutback -- the size of Britain's personnel squeeze -- would amount to about 200,000 fewer U.S. federal workers, among the best-paid employees in the country.
Britain also wants to cap long-term jobless benefits at 12 months; in the United States, that would cut the current extension of 99 weeks in half.
But if the United States wanted to tackle its debt and deficit with the same kind of vigor as Britain, it might end up dealing with even steeper cuts. The latest Treasury Department report showed the U.S. deficit was nearly $1.3 trillion in 2010. And while Britain's national debt is a paltry trillion, the United States owes $13.6 trillion.
As some economists warn that Britain's approach could backfire during an uncertain time for economic growth, one British official suggested the upcoming election in the U.S. could take the pulse of whether America is ready to try something similar.
"We have made our choice," Mark Hoban, financial secretary to the Treasury in Britain, told The Washington Post. "I have to leave it to the Americans to decide in the midterm elections whether (the Obama administration's) policy is right."