I?m being serious here, at least when it comes to the approach some European nations are taking to their government budget woes. As Geoff Colvin explains in a new Fortune column, an approach called ?consolidation? is designed to help prevent the prospect of future tax hikes and inflation. ?That?s why 35 of Britain?s top business leaders recently endorsed British Prime Minister David Cameron?s plan to abolish 192 government agencies and cut the budgets of major departments by 20% to 25%,? Colvin writes.
Colvin explains that this strategy offers a ?stark contrast? to the Obama administration?s stimulus-dependent policies:
In theory, the New World policy makes some sense when the economy is still fragile, as America’s is. But it cannot work in practice for at least three reasons.
People don’t trust Washington to reduce the deficit two years from now. Putting off the pain until tomorrow never works, because in Washington, tomorrow never comes.
People don’t believe that the administration’s purported future deficit reductions are real, such as the claim that the new health care reform law will reduce the deficit.
People don’t trust Congress to spend stimulus dollars on worthwhile infrastructure projects rather than on useless pork. Why? Google “John Murtha airport” for one example.
I fear that one result of the U.S. strategy will be little faith in America’s fiscal future. Just as confidence begets more confidence, lack of it becomes a vicious cycle. As people lose confidence in a country’s financial strength, they take their investments and innovations elsewhere, worsening the country’s plight, driving more business away, and so on.
