“Get fired, no one will call you a quitter.”
— CA Vikram VirmaPoor
Mrs. Truss came to power in the Conservative Party in England by comparing herself to Margaret Thatcher. Apparently, she’s no Iron Lady.
Poor Liz Truss… we hardly knew ya.
Before quitting her job today as prime minister, the British tabloid The Daily Star began a livestream of a head of lettuce and a picture of Truss on a table to determine who would wither first: the fresh produce or Truss’s time as prime minister.
She only lasted in the posh seat at 10 Downing Street for 44 days. The shortest tenure of any prime minister in history. We did a little math and discovered Thatcher had been prime minister for 4,223 days – the longest of any prime minister while the late Queen Elizabeth still shuffled her way about Buckingham Palace.
“Congrats to lettuce,” tweeted Dmitry Medvedev, the deputy chairman of Russia’s Security Council.
British PM Liz Truss resigns after 6 weeks in office. (Source: People Magazine)
What went wrong for Truss? It’s really fairly simple. A lot of talk with little logic. She promised tax cuts to make way for a low-tax, high growth, post-Brexit economy.
Sounds good to us… except, she and her finance minister Kwasi Kwarteng tried to finance $48 Billion dollars in tax cuts by borrowing the money. If you’ve been watching the global financial markets you know bond traders didn’t like the deal at all. They sold off British gilts (the equivalent of US Treasuries) and the pound headed quickly towards parity with the ever-upward U.S. dollar.
The wilting head of lettuce also had a plan for the government to pay energy companies directly to provide energy to consumers this winter to compensate for what is expected to be a shortfall because of the Russian invasion of Ukraine and subsequent economic sanctions.
Dutifully, as the leader of the UK Tories, she also promised to continue to limit the power of labor unions… and the Labour Party.
Back in the 1970s, Maggie Thatcher was also famous for forcing tax cuts… tackling unions… in an attempt to restore a vibrant economy. Thatcher’s go-to economic advisor was – drum-roll please – Frederick Hayek, who you’ll recall was a leading thinker in what has come to be known as the Austrian school of economics. The Austrians believe that low taxes lead to high growth economies, simply put. They do not take kindly to debt financing or government intervention in the economy.
“Anyone expecting a swift return to Thatcherite policies should take a closer look at Truss’s politics,” writes Craig Barry in The Conversation.
If Truss’ policies had not been openly trashed by the markets she would have presided over a significant expansion of state intervention into the economy. Her plan to pay companies to supply energy to households and businesses would have cost £130 billion over the next two years – the single biggest spending announcement in UK history. Barry continues:
Back then, Thatcher wanted to dismantle the collectivist, Keynesian state of relatively high taxes and government spending, and replace it by embedding neoliberal ideas encompassing lower spending and market primacy in UK economic policy. But now Truss takes the reins of a state already neo-liberalised, and is discovering that state power will increasingly be needed to deal with the crises she has inherited.
We don’t necessarily agree with Barry’s final conclusion. In fact, Truss’ short-lived affair only reveals how mutilated political messages can get behind all these -isms… and how poorly governments really are at managing anything in the economy.
Thatcher’s own ministers said she would never have agreed to massive expansion of government spending on debt… especially during a period of high inflation and global uncertainty.
Rishi Sunak, who may be elected by the Conservative party to replace Truss, said something we may have written in our daily missives. “Sunak warned that the [unfunded tax cuts] would push up inflation…” reports the Guardian “…increase mortgage rates and damage the economy.” Sunak also pledged tax cuts, while trying to get the UK government’s top job, but only after their bout with inflation had resulted in a TKO.
Sunak’s money quote: “Not only do I think the Truss plan is the wrong thing for the economy, I also believe that it’s immoral because there is nothing noble or good about racking up bills on the country’s credit card that we pass on to our children and grandchildren.”
P.S. It’s worth pointing out, Thatcher was PM during the “Reagan Revolution” in the United States. The two were friends and on the same page in many ways economically. Our own George Gilder articulated many of their ideas as speech writer for Reagan in the early years… during the same period when Volcker was battling what has come to be known by Federal Reserve historians as “The Great Inflation.”
One thing Reagan got wrong, as we’ve noted on occasion: he proved, as Dick Cheney oft repeated, that “deficits don’t matter” politically. Reagan established a precedent of increasing the deficit and by extension exploding the national debt. When Reagan took office the national debt was $995 billion… by the time he left office it was over $2.9 trillion.
No president that followed bothered to look back. The national debt at the time of this writing is $31.155 trillion… and ticking up so fast, you can’t round out the numbers to the nearest billion without committing a journalistic error.
