Tighten the Belt, not the Noose

31/07/2011 23:02 BST | Updated 30/09/2011 10:12 BST

The American national debt is extravagant, so vast as to be almost unimaginable. Everyone agrees that something must give and at this point, Republicans and Democrats face two options: raising taxes or cutting public programs. The current impasse over the debt ceiling is due to the reluctance of representatives from either side of the aisle to erode the foundations of their party's platform.

By contrast, Britain's Conservative-Liberal Democrat coalition government has selected a third way to deal with its deficit--high tax rates, particularly for the rich, austerity measures that have gutted public programs, and increased taxes on consumer goods and services. Everybody pays, and some people pay over and over again.

In Britain, tackling the deficit is the coalition government's most pressing priority and critics claim that its fast and furious methods are to blame for economic stagnation. America can't afford similarly momentous cuts to public spending, resulting in further job losses and flattening economic growth. For starters, the United States doesn't offer the kind of safety net British citizens enjoy, even at a reduced capacity. In the UK, vital lifelines such as council housing and the National Health Service keep those in genuine need from destitution, even as they are blamed for fostering a culture of dependency on the State. If a US citizen looses their job, is in poor health, or is unable to pay their mortgage, they may dig a hole of personal debt so deep that they are unable to see their way out of it. The personal risks that Americans take for the privilege of living the 'American Dream' would scare the pants off of the average Brit.

Despite the Republican Party's attempts to characterise Barack Obama as a 'Socialist,' a tag that only makes sense within the context of the history of its political rhetoric, the President's stance on the national debt is, in fact, centrist. Like Britain's coalitionists, he would raise taxes and cut spending-scaling back America's ill-advised war on two fronts would be his first order of business, just as our British allies have pulled troops out of Iraq and Afghanistan. British Conservatives led the way in raising taxes for high earners while simultaneously slashing funds to public programs. US conservatives, on the other hand, view tax hikes as a threatening expansion of government and disempowerment of individuals' ability to contribute to the consumer economy. They seek only to cut federal spending.

At the moment, the coalition government's rigid economic policies are no palliative to recession conditions, and its measures are a flawed model for Americans to follow. Critics argue that Britain has raced recklessly towards austerity, and the government's agenda has been controversial. Hopefully, the UK government's policy of devolution, which American conservatives hold so dear, will not go so far as to disassemble Britain's most humane and necessary public institutions.

Nonetheless, when comparing US and UK statistics, it seems that for America, a moderate rise in taxes combined with a well-considered roll back of public spending and a reduction in military costs is the most logical option. This is just what Obama has suggested. In the highest bracket, US household incomes of more than $379,150 (approx. £232,608) are taxed 35%. British citizens earning over £150,000 (approx. $244,499) are taxed 50% of their income.

There is no federal sales tax in the US; state tariffs usually fall between 1%-10%. Britain's national Value Added Tax (VAT) on goods and services is now at 20%, up from 17.5% as of last year.

Britain's National Health Service represents only 8.3% of the UK's gross domestic product, while America's health care system constitutes 15.3% of its GDP.

Indeed, when assessing the numbers on even the most basic level, one senses that America's politicians simply have refused to make tough choices, delaying the inevitable moment when they must call upon voters in already straightened circumstances to tighten their belts. Although unpopular, the Conservative-Liberal Democrat focus on deficit reduction means that the UK isn't facing America's deer-in-headlights scenario, and it isn't teetering on the precipice of economic disaster like the EU, despite its minimal economic growth. No wonder the British characterize American politics as a popularity contest.

Obama has constructed the conditions for a similar collaboration, one which neither the Democratic nor the Republican Party endorses. Given the polarized climate, his capacity to view the federal debt issue from all angles is at once the foundation of, and the solution to, the current stalemate. There simply are too few moderates in Congress to rally behind his reasoned proposals. Now, his only option is to break with his Party, conceding to Republicans amidst a din of criticism from either side. Democrats' lack of support for their incumbent may cost them the next election.