The Case for Fiscal Reform: Lessons from the Anglosphere
Alex Brill and Sean Speer | A MLI Anglosphere Series
Federal fiscal reform in the United States is increasingly necessary but over the last two decades has remained elusive. Part of the reason for the inaction reflects different political preferences and priorities. Part of it reflects differing views about the possible economic and social effects of controlling public spending and fiscal deficits. The result is that the US federal debt continues to grow unabated, which poses an increasing threat to future generations of citizens.
Resolving disputes about political preferences invariably has its limits. But we can draw on evidence and experiences with fiscal reforms elsewhere to better understand the relationship between particular reform strategies and their economic and social outcomes. The fiscal reform experiences in Australia, Canada, New Zealand, and the United Kingdom – what can be described as the “Anglosphere” – can give some context and background to the US policy debate and ultimately help shape a bipartisan consensus for action.
We have asked scholars and leading politicians from these Anglosphere countries to describe their respective experiences with fiscal reform, including what factors contributed to the reforms, their composition, and the economic and social outcomes that followed.
At different times, these Anglosphere countries were each confronted with fiscal crises thanks to overspending, high debt levels, and the same tendency to “kick the can down the road” that is present in Washington. Eventually, their behaviour caught up to them. It became a matter of “arithmetic,” not “ideology,” as then-Canadian finance minister Paul Martin once said.
Each country subsequently undertook ambitious fiscal reform programmes to control spending, cut budgetary deficits, and reduce the size of government. Their actions led to positive economic and social outcomes. Anti-austerity warnings – many of which sound similar to claims heard now in Washington – failed to materialize.
The potential lesson from these real-world experiences is that well-designed fiscal reform can yield economic and social benefits. We hope that US lawmakers from across the political spectrum learn from these experiences and see how fiscal reform can ultimately strengthen the US economy now and in the future.
This introductory essay sets out the reasons that US lawmakers should look to the Anglosphere for lessons from their successful fiscal reforms.