Thatcherism - Stateside
Fraser Nelson
news.scotsman.com
SIX WEEKS since President George W Bush’s presidential victory, and all is quiet in Washington. A Jewish Hanukah candle recently joined a Christmas tree outside the White House: this appears to be the sum total of action.
But inside, the adrenaline is still pumping from last month’s election. Karl Rove, its cherubic campaign mastermind, is still regaling aides with victory statistics: such turnout, such a majority, he says, means a mandate for action.
After revolutionising America’s foreign policy, the Bush administration now intends to give domestic policy the same overhaul. They have a mission: radical welfare state reform. And they have a name for it: Thatcherism.
Ever since being returned with a 3.5 million-vote majority, Bush’s aides have been deciding how best to use the momentum. A president with more votes than any other in history has a duty to use such authority in a second term. There is also a feeling of discovery. The victory was on a record turnout: the American public is far more conservative than even Rove’s figures projected. After defeating liberalism, he needs a creed to bury it.
After a long ideological search, Rove has chosen Britain in the 1980s. Then Margaret Thatcher took on a left-wing consensus, and embarked on an epoch-defining war which the President now aspires to wage in the US.
Scotland on Sunday attended a rare White House briefing on this agenda, rich in language Bush is unlikely to repeat to Tony Blair. The White House’s stated mission is "to make this young century a conservative century" by example. Aides from the Thatcher government are being courted by Bush speechwriters. Rove, himself, has been pouring over her speeches and has distilled Thatcherism in a new label: ‘ownership society’.
To Bush, this is the theme for a huge project: privatising the welfare state which Franklin D Roosevelt designed in the Depression of the 1930s.
While neoconservatives like Irving Kristol have moaned that welfare is "the best of intentions with the worst of results", such thoughts are whispered like a dirty secret. No more. Bush intends to smash the consensus. This is where Baroness Thatcher comes in. As explained in the seminar by a senior policy adviser to Bush, the Iron Lady is the ideological inspiration behind the revolution they intend to unleash.
"The closest analogy to what President Bush is attempting to do with his emphasis on an ‘ownership society’ may be found in the policies of former British Prime Minister Margaret Thatcher," he said. What she did with 1.8m council houses in Britain, Mr Bush intends to do with welfare in America - privatise, let people make their own choice, let them enrich themselves and instil the policies of thrift and independence.
The aide, who was speaking on terms that he is not identified, surprised the many Brits in his audience by explaining the President’s philosophy in relation to a 1993 British book, The Anatomy of Thatcherism.
Written by Shirley Letwin - the late mother of Oliver Letwin, Shadow Chancellor, - he hailed it a "remarkable" work which contains the mission for a second Bush term. The extracts he read out are worth reprinting in full: "The Thatcherite argues that being one’s own master - in the sense of owning one’s own home or disposing of one’s own property - provides an incentive to think differently about the world. A Thatcherite, whilst not believing that patterns of ownership absolutely determine people's moral attitudes, nevertheless stresses that the two are connected, and sees in wider individual ownership a useful means of promoting the moral attitudes that Thatcherism seeks to cultivate."
These words have been read out more than once in the White House - at the very highest levels. President Bush wishes to finish in America what Baroness Thatcher started in Britain.
America in 2004 is nothing like Britain in 1979. When Baroness Thatcher came to power, Britain was recovering from an era when the IMF paid its bills and strikes crippled the country.
Bush has a rather more favourable starting point: the strongest economy in the world and a welfare state which is, to British eyes, laughably parsimonious. Social security costs consumes 4.4% of America’s economic wealth - in Britain, it stands at 8.2%. Unemployment benefit stops after 26 weeks in most states. So where, precisely, is the dragon which Bush seeks to slay?
Much of this is ideological. It grates against many in the White House that - to borrow Rove’s complaint - "we conservatives are seen as heartless and cruel", while welfare is seen as a social accomplishment. The new Bush project involves challenging this orthodoxy - describing by aides as "contemporary liberalism". Instead of protecting society, they say, it condemns millions to "dependency and an entitlement mentality".
Just as Blair has sought to liberalise the UK National Health Service by referring to it as the "1940s model", Bush will argue that the contemporary liberal idea of welfare is failing, and belongs to the last century.
From its roots as insurance for the destitute, the White House believes that welfare has grown out of all recognition - and is forging a modern-day pauperism even among the comfortable.
Take, for example, the last study showing that 12.5% of Americans lived in poverty last year - up from 12.1% the year before. When this figure was released last August, it lit up the presidential election campaign.
But probe deeper and the picture changes. Of the 35.9m American poor, the official report also said, the average person has a car, air conditioning, two colour televisions, a VCR or DVD player. One in three own a dishwasher, and two or more cars. Their life is not opulent, but hardly matches what most people understand by the word "poverty". But they qualify for generous welfare: and, Bush argues, are in the grip of dependency.
Then there’s the politics. The White House’s study of the Thatcher years notes with approval that she created several million new conservative voters by giving them a direct stake in capital - through shareholdings, and house ownership.
Such people approve of low taxes, and policies likely to grow the economy. But how many more can be squeezed out of America, the world centre of popular capitalism?
Some 38% of American adults already own shares (against 22% for Britain). In both countries, around 70% now own houses. America has precious little government housing stock to flog, and no nationalised industries to privatise.
This is why Bush sees social security as the new frontier. Everyone who earns money has payslip deductions for Social Security and Medicare: the White House wants to turn part of this into an individual personalised account. And here, the White House is looking to another unlikely source: Sweden. Five years ago, it introduced personal social security accounts: giving workers the power to invest a chunk of their retirement in a choice of approved funds.
Swedes can choose five out of 700 approved funds, 40 of them foreign. It has had a transformative effect: people now talk about their fund choices at dinner parties, and compare notes on performance
But propose the idea in America and a flood of criticism ensues. "We will not privatise social security," said John Kerry, the Democratic candidate, in one of the more popular themes of his failed presidential bid. This infuriates Rove. "If a socialistic country like Sweden can get with personal accounts, the greatest capitalist country in the world should be able to do it too." He plans to allow workers to save up to $7,500 a year, tax-free.
The under-40s would be able to opt out of most of their social security taxes. It has been described be a pensions equivalent of the UK Individual Savings Account (ISA). Sounds complicated? So did home ownership to many tenants of British council houses in 1970s.
This is precisely the Bush argument. Investment should be for all, not just the rich: it’s boring, perhaps, but not complicated - and frequently lucrative. But there is another agenda, with far less ideology.
This embrace of Thatcherism is borne of fiscal necessity. Four years of carefree spending from a big-government Republican White House - aided an abetted by an equally spendthrift Congress - has left the US government with a historic deficit.
On social security alone, the White House says it is facing a $3.7 trillion shortfall over 75 years for the system paying its promised benefits. By 2018, it will start paying out more than it collects.
Roosevelt’s social security now consumes more than $500m a year, the single largest spending programme of the federal government. As things stand, Bush says, workers would have to see payroll tax jump to 20%, from 12%.
The White House say it needs radical reform to stop a coming financial implosion - one which is bitterly contested by Democrats, who say the figures are being cooked. The argument goes that, once pension plans are privatised, workers in America will not need to worry about when the state declares the official age of retirement - or whether a black hole is looming in the accounts.
But the financial crisis is the trigger for the whole process, as President Bush was making clear at his "economic summit" last week. "Today’s guaranteed benefits are an empty promise to younger workers," his spokesman said.
Crucially, he has yet to propose a specific proposal. While the Thatcherite ideology is complete, the implementation is still a mess. This helps explain the quiet: at present, the Bush-Thatcherite revolution looks more like alphabet soup.
The vanguards, for example, are Medical Savings Account (MSA) and HRAs (health reimbursement accounts). There are Individual Retirement Accounts (IRAs) and Flexible Spending Accounts, or FSAs. Health Savings Accounts were introduced last year, allowing pre-tax dollars to be set aside for medical expenses. The idea is to force people to make more cost-effective decisions, stressing that it is their money.
But each has complicated rules, limits and caveats. When the White House released a "nutshell" explanation for the HSA, it ran to four typed pages.
All Baroness Thatcher asked Britain to do was buy shares in nationalised industries, and spend some time choosing between a variable, fixed, repayment or endowment mortgage. This is always more popular than tax shelters.
Britain’s political upheaval in the 1980s was a harsh, but relatively straightforward project. The White House has grasped the ethos, but is still struggling to deliver a straightforward solution. It is also keen not to import unpopularity which scarred Baroness Thatcher’s time in office - and lingers to the extent that, even today, few Conservative MPs would dare praise her in tones now commonplace in Washington.
Bush wants this to be portrayed as a mission for the poor, not the rich. "Here, at home, we will extend the frontiers of freedom," says Rove: and by this, he means privatising social security.
"At some points in history, the role of conservatism has been to be reactive and to stand athwart history yelling ‘stop’," Rove says. "At other times, the role of conservatism is to be pro-active, energetic, and optimistic, to shape history rather than to impede it. This is clearly a history-shaping moment."
He talks about Thatcher and Reagan being "two of the most influential figures of the 20th century"; when she appeared at his funeral in June, it was as if she were the surviving partner of a political marriage.
The irony is that, in Britain, Thatcherism has scant chance of revival - when the Conservatives had pledged to outspend Labour on health and education and Letwin is taking months to summon the courage to pledge a hard tax cut.
This illustrates the gulf in confidence between conservatives on either side of the Atlantic. In London, Tory MPs talk as if their old leader’s ideology is dead. They will soon find Thatcherism alive, well and living in the White House.
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