03.05.2017

The Myth of the Fiscal Conservative

Austerity measures don't actually save money. But they do disempower workers. Which is why governments pursue them in the first place.

HLIT / Jacobin

The thinking behind “fiscal conservatism” and austerity measures holds that government programs are inefficient, so we should aim to curtail government spending, privatize government assets, and lower taxes. We are told that ending homelessness, providing universal early childcare, healthcare, or higher education are unrealistic policies that would require spending far beyond our means.

In reality, though, the arguments made by the fiscal conservatives — saving money, efficiency, less government spending — don’t align with the policies they are trying to implement. Fiscal conservatism is a myth, because cutting government programs doesn’t actually reduce government spending.

There is a well-known theory of economics related to us by Terry Pratchett in his book Men at Arms, through a character named Vimes. The theory is basically that being poor is more expensive than being rich.

Take boots, for example. [Vimes] earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was … on a foggy night by the feel of the cobbles. But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that’d still be keeping his feet dry in ten years’ time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.

Fiscal conservatism is trying to get us to buy the cheap boots — and doing so causes us to spend more money than if we had just bought the good boots in the first place.

Many social programs that fiscal conservatives advocate cutting have been shown to actually save the government money in the long run.

Let’s take providing affordable housing and adequate shelters in order to end homelessness as an example. In the rare moments such policies are even discussed, we are told that public affordable housing provision and shelters are too expensive to be feasible.

But academic research has shown that homelessness is actually very expensive, because homeless people tend to cost the government a great deal of money in healthcare and criminal justice system services. In fact, people experiencing homelessness tend to cost $3,810 per person per year greater than the average citizen in terms of justice services and $10,217 per person greater than the average citizen in terms of healthcare services. The cost of homelessness support programs range from a couple thousand dollars to just over $14,000 per person annually.

Set aside any moral obligation we might have to help the homeless — failing to meaningfully address homelessness is the more costly policy. We simply cannot afford austerity.

The same logic applies to universal early childcare. While fiscal conservatives tell us that we cannot afford quality universal early childcare, the truth is that we can’t afford not to have it.

Economic data shows us that providing universal early childcare actually saves the government money. This is because without it, childcare becomes so expensive that many parents face the impossible choice between working during the day or taking care of their child. One parent (disproportionately mothers) will often need to stay home and take care of the child. If that person is a single parent, they may have to go on welfare.

By providing universal early childcare, the government allows more parents to enter the labor force, get off of welfare, and generate taxable income. While the childcare program in Quebec is far from perfect, it has become clear that for “every dollar [they] invest, they recoup $1.05.”

There are a litany of similar cases: why does every state spend more money per inmate than they do per student? Programs that keep people out of prison by giving them the social support they need cost far less than prison, but fiscal conservatives are always telling us to live within our means. Spending on social programs also creates more economic growth than tax cuts for the wealthy, because lower-income people are more likely to spend their money (generating a ripple effect of growth), whereas wealthy people just put their money in the bank, taking it out of circulation in the economy.

Supporting social programs reduces government spending in the long run. Nevertheless, fiscal conservatives and neoliberals continue to insist on implementing austerity policies that harm us all.

This isn’t because they aren’t aware of how social spending budget cuts shake out over the long term. They’re less concerned with which policies are ideologically consistent or financially sound, and more concerned with preventing the kind of redistribution of wealth and power from the top to the bottom which increased social spending provides.

If it costs a bit more over time to structure budgets this way, so be it: spending extra on pair after pair of cheap shoes is worth it if the shoes are so shoddy that the working class can’t kick your ass with them.