OPINION | For years now, it has been clear that there’s no strong evidence that tax cuts fuel economic growth. But Republican politicians in the United States kept trying it anyway — it was the idea that wouldn’t die.
Liz Truss talks at a press conference in 10 Downing Street after sacking her former Chancellor, Kwasi Kwarteng, on October 14, 2022 in London, England. | Daniel Leal/Getty ImagesMonica Prasad is a professor of sociology and faculty fellow at the Institute for Policy Research at Northwestern University. She is the author ofBehind the implosion of British Prime Minister Liz Truss lurks a question.
At the same time, the British debacle comes at a time when the American right has been edging slowly away from free market orthodoxy. The GOP is embracing a more populist edge and is eager to be seen as a working-class party, criticizing trade and “woke” businesses. The ways of financial markets are inscrutable, even to the people who constitute those markets, but there do seem to be big differences between Britain and the U.S. that suggest the United States may not face a similar crisis the next time its government proposes big tax cuts.
and repeated incremental increases in the deficit and the debt to bring the U.S. to a point where investors are calm about these numbers.whether the U.S. could face its own turmoil after the U.K. calamity, and no one knows what will happen next. But examining the recent past suggests one reason markets reacted so badly to Truss’ policy is that investors have not gotten used to the idea that the U.K. is now a country with permanently high debt, just like the U.S.
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