British PM Liz Truss Resigns After Six Chaotic Weeks – A Cautionary Warning To American Voters

Reuters reports, Liz Truss quits after six chaotic weeks as UK prime minister:

Liz Truss quit on Thursday after the shortest, most chaotic tenure of any British prime minister, forced out after her economic programme shattered the country’s reputation for financial stability and left many people poorer.

UPDATE: Following Truss’ recent appointment as the prime minister of the UK, British tabloid The Daily Star bought a lettuce for 60 pence from a Tesco grocery store and posted a livestream video titled:

“Will Liz Truss outlast this lettuce?”

The lettuce joke was reportedly inspired by The Economist, which compared Truss’ tenure as prime minister with “roughly the shelf-life of a lettuce.” As the newly-elected PM resigned, The Daily Star immediately declared the lettuce the winner of the challenge:

“The lettuce outlasted Liz Truss”

Reuters continues:

The Conservative Party, which holds a big majority in parliament and need not call a nationwide election for another two years, will now elect a new leader by Oct. 28 – Britain’s fifth prime minister in six years.

That contest is likely to pit ex-finance minister Rishi Sunak against Penny Mordaunt, but could also see the return of Boris Johnson, who was ousted as prime minister in July when his ministers resigned en masse to force him out of office.

“The King has asked me to become Prime Minister because this nonsense has gone on long enough.” pic.twitter.com/eFL3fgSfVL

— Larry the Cat (@Number10cat) October 20, 2022

The sight of yet another unpopular prime minister making a resignation speech in Downing Street – and the start of a new leadership race – underscores just how volatile British politics has become since the 2016 vote to leave the European Union.

Speaking outside the door of her Number 10 office, Truss accepted that she had lost the faith of her party and would step down next week. The pound rallied as she spoke.

“I have therefore spoken to His Majesty the King to notify him that I am resigning as leader of the Conservative Party,” said Truss, who was supported only by her husband with her aides and loyal ministers noticeably absent.

Allied leaders said they would continue to work with her successor and emphasised the importance of stability.

Truss was elected in September to lead the Conservative Party by its members, not the broader electorate, and with support from only around a third of the party’s lawmakers.

She had promised tax cuts funded by borrowing, deregulation and a sharp shift to the right on cultural and social issues. [This is what Republicans are promising to do in this country.]

But within weeks she was forced to sack her finance minister and closest political ally, Kwasi Kwarteng, and to abandon almost all her economic programme after their plans for vast unfunded tax cuts crashed the pound and sent British borrowing costs and mortgage rates soaring.

Approval ratings for her and the party collapsed.

On Wednesday she lost the second of the government’s four most senior ministers, faced laughter as she tried to defend her record to parliament and saw her lawmakers openly quarrel over policy, deepening the sense of chaos at Westminster.

New finance minister Jeremy Hunt is now racing to find tens of billions of pounds of savings to try to reassure investors and rebuild Britain’s fiscal reputation.

With the economy heading into recession and inflation running at a 40-year high, millions of Britons are struggling with a cost-of-living crisis.

Hunt, who has ruled himself out of the leadership race, is due to deliver a new budget on Oct. 31 that is likely to cut spending on public services that are already showing clear signs of strain.

One senior Conservative lawmaker said Sunak and Mordaunt were willing to keep Hunt as their finance minister.

Jennifer Rubin at the Washington Post earlier wrote, Truss-nomics failed. It’s a warning about the GOP’s economic schemes.

British Prime Minister Liz Truss has been in office for less than five Scaramuccis (or about six weeks), and as with the Trump administration’s ill-fated director of communications, Truss’s days might be numbered. [Prophetic.]

“Britain’s brand new finance minister scrapped the remaining elements of Prime Minister Liz Truss’s signature taxation policy on Monday, a move that seemed to successfully reassure markets but left many wondering who is now in charge of the government,” The Post reported Monday.

At a time of raging inflation, Truss’s plan of massive tax cuts (mostly for the rich) plus energy subsidies sent the British pound into a tailspin. She was forced to swap out her initial chancellor of the exchequer for a replacement, who then nixed most of the plan. Interestingly, at the time she introduced her plan, some American conservatives cheered the supply-side attempt to juice the economy. Truss’s belly flop does not seem to have dissuaded Republicans from pushing tax cuts for the rich.

The economic travails of Truss and the Conservative Party are nothing new, and that, too, holds a lesson for Americans. First, Brexit, the hyper-nationalist plan to disengage from the European Union — also cheered by American right-wingers and especially their protectionist and anti-immigration leader — has been a loser for the Brits. (The Conservatives did not uniformly support Brexit at first, but they did rally around the referendum.)

Study after study has confirmed that Brexit diminished Britain’s productivity and growth. “Brexit has reduced the competitiveness of the British economy,” Bloomberg recently reported. “Workers can expect to be almost £500 pounds worse off in real terms by 2030 as reduced productivity depresses pay levels across the economy.” The takeaway? When you intentionally make your economy smaller by limiting immigration and trade, you get poorer.

But the Conservative Party’s maladministration of the economy predated Brexit. Steven Rattner, who served as car czar in the Obama administration, writes, “Central to Britain’s economic struggles is its poor economic performance, manifested perhaps most tellingly in the bedraggled state of British workers, whose average earnings after inflation have performed poorly since the financial crisis struck more than 15 years ago and are now no higher than they were at the end of 2007.”

By contrast, he notes, “Real wages in the UK saw strong growth in the UK before the [global financial crisis]: 2.7% per year. Now, in real terms, UK workers earn the same as they did in 2007. That’s 0% growth over 15 years.” (During the period 2000 to 2007, two Labour prime ministers held office.)

Rattner’s conclusion is simple: If you don’t invest, productivity doesn’t increase, so growth and wages stall. “At the heart of that divergence is the poor record of investment into the U.K., which ultimately translates into poor productivity, the amount of output generated by each worker,” he explains. “In the long run, improving productivity is the only way to generate sustained economic growth and higher earnings for workers.”

Isolationism, disengagement, immigration restriction and poor public investment coupled with tax cuts for the rich have landed Britain in the economic soup. And strangely, that same formula — down to opposing critical investments such as President Biden’s infrastructure bill, Chips and Science Act and green energy funding — is just what the GOP has in store for America.

So if you like what Brexit and Truss have done for the British economy, vote Republican. If you prefer prosperity, then don’t.

UPDATE: Jennifer Rubin adds, Republicans’ inflation plan: Tax cuts that’d make Liz Truss blush:

Republicans routinely declare that inflation is their “best” issue in the midterms. But there is no reason to think inflation would shrink under a GOP majority in the House or Senate. Indeed, Republicans are projecting they would make inflation worse.

The Post reports, “Republicans plan to push to extend key parts of President Donald Trump’s tax cuts if they take control of Congress in this fall’s elections, aiming to force President Biden to codify trillions of dollars worth of lower taxes touted by his predecessor.”

Wait, what happened to their hand-wringing over inflation? Do they expect voters to believe that tax cuts primarily for the rich wouldn’t be inflationary?

In fact, when the Trump tax cuts were first passed, Republicans insisted they would pay for themselves by boosting economic growth. (That didn’t happen, but it did spur stock buybacks, contrary to Republican claims.) At a moment when Republicans are hollering about fiscal irresponsibility, it is bewildering that they are doubling down on the same tax cuts.

Jim Kessler, head of the moderate Democratic Third Way think tank, tells me, “Tax cuts like that in the U.S. would contradict everything the Fed is doing and put the U.S. economy in an inflation-driven tailspin.”

Jason Furman, former chairman of the Council of Economic Advisers, compares the Republican proposals to British Prime Minister Liz Truss’s disastrous tax proposal that sank the British pound, and led to Truss’s resignation, arguing, “At worst they could also cause a U.K.-style market meltdown. Either way they are completely at odds with the argument that deficits have fueled inflation.”

This should end any talk that the election is a choice between addressing inflation or protecting democracy. In reality, it’s about whether Republicans will be granted power to make inflation worse and to threaten democracy.

In a larger sense, this is a reminder that Republicans advance policy arguments (i.e., too much fiscal stimulus caused inflation) not because they believe them, but because they will say whatever can help them attain power. Had Biden resisted spending during the pandemic, they would have attacked him for failing to tame inflation andunemployment. As Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, put it to me: “Increases in the deficit will push inflation up, not down. This will result both from unpaid-for spending and any tax cuts that aren’t matched with spending cuts as well.”

Republicans’ angst about deficits was always phony given their track record when they controlled the White House. As ProPublica reported in January 2021, “The national debt has risen by almost $7.8 trillion during Trump’s time in office.” Moreover, “The growth in the annual deficit under Trump ranks as the third-biggest increase, relative to the size of the economy, of any U.S. presidential administration. … And unlike George W. Bush and Abraham Lincoln, who oversaw the larger relative increases in deficits, Trump did not launch two foreign conflicts or have to pay for a civil war.”

In other words, deficits become a problem only when Democrats are in charge.

It gets worse. William Gale, co-director of the Urban-Brookings Tax Policy Center, explains to me that the Republican push to extend Trump’s tax cuts could be seen as “cynical.” They were in control of Congress and the White House in 2017; they could have made them permanent. But, Gale notes, they “chose to make the individual provisions temporary, to keep the costs down.”

Moreover, he adds, “What is hypocritical is that they now want to repeal some of the revenue raisers they enacted in 2017 that have not taken effect yet,” such as the provision requiring businesses to amortize research and development expenses, rather than deduct them from taxable income. Republicans added the measure because they knew their tax cuts were a budget-buster.

As Austan Goolsbee, former chairman of the Council of Economic Advisers, tells me, it’s as if Republicans are watching the financial chaos in Britain, and “all it did was convince them to find someone to hold their beer.”

You can make the case that the Biden administration spent too much too quickly. You can even make the argument that the administration isn’t doing enough to tighten the purse strings now (though such arguments ignore that this spending alleviated human suffering during the pandemic and funded productivity-enhancing infrastructure). But you cannot denounce measures that help working- and middle-class people (e.g., college debt relief) as inflationary and then turn around to propose another economic stimulus in the form of an enormous tax cut [for the top one percent.]

Well, you could, but that would make you a hypocrite and unfit for public office. A Republican leader, in other words.