Related topics: Tea Party, politics, economy, recession, Anthony Mirhaydari
Besides the heartwarming rescue of those trapped Chilean miners, the one story that has consistently dominated headlines this year has been the rise of the Tea Party movement, that fractious and emotionally charged rebellion that has shaken the Washington establishment.
Although the movement's genesis can be traced to a rant on CNBC about the fairness of assisting troubled homeowners, it now stands mainly for restoring fiscal balance by cutting government spending.
Yes, the movement looks at other issues, including health care and energy. And it's hard to sum up a platform, because there's no one central Tea Party office.
But the core rallying cry has been "restoring fiscal responsibility," according to the Contract from America, a group trying to rally the Tea Party around a common platform. Given the disappointing economic recovery, could this idea put us on the right track?
In other words: Could the Tea Party save the economy?
Austerity for austere times
Anthony Mirhaydari
Traditionally, fiscal-austerity steps like demanding a balanced budget are seen by economists as big no-nos during periods of economic vulnerability. We're in such a period now.
After all, forced budget cuts in the periphery of the eurozone -- in places such as Greece, Spain and Ireland -- raised much concern earlier this year that they would make the recession worse.
There is the dark parallel in these austerity proposals to President Herbert Hoover's tax hikes of 1932 and President Franklin D. Roosevelt's efforts to balance the budget in 1938, both of which magnified the effects of the Great Depression. And after all, it wasn't budget cutting that led the federal budget into balance during the 1990s; it was a tax hike, slower spending growth and a powerful economic boom.
There are also questions about how serious the Tea Party is about cutting Social Security, Medicare or defense, the three largest components of U.S. spending. Tax hikes, of course, would be anathema.
But there is some support these days for the idea of "expansionary fiscal consolidations" -- growth by way of government austerity. And it comes from a place that may surprise the Tea Party: Europe. Specifically, European Central Bank President Jean-Claude Trichet has recently spoken out for the need for governments to restore confidence with credible plans to restore their finances to pre-crisis norms.
First, let's take a quick look at just how influential the Tea Party has become and why we should pay attention to its proposals.
The rise of the Tea Party
A recent New York Times analysis found that a total of 138 Tea Party candidates, all Republican, are competing for U.S. House and Senate races as we near Election Day. In many cases, they've already won primary battles against mainstream GOP candidates. The best-known examples include Christine O'Donnell, a Senate nominee from Delaware who's had to insist she's not a witch, and Rand Paul, a Senate nominee from Kentucky who's fending off stories that he worshipped something called "Aqua Buddha" in college.
Much of the media attention has focused on the kookier parts of some Tea Party candidacies. But that belies the movement's significance and the real concerns underpinning it.
Based on current polling, a significant share of Tea Party candidates stand to win their elections or have 50-50 chances: 33 in the House and eight in the Senate. Especially in the Senate, this means the Tea Party's calls for spending cuts and tax relief are likely to gain strength after Nov. 2, forcing the Republican Party to take a harder line on the budget deficit at a time when policymakers are loath to do so.
That's because fixing the government's long-term fiscal health is a no-win scenario for a career politician. Americans are worried about the deficit -- which stood at $1.3 trillion for fiscal 2010, near 60-year highs as a percentage of the economy, because of relief spending, war costs and slumping tax revenue from the weak economy -- but they don't like either of the solutions: spending cuts or tax increases.
While more than 75% of Americans believe the cost of the government's major entitlement programs will create economic problems, according to a recent Gallup survey, just 42% support a tax increase and just 31% support a spending cut.
It took the verve of a grass-roots campaign to focus attention on the issue.
Indeed, there is evidence that the conservative fiscal movement is willing to eat its own in an effort to purify itself and ensure strict discipline to its fiscal ideals. Three-term Republican Sen. Bob Bennett of Utah was ousted in a primary duel with Tea Party opponents after being branded too much of a spender.
