Orbán, Trump and the International Right Wing Populist Movement

 

If you doubted that right wing populism is an international movement, then the turnout of support for Victor Orbán and his party Fidesz before Sunday’s election should have put you right. It wasn’t just visits from US Vice President Vance and Secretary of State Rubio, plus supportive messages from Trump himself. [1] Every leader of the main right wing populist parties in Europe offered Orbán support, alongside Netanyahu from Israel and of course Putin from Russia.

The scale of Orbán’s defeat, with his opponent Péter Magyar,winning a super majority of seats allowing him to undo constitutional changes enacted by Orbán, is impressive when set against past Orbán victories and the extent of election rigging in favour of Fidesz. But the main two reasons that Magyar won were fairly inevitable after a prolonged period of right wing populist government: economic stagnation and widespread government corruption. I noted here how severe economic decline is typical after a period of right wing populist government, and corruption is also standard in any highly autocratic state.

The durability problem with right-wing populist governments is not their popularity, but that these governments meet unpopularity with measures that degrade and possibly eliminate the democratic process. Sunday’s election result is a reminder that there are limits to what an almost entirely pro-government media can do, and the scale of Orbán’s defeat may have also deterred him from trying to ignore the result by claiming it had been stolen as a result of EU interference. [2] Orbán might have been able to get away with such a tactic if the result had been close and he still had large areas of support, but after such a large defeat popular resistance to such a tactic could have been too great for Orbán to risk.

The scale of Orbán’s defeat may also be a result of where that defeat came from. Sunday’s victor, Péter Magyar, was a member of Orbán’s party, Fidesz, until just two years ago. He is a right wing conservative, but broke with Orbán and Fidesz over the issue of corruption. In those two years Magyar worked tirelessly in visiting rural areas that had traditionally been Fidesz strongholds, and this may help explain the scale of his victory. Social conservatives who might have still hesitated to vote for a more liberal opposition leader were prepared to vote for Magyar. (A lesson perhaps for centre right parties elsewhere including the UK: you defeat right wing populism by fighting it rather than becoming it.)

The task ahead for Magyar is still immense, and it will take time to get rid of all the Orbán loyalists that have become entrenched after sixteen years of his rule. But the benefits for those outside Hungary are likely to be more immediate. Magyar has pledged to stop Hungary being the odd one out in the EU, which means no longer doing Putin’s bidding and trying to block European aid to Ukraine.

The desire of right wing populists around the world to support Orbán is also an indication of the key role that Hungary played in the international right wing populist network, both as an example of the kind of regime that this movement hoped to spread to other countries, and as a direct provider of cash for events and propaganda. However here the impact of Orbán’s fall should not be overestimated. In the UK, for example, few of those voting for Reform will even be aware of Orbán, and there will still be plenty of money around to support right wing populism in the UK and elsewhere.

This external support for Orbán doesn’t seem to have done him any good in Sunday’s election, and may well have been harmful. In particular Orbán’s increasing links with Russia and hostility to the EU (to the extent that his ministers acted as Russian spies within the EU) are unlikely to have been popular. But support from Trump could also have backfired.

I have argued for some time that a silver lining to Trump’s second term may be the damage he does to right wing populism outside the US. There are three reasons for this. First, right wing populists typically inflict severe damage to their own economy, to their voter’s health and so on. Because events in the US are often well publicised in other countries, voters can see this damage. As domestic right wing populists often cannot help themselves in praising or emulating Trump, then Trump’s failures in the US will reflect badly on right wing populists at home.

The second reason is that Trump, among the set of right wing populist leaders, is particularly incompetent. Not, I should say immediately, incompetent at keeping his political base happy, but simply in terms of decision making. In part this may simply be because of his mental health, but it also comes from his personality. A third reason is that some of those bad decisions directly impact voters overseas. Tariffs used to be the main example but now the consequences of Trump’s Iran war dominate. Trump’s unpopularity overseas is only likely to grow.

Unfortunately this third reason means that Trump’s impact on the success of right wing populism may be double edged. His increasing unpopularity caused by the evident harm he is doing will reduce the support for right wing populists, both in government and in opposition outside the United States. Even Farage, who in the past has been a very vocal and indeed loyal fan of Trump, recently said “I happen to know him, but that’s by the by”. Just as right wing populists outside the US begin to distance themselves from Trump, they will also begin to realise that what works for the MAGA base does not necessarily work elsewhere.

However Trump’s actions could actually add to the support of right wing populist parties outside the US if those parties are not in government. In particular Trump’s Iran war is leading to lasting increases in the price of energy and food, similar in scale to the increases seen after the end of the pandemic. We know that the latter was associated with a period where incumbent governments fell around the world, perhaps because many voters blamed those governments for the hit to their prosperity. In that respect Trump’s actions could provide a boost to right wing populists in the years to come.

For this reason alone Orbán’s defeat should not be seen as a turning of the tide against right wing populism. I argued here that ever since advocating extreme socially conservative views has become normalised, there will always be at least a third of the electorate that will be attracted by parties that make immigration and overt nationalism their main issues. Hard economic times, and in particular cuts to public services, will boost that number, as many voters begin to believe that immigrants are responsible for their stagnant real wages and their difficulty in accessing public services. [3] These are the circumstances that offer right wing populist opposition parties the chance to gain power, and in Trump’s case and perhaps in Orbán’s case to regain power.

[1] This is an interesting connection I was unaware of between the Republican party and Orbán’s election victory in 2010.

[2] Pusuing that possibility may be one reason for the variety of fake polls suggesting Orbán would win.

[3] This is the reason why it is so important to keep repeating the truth that immigrants tend to pay more in taxes than they take out in terms of using public services, because that discussion is a counterweight to populist narratives about immigration putting extra strain on public services.

Taxation as Insurance, Welfare and Entitlements

 

A rather abstract discussion which leads to a very specific conclusion about the merger of income tax and employee national insurance contributions

Paul Krugman has described the Federal US government as a gigantic insurance company with an army. Can the same thing be said of public spending in most European countries, including the UK? Broadly yes, with one big caveat and some smaller caveats. Indeed, where countries have an army for defensive purposes alone (unlike the US at present) even the army can be regarded as a form of insurance. Spending on law and order can equally be regarded as a kind of collective insurance against being harmed or robbed by others.

The biggest item of departmental spending in the UK is on health. This is a classic form of insurance, where we pay taxes but receive health care that is by and large free when we need it. Much of welfare spending is a form of insurance. The biggest item of welfare spending in the UK is the state pension, which is a type of insurance policy where you receive an annuity on retirement, which in effect insures you against the financial cost of a long life. Disability benefit can be seen as insurance against becoming disabled, unemployment benefit as insurance against becoming unemployed, and universal credit as insurance against low earnings.

In some of these cases, and particularly the last, seeing spending as insurance only works for everyone if it is insurance you might take out behind a veil of ignorance before life begins. A medical consultant is unlikely to want to take out insurance against low pay, as would an unborn child who knew their parents were billionaires. For that reason I’m using insurance in a Rawlsian, social liberal sense. Perhaps, as a result, we could describe much of state spending as a form of social insurance.

The major caveat is that a significant part of public spending is on education. (Of course the same is true in the US: Krugman was referring to Federal spending, and education is funded at the state level.) If we add child benefit, we could say that a significant part of public spending is for types of child support [1]. The smaller caveats include spending on transport, housing, overseas aid etc.

Of course a lot of this insurance individual citizens could provide for themselves using the private sector. We could provide for our health by taking out private insurance, but since Arrow’s seminal work economists have recognised the problems with personal health insurance, and the United States is a good example of why a private health system can be very inefficient. We can also buy our own pensions, but one large advantage of a state pension is that it avoids the risk of stock markets or interest rates being low when your pension matures. [2]

Putting the caveats to one side, taxation can therefore be seen as a form of insurance payment. Indeed one of our main taxes has the word insurance in it. In particular, taxes are a significant part of insurance against old age. This is important, because it means that during the middle part of people’s lives, and much of their voting lives, they will be paying taxes that considerably exceed the benefit they receive in terms of public services. Indeed in this respect taxes and benefits are like individual income and consumption: we earn (pay tax) more than we consume (use public services) in middle life and vice versa in early and late life. (This is also why the claim that immigrants on average put a strain on public services is just wrong.)

The insurance provided by the state is a little different from insurance provided by a company in terms of both contributions and benefits. State insurance is unlike most private insurance because benefit entitlements can be changed at any time. In addition, in theory many of the benefits paid out by the government, including benefiting from the NHS, do not require any contributions whatsoever. In practice we all make a contribution by paying tax, and everyone beyond a certain age pays taxes the moment we buy anything that isn’t zero rated for VAT. The idea that those paying income tax should have a greater voice in spending decisions makes no sense for this reason alone, and because few would want to argue that billionaires should have the right to much more political influence than anyone else.

Some state benefits require a degree of contribution. The state pension, for example, requires a minimum period of contribution to receive it, and how much you receive depends on how long you have been either earning or receiving child benefit. But how much you receive does not depend on how much money you contributed. What is less often noted is that the same is true for unemployment benefits, where you need to have been paying contributions in previous years. These requirements sometimes lead people to think that their contributions fund their pension, but this is false. Pensions today are paid for by those paying tax today.

Periodically I come across people who think that state pensions should not be classed as a welfare payment by the government because it is something they are entitled to by contributing employee national insurance payments (see this, for example). This is an illusion, because whatever requirements the government may make to receive a pension are pretty arbitrary. It is really a reaction to much of the media describing state benefits as ‘handouts’. Seeing these benefits as a type of insurance is much more realistic.

However there is a sense in which people are entitled to all state benefits. Paying taxes when younger is part of a social contract that involves the understanding that you will receive various forms of insurance, usually but not always later in life. Insurance against ill-health (a free NHS), insurance allowing you to live a long life without financial hardship (a state pension), as well as insurance against unemployment, having a low wage job/poverty and so on.

If we see taxes in general as largely a form of insurance policy, and welfare benefits as a form of insurance payout, then the argument for workers paying national insurance contributions alongside income tax is diminished. Having two separate taxes on income leads to all kinds of distortions that make little sense, and for this reason many economists have long argued that the two taxes should be merged. [3]

The reason this sensible idea has not been adopted by most Chancellors is simple. It would mean that pensioners would pay more tax and workers would pay less. Pensioners tend to vote more often than workers, particularly younger workers. [4] In particular, given the current system pensioners would argue that such a merger would be unfair, because why should they contribute to their pensions once they start receiving those pensions?

However that argument could be turned around, suggesting that linking particular taxes to particular benefits is a bad idea. It is a bad idea because those paying for private education could argue they shouldn’t pay the taxes that go to fund state education, and those paying for private medical insurance shouldn’t pay so much for the NHS and so on. Arguing that state pensions are a return on earlier national insurance contributiions views taxes as just like personal insurance, where we pay taxes just for what we personally get back in return. Instead taxes can be seen, as I show above, as a form of social insurance, where society collectively insures all of its members. If that is the case, relating a particular tax to particular benefits makes little sense. 

[1] Could state spending on children be seen as a form of insurance against the cost of having kids? The reason I don’t think this works is the state doesn’t support a proportion of the cost of having kids, but instead funds all the cost of educating kids. A major reason it does this is because education has clear economic benefits for society. This is perhaps why the OECD sometimes distinguishes between public spending that is military (defence), economic (education) and social (much of the rest)

[2] Retire when the stock market is booming and your pension will be that much better than someone who has contributed exactly the same but retired when the stock market was bust. Defined benefit personal pensions avoid this problem, but are now increasingly rare outside the public sector. In addition annuity rates can vary widely depending on the level of long term interest rates at the time the annuity is taken out.

[3] In my post three weeks ago I questioned the wisdom on political economy grounds of economists, including the IFS, arguing for abolishing zero-rating of VAT, so I’m happy to support them on this particular issue. (Here is the IFS putting the case for merger.) The case for merging employers’ NI contributions as well as employees' is more complex, in part because in the short to medium term the incidence of this tax is only to a small extent on wages (see here and here).

[4] To avoid this an income tax and employees national insurance merger could be combined with a one-off uprating of pensions, perhaps combined with getting rid of the triple lock for future pension increases.

The damage that right wing populists do

 

History, and events today, tell us the damage that fascism can do. Right wing populism is a milder form of fascism. Right wing populism is not about doing popular things! Instead it is an authoritarian creed that is intolerant of a pluralist democracy (where there are many sources of power), and instead believes that ‘the will of the people’ should always prevail, where that ‘will’ can only be expressed through the wishes of the leader. An intolerance of political opposition means that political opponents are either demonised as dangerous minorities or dismissed as out of touch elites. For this reason, right wing populists have little time for human rights because they believe they (representing ‘the people’) should have ultimate power over everyone else.

In a post a year ago I discussed two developments that could mark out fascism as an extension of populism: abandoning democracy and the use of violence against opponents. I argued at the time that Trump could in those terms be described as fascist, and unfortunately subsequent events have only confirmed that judgement. Trump and his party are doing everything they can to rig the mid-term elections in November, and Trump has used his police force ICE and the justice department to go after domestic political opponents, and has used illegal force to kidnap or kill heads of state overseas who are his enemies.

More recently I wrote about a study that showed the economic damage that populists on average do when they take power. After five years GDP would be lower by around 5% compared to what it would have been if populists had not gained power, and this damage carried on increasing in size if they stayed in government longer. In that post I gave the obvious reasons why right wing populists can do so much economic damage: their nationalism tends to restrict overseas trade and also the entry of people from overseas.

We can now add to that list a military attack on a country that has the ability to restrict global trade. Even if ships started going through the Strait of Hormuz immediately after this post is published, the damage already done would have a significant impact on global GDP. Continuing costs arise not just from the higher price of oil and gas, but also from the higher cost of fertilisers and other goods shipped through the Strait of Hormuz.

This war illustrates a point that I hope is pretty obvious. While some of the costs of right wing populism or fascism come directly from its ideology, others are a more indirect consequence. For example, putting so much unchallengeable power in the hands of one individual is just asking for trouble. It’s a recipe for disaster, like the disaster of the Iran war, if that individual is a very elderly fool.

Equally authoritarian rulers are likely to value loyalty over expertise, so they will pick advisors who become yes men and women. Watching Trump’s court spend so much time praising him, or wearing the wrong size shoes, is just incredible. Is it any wonder a leader with these priorities and with these types of advisors makes some terrible decisions. That attitude then filters down the chain of command. Add to this a common trait among right wing populists to be antagonistic towards expertise, and academics in particular, and making policy based on evidence becomes increasingly unlikely. That all adds to the cost of right wing populism or fascism.

While the focus on the economic costs of right wing populism is understandable, many of the problems outlined above impact on government decisions of all kinds. [1] The publication of the UK’s Covid Inquiry reports make it clear, if it wasn’t already, that tens of thousands of people lost their lives unnecessarily as a result of UK government inaction during the second COVID wave in 2020/1. This substack from Christine Pagel provides an excellent account, so in what follows I want to focus on the key details and relate them to the right wing populist government we had then. It suggests yet another reason why populists and fascists do so much harm.

During the first COVID wave there were plenty of mistakes made by pretty well everyone involved, including the experts advising the government. But the second COVID wave killed more people, and the second wave did not take the experts by surprise. We had learnt from the first wave that strong lockdowns could bring cases (and therefore deaths) down, and that is what experts both inside and outside government recommended when cases started rising over the summer of 2020. This advice was ignored by a right wing populist leader.

By the summer of 2020 it was already clear that a vaccine against COVID was a strong possibility and could be developed quite quickly. A key argument against using lockdowns to isolate people and decrease the speed at which the pandemic spreads is that this just delays infection. But with a vaccine that argument is blown out of the water. The vaccine could provide the ‘herd immunity’ that the disease would otherwise eventually create, but with a fraction of the deaths. So in the autumn and winter of 2020 it made complete sense to use strong lockdowns to isolate people until vaccines became available. By mid-March 2021 over 95% of all adults over 65 years old in the UK had been vaccinated.

It was complete sense that Boris Johnson didn’t accept. He was already having severe misgivings about the first lockdown as the first wave came to an end. Even before the pandemic started in the UK his instincts were libertarian. During the first lockdown these instincts were revived by strong criticism from the right wing press, which had a powerful influence on the former journalist who was now PM. Newspapers were losing a lot of money as a result of the lockdowns.

Once the impact of the pandemic became clear, most people supported lockdowns, including a stronger lockdown in the Autumn of 2020, but for populists the ‘will of the people’ is measured by the preferences of the leader rather than opinion polls. The UK right wing press, in particular, is used to pretending that the wishes of its owners represent popular opinion when they in fact do not.

While it is easy to relate anti-lockdown sentiments among the populist right and its media to ideology or simply money [2], I suspect there is a rather simpler explanation for the harm they did in this case and which will apply to populists more generally. Right wing populist leaders do harm in part because they don’t care very much about other people, and also have extremely elevated opinions of their own self-worth..

Of course that combination of characteristics apply to many politicians, and indeed might be something of a prerequisite for any political leader. But right wing populist leaders seem to take this to another level. They tend to be narcissists. Johnson said he would rather “let the bodies pile high” than impose another coronavirus lockdown, and it is difficult to imagine previous UK Prime Ministers even thinking let alone saying that.

This is one reason why corruption under right wing populist leaders is so much greater than it would be in their absence. To populist leaders it seems only right that they and their colleagues or friends should profit as much as they can from their position, and their sense of public duty is very small. (The other reason for populist corruption can be the ability of populist governments to curb controls on it, and in particular to control the law.) Of course corruption not only takes money away from everyone else, but it also is likely to reduce the overall size of the economic pie. In the case of Covid, it led to nurses and doctors not getting the projective equipment they needed.

George Bush’s ‘Axis of Evil’ was never an axis: Iraq and Iran had recently fought a very costly war against each other. In contrast, what Paul Krugman calls the ‘Axis of Autocracy’ is very real. Right now both Russia and America are doing what they can to help Victor Orban’s party in Hungary avoid defeat after being in power since 2010. After a strong recovery from the Global Financial Crisis, the impact of populist government is now very evident in Hungary, and despite controlling the media and tilting the electoral scales Orban may lose power in April. Hungary under Orban, like the US under Trump and the UK under Johnson, is another example of the harm that populists do.

[1] As a key part of right wing populism is to scapegoat minorities, then we should include the damage caused to those minorities in any inventory of the harm this populism creates.

[2] Unfortunately the economic argument against strong lockdowns just does not hold up, because it only applies in the very short run. As long as the health system is limited in its ability to cope with a growing pandemic, then at some point a lockdown will be required to prevent the health service collapsing. The larger the number of cases there are, the longer and/or more strict that lockdown will be. So delaying a lockdown ‘for the sake of the economy’ is just making the eventual economic hit that much bigger. In this post I used an analogy with inflation and the Phillips curve.

Both Reform and Conservatives are now officially Islamophobic

 

After 9/11, when George W Bush declared a war on terror, he at first described it as a crusade. European leaders, and especially Tony Blair, warned him against that. The crusades were a religious war, a clash of civilisations, and that was not what the war on terror was supposed to be about. Unfortunately the US media took no notice, in part because a clash of civilisations was easier to write about than, for example, the politics of the Israel/Palestine conflict.

A key component of tight wing populism and fascism is the dehumanisation and demonisation of minorities, and treating those minorities as a threat to ‘the people’. In the United States 9/11 and the war on terror made Muslims the ideal minority for populist right wing politicians to attack. As Hannah Knowles notes in the Washington post, Republican members of Congress have said that “Muslims don’t belong in American society” and that “the choice between dogs and Muslims is not a difficult one.” Unlike Bush, Republican leaders today do nothing to rebuke such comments. Of course it was Donald Trump who, in his first term, called for the “total and complete shutdown of Muslims entering the United States”.

Islamophobia is very prevalent in the US. In one poll only a minority of people say that Muslim Americans strengthen society. When asked whether they would vote for a President whose views they agreed with if he was a Muslim, a third of people said no, although that number was just over 50% among Republicans and those numbers for both parties are increasing. But the recently elected mayor of New York is a Muslim. With Muslims making up only just over 1% of the population, the chances that most Americans will know any Muslims is slim, which makes it easier for a populist media to paint the picture it wants people to see. 

The Iran war is likely to make things worse. As I noted in my post two weeks ago, the US Secretary of Defence Pete Hegseth seems happy to see the war as part of an American crusade. Republican politicians have stepped up their attacks on Muslims, with one saying “We need more Islamophobia, not less. Fear of Islam is rational.” In the UK the two political parties that tend to support the current Republican administration initially backed the US attack on Iran, although its unpopularity in the UK has meant both have appeared to backtrack more recently. Of course if they had been in government the UK would now be at war with Iran.

Where neither party has not backtracked, and instead has followed US Republicans, is in their attitude to UK Muslims. This was most evident in remarks made by both Farage and Shadow Justice minister Nick Timothy about the traditional celebration of Eid in Trafalgar Square attended by the mayor of London. Both described the event as a declaration of Muslim “domination”. That is utter nonsense, but extremely dangerous nonsense. Trafalgar Square is often being used by Christian groups and other faiths as a place for prayer and celebration. No one has accused these as expressing domination.

Farage described the event as “a wake up call and a warning to everybody” and “an open, deliberate, wilful attempt, not at the private observance of a different religion, but the attempt to overtake, intimidate and dominate our way of life”. Even by Farage’s standards that is an extraordinary attack. Islam is the second largest religious group in the UK and Muslims make up around 6% of the population. As Carole Cadwalladr pointed out, the influence of the Republican party in the US was clear when Farage referred to the UK being built on “Judeo-Christian values”, a term often used in the US but hardly ever used in Britain.

Badenoch, the leader of the Conservative party, supported what her justice secretary had said, and refused calls by the Prime Minister Starmer to sack him. There are still prominent Conservatives who feel very uncomfortable with this blatant Islamophobia, such as Andy Street, former Conservative West Midlands Mayor, who said he had attended many such celebrations. But, as I noted here, this group with the Tory party is an increasingly impotent and ignored minority. Even James Cleverley described Timothy’s statement as being “very thoughtful” on this issue.

The attack by leaders of Reform and the Conservative party on this event involving Muslims, while ignoring similar events in the same place involving other religious groups, is as obvious an example of Islamophobia as you are likely to find, and it justifies the title of this post. The claim that this event was about domination is a direct appeal to a form of Great Replacement theory, which sees white European populations being deliberately replaced by non-white peoples, and especially those from Muslim-majority countries. The US Vice President has remarked that the UK might become the “first truly Islamist country to get a nuclear weapon”. As is now standard, Farage and Badenoch are acting as the Trump administration’s mouthpiece in the UK.

Islamophobia has been strong in the Conservative and Reform parties for a long time, but in the past when this became public the Conservative leadership at least were careful to distance itself from it. Today it seems that the ties with the Republican Party in the US, mediated in large part by social media, have emboldened the leadership of both parties to bring it out in the open and make it their party’s official policy.

Will the policy win votes? The UK is probably less Islamophobic than the US, perhaps partly because contact with Muslims is more likely and also because in the UK the Christian religion is less strong. In one poll, only 21% of people had a negative view of Muslims, and 28% would feel uncomfortable with a family member marrying a Muslim. As a result, political leaders who make Islamophobic comments are unlikely to win new votes by doing so. Instead such remarks should be seen as firming up and radicalising their existing political base.

It is also increasingly possible, because the populist right works within an eco-system provided by mainstream and social media that is increasingly like an echo chamber, that this escalation of bigotry will backfire. Other religious groups may recognise that once one minority group is attacked, any can be. This religious intolerance that is now part of Reform and Tory policy does not play well in a predominantly secular country like the UK. It is also an affront to some of the very British values that the populist right go on about so much: values like tolerance, mutual respect and fair play. Over 80% of people agree that “I don’t like it when our English flag is linked to racism or used to intimidate minorities. That’s not what this country stands for.” The more the populist right in the UK behave as fascists have behaved in the past, the more the dangers of importing current day fascism from the US become clear.

However, the possibility that this ends up being populist overreach should not make us sanguine about the dangers of the UK right advocating religious discrimination against Muslims. With democracy around the world in retreat, a fool leading the most powerful military machine in a thoughtless war that will cause economic distress across the globe, and Netanyahu using military superiority to brutally create a Greater Israel, parties representing nearly half of UK voters promoting a clash of civilisations is the last thing we need right now. Of course extremists thrive on trying to turn political and international disputes into conflicts over race or religion, but in this respect it seems we have to consider both the UK's main right wing parties extremists now.

Public Attitudes to taxes and spending, and VAT zero rating

 

Does the recent and unprecedented increase in the minority wanting a smaller state reflect the non-indexation of tax thresholds? If it does, are social attitudes a problem for those economists arguing to end the zero-rating of many goods for VAT?

The National Centre for Social Research produces an annual survey about British Social Attitudes, and they have issued a preliminary look at the survey conducted in the Autumn of last year. One question that I have looked at a number of times in previous years has concerned attitudes to taxes and public spending. The latest results are both surprising and imteresting.

As I have regularly noted, over the 40+ years of the survey the number of people saying they wanted lower taxes and spending (a smaller state) has been remarkably low at less than 10%. Remarkable, that is, given the prominence that view gets in public discourse. But not any more. In the last few years this proportion has grown significantly, and is now at 19%.

Why is this? The most obvious explanation is that taxes are going up, which is true. But total taxes have risen before, and we haven’t seen this response in public attitudes. Here is the share of total taxes in GDP from the OBR’s database.

Taxes have risen substantially since the pandemic, but they rose by almost twice as much from 1993/4 to 2000/1, yet in the social attitudes survey there is no rise in those wanting a smaller state over that period comparable with recent movements..

One explanation for this recent rapid increase in those wanting a smaller state would be if people were much happier about the level of public services now compared to the late 1990s. This isn’t plausible because both the level of public service provision (measured by indicators like waiting times for hospital appointments) and the level of spending on public services is clearly inferior to the period at the end of the last Labour government, and is at least comparable if not worse than in the late 1990s. The impact of the austerity period from 2010 onwards has not been undone.

A more plausible story is that those answering the survey are not thinking about total taxes, but rather just taxes on income. Here is a chart from the Resolution Foundation:

The noteworthy fact this chart shows is that taxes on income have been falling for most earners since 1980. [1] This hasn’t been true for the total tax burden because taxes have been shifting from taxes on income to taxes on consumption (e.g. VAT) or taxes on profits.

Very few survey respondents will be aware of the total tax burden they face. What most will see is the amount of tax taken from their pay each month. So the recent increase in the number of people wanting a smaller state could simply reflect the recent rise in the amount of income tax they are paying, which in turn is mainly the result of the non-indexation of income tax thresholds, started under the previous government and continued by Rachel Reeves. [2]

If this interpretation of the survey is correct (and I’m sure there are other interpretations) then the main implication for me is that attitudes to the size of the state depend crucially on the type of taxes being raised. Public attitudes to the size of the state may depend on the mix of taxes, with in the longer term the public accepting higher taxes on consumption and profits more easily than taxes on income. (In the short term the latter will generate inflation which is unpopular, but that unpopularity does not seem to be translated into public attitudes about the size of the state.)

Of course politicians, particularly on the right, have long suspected this, which is one reason why there has been a shift away from taxes on income over the last few decades. To that extent recent public attitudes are consistent with this belief. Those on the political left have often favoured higher taxes on income rather than higher taxes on consumption because the former is thought to be more progressive. This is true, although VAT in particular is in itself mildly progressive because there are lower or zero tax rates on necessities like food, children’s clothing or domestic energy.

However the progressivity of consumption taxes has been challenged by economists, who argue there are better, more effective ways to help poorer people than zero-rating. They, and journalists, love to tell us about the time wasted on borderline cases involving Jaffa cakes and the like, and these compliance costs are real and waste resources. At least as important is that the better off also spend large amounts on zero rated items, so zero-rating is a relatively inefficient way of redistributing income.

In my view a perfectly legitimate counter argument is that this reasoning neglects how many people feel about helping the poor in other ways. The same National Centre for Social Research Social Attitudes survey shows more people now disagree than agree that more money should be spent on benefits for the poor. It is fine to argue that the poor can be helped more efficiently by replacing zero-rating with better benefits, but that will not happen if better benefits are impossible to achieve politically, or are gradually reduced in real terms because of public suspicion or even hostility. 

To take a more specific example, an economist would argue that benefits (like child benefit) are better than VAT zero-rating on essentials in part because benefits don’t distort the choices those receiving them make. But many socially conservative voters might argue that they are happy to subsidise children’s clothing for the poor because they know that money is well spent, whereas they will be more suspicious that money on benefits that the beneficiiary is free to spend as they like will be misspent. 

There are many reasons why people might favour higher taxes and public spending, but one may simply be that they are unaware of the taxes they pay indirectly through VAT and elsewhere. This in turn may encourage politicians to shift the tax burden from direct to indirect taxes. Economists argue quite rightly that VAT zero-rating on essential items is an inefficient means of redistribution, but making indirect taxes more regressive could end up making the overall tax and benefit system less progressive if socially conservative voters and the politicians that represent them squeeze benefits.

[1] The only exception is for high earners, but they are likely to make up a good proportion of those who always thought that their taxes should be lower.

[2] An interesting question is whether the impact of the non-indexation of thresholds has been more noticeable ex post by survey respondents than the same amount of revenue raised by raising tax rates would have been, because it has meant that some are now paying income tax for the first time.

Idiot Wind

 

What Trump’s war against Iran tells us about the US government, the UK political right and the mainstream media in both countries

What did over 150 children in Iran die for on the first day of this new war? Did the US attack that killed them have a purpose? When the answer to this question changes many times in a week, and none make sense, you are entitled to believe this is a war without a strategy. As Ian Dunt writes: “It is a war that is so insane its own perpetrators seemingly do not know why they started it.” At least no purpose for the nation as a whole. Trump and some of those around him might hope that the war and its repercussions might allow him to avoid the humiliation of mid-term elections this year, and Trump must know this war will help Russia.

The US Secretary of Defence Pete Hegseth, on the other hand, seems to regard the war as another crusade. (Trump has appropriately issued an Executive Order renamining him as the Secretary of War!) Hegseth holds monthly religious services at the Pentagon, and in 2020 wrote a book called the "American Crusade". Hegseth has praised the Crusades, claiming that people who enjoy the benefits of Western culture should "thank a crusader". He has supported Donald Trump's threat tp destroy Iranian cultural sites. About the current war he has said “"No stupid rules of engagement, no nation building quagmire, no democracy building exercise, no politically correct wars.” He has blocked U.S. military personnel from taking courses at the most elite American universities, and instead stresses the warrior ethos. Before becoming Trump’s Secretary of Defence he spent a decade as a presenter on Fox News.

The initial justification for war was the prospect of Iran becoming the second country with nuclear weapons in the region. (Israel has had them for decades.) President Obama negotiated a deal with Iran that could have prevented its development of nuclear weapons, but it was torn up by Trump in his first term as President. According to one of the negotiators, just before Trump attacked, the US was close to securing another nuclear deal with Iran, but Trump attacked anyway.

The idea that the US had to attack because Israel was going to regardless is ludicrous. The US has always had the power to stop Netanyahu using force because it supplies its weapons, and previous US Presidents were not afraid to use that power. Trump, on the other hand, is easily led and Netanyahu has been doing his best to lead him in the direction of using force in Iran, again (with a little help from Republican friends). The most likely explanation is that Israel and the US had intelligence about where the Iranian Supreme leader would be and saw their chance to assassinate him. If Trump’s actions in Venezuela had a logic it was to show the capability of the US to abduct or kill the head of state, and therefore scare other heads of state to do Trump’s bidding. But in Iran they seem to have killed the whole line of succession. If that was Trump’s strategy, the tactics were not clever, and Iran’s new leader is more hardline.

Was the idea to return democracy to Iran, after the US and UK helped overthrow it in 1953? Initially Trump seemed to suggest this was one motivation, but has since said he doesn’t care. As someone who has a rather fraught relationship to democracy in the US this is hardly surprising. Also it is difficult enough for a foreign power to impose democracy when they have troops on the ground, as Iraq showed. Doing so from the air is almost impossible.

In truth the Commander in Chief and those advising him are not capable of any strategy beyond enriching themselves (corruption has always existed in the US, but now it is off the scale), entrenching fascism at home and spreading it to the rest of the world. This includes encouraging regime change in the UK. There is no reason why fascism has to involve a fool being the all powerful leader, but with Trump that is the case. Unlike 2016, today Trump has surrounded himself with people who are either as foolish as he is or know when to keep quiet. Here is a video recently released by the White House. And these are the words of the President.

When the UK’s Labour government refused to allow the US to use its bases to attack Iran, the UK’s right wing politicians and media became apocalyptic. According to them, the UK should have joined Trump in fighting his pointless war. To do this without the appearance of a moment’s thought about the objective of this illegal war just shows how deep in Trump’s image the UK right has fallen. They are now as much fools as he is.

Have they considered what impact this war will have on the conflict between Russia and Ukraine, and Europe’s ability to support Ukraine? Does it not worry them that it was Trump who attacked President Zelensky in the Oval Office, who ended all US military aid for Ukraine, who has undermined Ukrainian air defense, who has tried to bully Ukraine in handing over territory, who has rolled out the red carpet for Putin, and reduced oil sanctions on Russia. Does it not worry them that despite all the help Trump has provided Putin it is now Putin who is providing intelligence to Iran on US military assets?! But perhaps asking for a moment's thought and any consistency from those who write for the right wing press is asking too much. Perhaps they are paid not to think, but just to have a modest talent for transcription.

Trump duly obliged by saying Starmer was no Chrurchill, and Hegseth complained that America’s traditional allies “wring their hands and clutch their pearls, hemming and hawing about the use of force.” Hegseth seems to believe that attacking a country for no lawful reason is one of the masculine values he is so keen to promote. Trump, despite being at war, seems to have plenty of time to meet right wing UK politicians or journalists to attack our government.

The claim that Starmer has now destroyed the ‘special relationship’ between the UK and US, conveniently forgets that Harold Wilson refused to send UK troops to support the US in Vietnam. It also forgets that it is Trump that has threatened to invade a NATO state, and who is imposing tariffs on UK goods. It should now be clear that in political terms the ‘special relationship’ is nothing more than a device used by the right in the UK to tie the UK to US foreign policy. [1] The US has always acted in its own interests, and the idea that Trump would do anything otherwise as a favour to the UK is simply ludicrous. When these papers declared they wanted to leave the EU to take back control, what it seems they really meant was to give control instead to a fascist in the United States. Patriotic they are not.

Does the UK populist right, that very much includes the leadership of the Conservative party, worry about the impact a prolonged attack on Iran will have on energy prices and the global economy more generally? I doubt it, as such difficulties can be reckoned to assist the chances of the right winning the next election. Just as Conservative politicians have in the recent past put party before country, so does the right wing press. If the war does bring long term harm to the UK economy, the right will blame Starmer who opposed the war and conveniently forget that they were the ones supporting it.

These newspapers claim to speak for the UK public in describing the government’s stance as humiliating, but the reality is very different. A large majority of Britons oppose US air strikes on Iran, and overwhelmingly do not want the UK to join the war (and even the minority support for the war is falling). Like Trump, the right wing press has learnt to lie without shame.

In any sane world the deadly foolishness of Trump and the dangerous nonsense coming from the right wing press would be regarded as some idiot wind that we needed to shelter from but at the same time we could laugh at. Unfortunately the right wing press, although slowly dying in terms of people who actually buy their papers, has an incredible influence on the mainstream broadcast media in the UK. The right wing press so often sets the agenda for the broadcast media.

There is a desperate desire in mainstream media in both the US and UK to pretend that Trump isn’t the fool he obviously is, but instead to treat Trump like just another US President. This media’s reaction to fascism in the US is to pretend it is not there, and invent strategy where there is none. To ‘sanewash’ where there is no sanity. In the UK Robert Peston provides a good example of this failure, although Chris Mason is more thoughtful here.

Much of the mainstream media in the US will very soon be in the control of those who support Trump, and that is true for a growing proportion of the UK media. For that which remains free to tell the truth, an obsession with balance rather than knowledge and a deference to power means this media also assists rather than resists the onset of fascism. The good news is that with a fool at the helm fascist overreach is a constant danger, and the UK government and US opposition may end up benefiting from Trump’s bombardment of Iran. Those that die in this pointless war will not get the chance to be lucky.

[1] There are of course close military and intelligence ties between the UK and US. However the idea that because of these the UK should always follow the wishes of the US President, and particularly a President like Trump, is just absurd. Should we support his pro Putin, anti Ukraine stance?! It is equivalent to saying that all NATO members should acquiesce to any demand from Trump, including selling him Greenland, because otherwise NATO might be weakened.