Mrs. Thatcher, like Reagan, moved her country in a conservative direction. But Mrs. Thatcher’s fiscal accomplishments were much more modest than many of today’s Republicans think.
The lesson they should learn from her is that it is very hard to shrink the size of government even when a strong leader has complete control of the legislature, that it takes many years of arduous work to do so and that at the end of the day it won’t shrink very much.
At the end of the day it won't shrink very much. Talk about words to live by! Actually, in the U.S. at least, the only person who meaningfully cut the size of government was Clinton. While I'm a Clinton man, that's one thing I don't think is in his favor.
As Krugman points out, while she didn't cut the size of government she did remake the British tax code in a much more regressive direction:
What she did do was redistribute the burden of taxation downward, cutting top income tax rates while raising consumption taxes, which fall most heavily on low incomes. Her downfall came with the poll tax, a drastically regressive tax — the same amount for everyone, regardless of income — that was too much even for her own party.
He points out that this has recently been emulated by Bobby Jindal's tax proposal in Louisiana where he called for the end of individual and corporate taxes while replacing it with a sales tax-he's now had to drop this plan thanks to its extreme unpopularity-his own popularity has taken a 30% drop since proposing it. Actually he's also taking a page out of Herman Cain's book who ran under 9-9-9 during the Republican primary.
However, if we want to speak nicely of the dead what nice things can we say about her? I'd say the one thing she did that it's hard to argue she wasn't right on is what some argue led her own political demise:
"Yet it was a foreign affairs issue upon which Thatcher did not change her beliefs that brought about her political demise. Her view on European integration was always clear: “Europe” was foreign, a bloated bureaucracy pushing side-payments to special interests such as uncompetitive continental farmers. As the European Community moved toward full monetary union and ever increasing political integration, Thatcher become more resolute in her determination to retain, as she saw it, British independence and sovereignty. Her political problem was that a huge part of her own party, including many of the most senior members of the cabinet, did not share her views. Her powerful Finance Minister, Nigel Lawson, and Foreign Secretary, Geoffrey Howe, threatened to resign unless she took Britain into the “Exchange Rate Mechanism” – a precursor to the single European currency. Her extraordinarily belligerent performances at European summits and in parliament during this period, bellowing “No! No! No!” when responding to questioning on the issue, exposed fatal splits in her government. The Europe controversies were followed by the introduction of a deeply unpopular new taxation scheme, her characteristic refusal to change course in the face of public and political opposition, and the eruption of street riots in London. She was removed by cabinet coup in November 1990. “Treachery with a smile on its face,” she called it.
So the two mitigating factors were her refusal to let Britain join the euro-over the objection of many senior people in her own cabinet-and her regressive tax scheme. If we appeal to history, it seems she was dead wrong on the tax scheme but dead right on the euro. After all, if most Tories even in her own cabinet wanted to be on the euro, what stopped them from doing so after they took her out? That's usual the proof of a politician's success. After all, if they force in some unpopular reforms, why does't the opposition get rid of them when it gets back into office? Yet the Tories weren't able to get Britain on the euro:
"Thatcher’s political legacy was profound. Her successor, John Major, proved unable to seal the Conservative Party fissure over Europe, nursing his battered and exhausted party through a weak single-term in office followed by thirteen years out of power. Tony Blair, a media-savvy reformer who entered parliament in one of the few victories by a Labour party candidate in the 1983 election, saw Thatcher in full pomp as the model of what an assertive prime minister could achieve. He shifted the Labour party to the center, consolidating a new post-Thatcher consensus well to the right of the pre-Thatcher mode. His foreign policy was characterized by a definitive, assertive worldview reminiscent of the Iron Lady."
"Lacking the ability to re-run the years 1979-1990 with a different person as prime minister, a weighting of the impact on history of Thatcher’s personality versus the circumstances she faced can be a matter only of thoughtful speculation. As we reflect upon the Thatcher era, and larger questions of structure and agency in political life, we should continue to ask what would have been the same, and what would have been different, if someone else had been prime minister during that long decade."
The question of counterfactuality is always a daunting one in economic and political analysis. However, that's a good definition of having a "legacy." Legacy basically means that the reforms you put in aren't simply reversed when the other party gets back into power.
Thatcher's legacy was proved by Tony Blair's relatively more conservative position. FDR's legacy was when Eisenhower came in and upheld the New Deal. Clinton proved Reagan's legacy by maintaining many of the achievements of Reagan-whether you like these is another question.. We''ll better be able to assess Obama's legacy after he leaves office.
On the question of the euro though, you have to admit, Britain dodged a bullet. For this alone, one has to admit that some good things came out of her time in power.
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