Thursday, September 6, 2012

Why Britain Matters – Economic Policy for the U. S. Could Follow Britain

Previews of Things to Come

Regular readers of this Forum have come to wonder why the obsession with British economic results.  We do have enough problems in this country to worry over, why take on someone else’s?  The answer is that Britain is currently undergoing an experiment to see if Conservative economic policies work to create an economic recovery.  It turns out, to the surprise of no one, they don’t.

Paul Krugman nice sums up the core of British economic policy after the Conservative party took over in that country a little over two years ago.  George Osborne (think England’s Paul Ryan but with a little more charm and class) is the person in charge of economic policy in Britain.  And because Britain is a parliamentary democracy, the person in charge can pretty much do what he or she wants.

Osborne’s big idea was that Britain should turn to fiscal austerity now now now, even though the economy remained deeply depressed; it would all work out, he insisted, because the confidence fairy would come to the rescue. Never mind those whining Keynesians who said that premature austerity would send Britain into a double-dip recession.

Now if that policy sounds familiar, it is because using different words this is exactly what U. S. Conservative economic policy portends to do.  There is a slight difference, the U. S. policy would cut taxes on the wealthy in a supposedly revenue neutral way, meaning that all of the deficit reduction would come from reduced government spending.  And reduced government spending is exactly what has been proposed and to some extent carried out in Britain.

So how are things working out across the pond?  Not so well.


Hm.  Again Mr. Krugman.

And the slump — which has now, in Britain, lasted longer than the slump in the 1930s — goes on.

As we said, a preview of the coming attractions for the U. S. economy.

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