Tea partiers and their Republican allies in the United States are convinced that the path to prosperity starts with budget cuts right now. That’s what the Tory brain trust in Britain thought too when they swept to victory last year. So how’s that working out?
Retail sales plunged 3.5 percent in March, the sharpest monthly downturn in Britain in 15 years. And a new report by the Center for Economic and Business Research, an independent research group based here, forecasts that real household income will fall by 2 percent this year. That would make Britain’s income squeeze the worst for two consecutive years since the 1930s.
All of which has challenged the view of Britain’s top economic official, George Osborne, that during a time of high deficits and economic weakness, the best approach is to aggressively attack the deficit first, through rapid-fire cuts aimed at the heart of Britain’s welfare state.
….“My view is that we are in serious danger of a double-dip recession,” said Richard Portes, an economist at the London Business School. “This is going to be a cautionary tale.”
The rest of the article makes clear that there’s still a big difference between British conservatives and their American counterparts. Right or wrong, the British variety are actually serious about the deficit: they’ve slashed spending but they’ve also raised taxes and kept high marginal rates for top earners. American conservatives, of course, have no such seriousness: they just want to use the deficit as an excuse to cut social programs that they’ve hated for decades.
Either way, though, it’s not likely to work. Britain is probably going to be paying the price for this folly for many years to come.