Ominous: Household spending in the U.K. is down for a second consecutive quarter, meaning that technically British consumers are back in a recession. Business investment is down, too. Overall economic growth in the first quarter was up an anemic 0.5 percent.
Britain's unhappy experiment with austerity should be instructive for the U.S. London's effort to eliminate its budget deficit by 2016 has entailed slashing government services to the bone. Now it's paying the price. The abrupt withdrawal of public spending has left the economy sucking fumes.
Even the Organization for Economic Cooperation and Development, which has supported British Prime Minister David Cameron's cost-cutting program, was forced this week to admit that it's not working:
Pier Carlo Padoan, chief economist at the economic think tank, told the Times newspaper: ''We see merit in slowing the pace of fiscal consolidation if there is not so good news on the growth front.
''We have seen that (growth numbers) are a bit weaker than expected. Should that continue to be the case, there is scope for slowing the pace," he said.Unfortunately, it seems we here in the states are determined to learn nothing. The economic plan House Republicans released yesterday calls for the usual stew of reduced spending, lower taxes and looser government regulation.
Here's how crazy it's getting. House Majority Leader Eric Cantor, R.-Va., doesn't want to provide any emergency financial assistance to victims of tornadoes and flooding in the Midwest unless that aid is accompanied by cuts in federal spending.
Heartless? Sure. And a good metaphor for the GOP's approach for dealing with the financial twister that hit the broader U.S. economy. When disaster strikes, pretend nothing happened. Says Forbes's Rick Ungar in characterizing current Republican ideology:
While we may battle over what those things might be, that ideology has never, to the best of my knowledge, been extended to deny help to those who clearly cannot provide for themselves due to a dramatic and overwhelming catastrophe such as what has been experienced in Joplin and the many other American towns devastated by recent weather emergencies.Unfortunately, all the talk in Washington -- including on the Democratic side of the aisle -- remains focused on budget deficits and government spending. The illusion persists that the country is broke.
It's not. But it will be if we insist on following the Brits down their perilous path.
- Scorched Earth: What the U.S. Can Learn From Deficit Reduction in Germany and the U.K.
- Red State: How the U.S. Went $10 Trillion in Debt in a Decade
- Attention Deficit: How Cutting Federal Spending Will Prolong the Recession
- Crazy Talk: If You Want to Slow the Economy, Cut Taxes
- How Republicans Are Holding a Gun to the U.S. Economy