April 15th, 2011
04:53 PM ET

Pain of British fiscal cuts could inform U.S. debate

Here is an analysis from The New York Times on Britain's austerity program. This is the big debate and the British example isn't looking so good. After reading the excerpt below, check out my prior GPS interview with UK Chancellor of the Exchequer George Osborne:

In the United States, the debate over how to cut the long-term budget deficit is just getting under way.

But in Britain, one year into its own controversial austerity program to plug a gaping fiscal hole, the future is now. And for the moment, the early returns are less than promising.

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.

Doing so, says Mr. Osborne, the chancellor of the Exchequer, secures the trust of the financial markets, and thereby ensures the low interest rates necessary for long-term economic growth.

That approach, and the question of whether it risks stifling an economic recovery that might itself help narrow the budget gap, lies at the root of the deficit debate in the United States. On one side is the go-slow strategy favored by President Obama. On the other is the more radical path championed by the Republicans. The two camps are no doubt closely watching Britain’s experiment.

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Topics: Economy • From Fareed

soundoff (4 Responses)
  1. sarahsmith232

    it's the 'rapid-fire cuts aimed at the heart of Britain’s welfare state' that are the whole point, not the economic recovery. they prob' couldn't believe their luck coming to power with the ability to chuck the 'we inherited a stupendous fiscal mess, the machete to the out of control welfare state is the only remedy' line out there every time there's any public squealing. plus, the majority of people in this country (UK) have been sickened and frustrated by Labour's welfare policies. so from the Tory point of view a few years of sluggish growth is neither here nor there if they get to permanently upend the welfare system out of it. so there's prob' really no pointers anyone should be taking over in America about this.

    April 15, 2011 at 6:01 pm | Reply
  2. Onesmallvoice

    What the British need to do just like the Americans is to get out from under all these useless wars and cut their needless military spending,but they won't,unfortunately. Then again,the British Empire was built on sheer greed. Old habits do die hard!!!

    April 15, 2011 at 7:15 pm | Reply
  3. j. von hettlingen

    It was sheer luck, that a "regime change" came about last year in Britain. The Tories and the Libdems had the discontent of the voters to thank for, who were tired of the labour – Tony Blair's war in Irak, Gordon Brown's unpopularity within and outside the government and the MPs' expenses scandal etc. As Gordon Brown admitted to spending cuts and knowing the Tories would do the same, the voters decided for the lesser evil.

    April 16, 2011 at 4:41 am | Reply
  4. Muin

    President's sppech was good though cuz he put everything in a broader context to create a solid framework for future. However, I don't understand why democrats compare social prgrams like Headstart to oil subsidies. Programs like that are probably administered by kennedy clan. Then they hire bunch of people to run the entire program. Their funding directly comes from the Government. These are more like charitable social justice programs. These may be very good for society but comparing these social programs to oild subsisidies is comparing apple to orange.

    April 16, 2011 at 6:24 pm | Reply

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