Roll Call: Latest News on Capitol Hill, Congress, Politics and Elections
March 5, 2015

The Failure of Austerity

Martin Wolf continues his attack on British austerity policies with a devastating column in which he calls the program “overwhelmingly wrong-headed.”

“What truly is incredible is that Mr Cameron cannot understand that, if an entity that spends close to half of gross domestic product retrenches as the private sector is also retrenching, the decline in overall output may be so large that its finances end up worse than when it started.”

Felix Salmon: “Everything comes back to growth: the UK credit rating, the size of the deficit, and, most simply, nominal GDP, which is now 13.6% lower than the government officially forecast it would be back in 2008. What’s more, government spending comprises a much larger share of GDP in the UK than it does in the US, which means that spending cuts can easily directly cause recessions. And deficits always go up, rather than down, in recessions.”

  • Shma

    Policy-wise, I’m sure even Cameron and Osborne realize that they need to change tactics. But they have tied themselves so tightly to Austerity, that to back out now would destroy them politically.

    So instead of doing what’s right for their country, they will continue with their “overwhelmingly wrong-headed” program, wrecking their economy just so they can suffer a slow political death instead of a quick one.

  • carolerae

    Obama had done well not going for austerity when DC all demanded it; but the Sequester might finally kill the fragile economy. It needs to be repealed until the economy is strong.

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