The Failure of Austerity
Posted at 2:30 p.m. on March 13
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.”
