We're all disaster capitalists now
We've been following the British austerity experiment here for the past few months in fits and starts. The early indications were that it was a disaster.
Dday fills us in today on the latest news which showed a horrible 0.2% growth in the second quarter (probably to be downgraded) after a previous two quarters of essentially zero growth. They are blaming it on Will and Kate and the Japanese Tsunami!
The excuses in this article are ridiculous: did the economy slow down because a lot of people missed the Tube stop at Notting Hill, too? Anyway, didn’t the William and Kate wedding produce a lot of economic activity?
The point is that Britain rolled back demand during a time when the economy was already weak, and they are suffering through the consequences. Instead of looking at this as a problem to be avoided, US policymakers are on the verge of emulating it. And not even in a good way: the British plan was at least somewhat balanced, with tax increases along with the spending cuts. This shows that the idea of a “balanced approach” is still flawed, because either way, you’re reducing demand during a time with a demand shortfall.
What's most interesting to me about this is that the the Tories formed a coalition with the centrist Liberal Democratic party to put this program in place. Let's just say the similarities between their governing coalition and ours is pretty clear, although in their case the Prime Minister is admittedly conservative. I'm guessing they're searching madly for green shoots with a magnifying glass even as we speak.
Yesterday eventheliberal Nancy Pelosi said, "it is clear we must enter an era of austerity; to reduce the deficit through shared sacrifice."
We are all disaster capitalists now.