Britain Triple Dippin’

The United Kingdom, amidst increasing austerity measures taken by the government, is heading toward a triple-dip recession following a 0.3% decline in GDP for 4Q 2012.  IHS Global Insight economist Howard Archer predicts UK GDP will not return to its 1Q 2008 level until the first half of 2015, representing seven lost years.  Even the IMF’s Chief Economist Olivier Blanchard is concerned, recently telling the British Chancellor that Britain should “reassess” its austerity policies – which is a little like John Blutarsky telling you to take it down a notch on the booze.

Source: The Telegraph (UK)

All of this points to the glaringly obvious Keynesian point that you don’t cut government spending and raise taxes in a recession!  Not only will fiscal contraction cut economic growth, it also inevitably fails to reduce public debt because lower GDP growth decreases incomes and tax revenues, which makes it harder to close budget deficits in the first place.  Britain’s National Institute for Economic and Social Research has predicted that “Britain’s debt to gross domestic product (GDP) ratio will be 4.85 percentage points higher by 2013 because of the spending cuts and tax rises introduced by the Coalition government.”

Although US growth has been sluggish by understandably high American standards (we are the richest/greatest country on the planet after all), the US has done far better than most of its European counterparts.

Source: Paul Krugman

Nobel Prize winner Paul Krugman points out that Europe’s austerity policies are largely to blame for this stagnating growth, and has loudly called for the US to implement additional stimulus to boost the economy.  It’s depressingly clear that Washington is not listening.