Though the United Kingdom’s decision to slash government spending and temporarily hike taxes in response to the Great Recession sent the country tumbling into a double-dip recession, the Conservative government announced on Wednesday that it would extend austerity measures for an extra year. Chancellor of the Exchequer George Osborne informed Parliament that the government planned to end austerity in 2018 rather than 2017, claiming that “it’s taking time but the economy is heading in the right direction” amidst what the New York Times described as “heckling and laughter from some members of Parliament.”
Their derision might be because austerity has failed the United Kingdom, much as it has failed the broader Eurozone and, on the state level, severely held back the American recovery. An apples-to-apples comparison between the U.K. approach and American stimulus suggests that stimulus caused the U.S. to beat growth expectations and Britain to lag behind them.
Broader European austerity caused its GDP to shrink over the past five years while the U.S.’ grew by 2.9 percent. And had state governments not implemented their own austerity plans in the form of slashing government jobs, American growth would have been even more robust.
Moreover, austerity doesn’t even accomplish its stated goal of reducing a government’s debt. The European experience proves that austerity hurts growth more than it reduces government spending, meaning it actually increases debt-to-GDP ratio. Indeed, as a chart by the conservative UK Spectator shows, Britain now has the highest deficit of any Western country despite its sever budget cutting: