Sorry, no. I am being sarcastic.
The U.K. economy shrank in the first quarter as construction output slumped, pushing Britain into its first double-dip recession since the 1970s and raising pressure on officials to salvage the recovery.
Last month I described Britain’s problems: GDP levels have never recovered to pre-crisis levels, the unemployment rate continues to climb from post-crisis levels, government debt level continue to climb, inflation levels are elevated, and all of these metrics are somehow worse than the situation in America.
And now Britain is back in recession.
The bottom line here is that trying to conduct an austerity program during the depths of a recession is dangerous. Less government spending and higher taxation translates into falling incomes for many, which often translates into falling tax revenues (as is the case here), which means that “deficit reduction” just produces larger deficits. Greece is the extreme example.
Nations in the Eurozone that have seen the most growth have conducted the least austerity:
So what would a successful conservative economic program look like today?
Well, until the nation is out of the slump and consistently growing, it should begin and end with slashing regulation and barriers to entry so that more unemployed people can become self-employed. It could include some form of program to encourage taxpayer-funded banks to lend to people who want to start businesses, for the same reason.
While not throwing around stimulus slush money (for that tends to end up in the pockets of well-connected corporations) it would maintain spending levels, and look to redirect some spending toward more productive endeavours for instance giving small businesses tax breaks for every job they create, or every factory they open.
The welfare cuts must wait until there is a strong and self-sustaining recovery, for when the economy is creating lots of jobs, for when there is a demand for labour. Slashing welfare when there are no jobs to go to is totally self-defeating.
The deficit reduction must wait until tax revenues are consistently rising due to a strong and self-sustaining recovery.
It frightens me that conservative voices have gotten this so hideously wrong. We had a decade of fiscally reckless government, where governments, consumers and businesses totally forgot the imperative to save in the fat times to spend in the lean, and joined the leverage mania and the derivatives casino. That was dangerous and foolish. And now policymakers have chosen to focus on deficits at precisely the wrong time. It is absolutely the worst of both worlds.