Austerity measures are making it harder to cut the deficit

Symmetry Breaks

You might have noticed that the UK economy is unhealthy. For one thing, we’re back in recession. Then, there’s the unemployment level, above 2.6 million. Meanwhile our private consumption and investment are still below their 2007 peak.

But not every economy is suffering the same way. As I mentioned in my previous post, Adam Posen admitted at a recent Bank of England speech entitled Why is their recovery better than ours?  (Even though neither is good enough), the US is finally stumbling on its way towards recovery. Unemployment in the US is now slowly falling, and private consumption and investment are well above their pre-crisis peaks.

And why has the American recovery been so much more successful than our own? Adam Posen concludes:

Cumulatively, the UK government tightened fiscal policy by 3% more than the US government did – taking local governments and automatic stabilizers into account – and…

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