U.S. Deficit Reduction and U.K. Growth.
At last the U.S. government has woken up to the need to reduce its out of control budget deficit and the Administration has asked a panel of two experts, one from each Party to come up with a plan. They have done so. It amounts to an eye popping $4 trillion of cuts and tax hikes by 2020. Wow.
Now the arguments begin. To cut will harm recovery. To hike taxes will do the same. Maybe, but to do neither is to end up like Ireland or Greece. Except there is not enough money around for a bail out, so it’s bust, or a national Chapter 11. Sorry, but it is that tough.
We have had all these economists running around saying carry on spending etc, but one by one the countries which did so, are having to call a halt. With vast deficits run for years and years, the whole Keynesian philosophy is unfit for this purpose. Keynes would be the first to say so if he saw the figures.
Meanwhile in the U.K. manufacturing output is rising at the greatest rate for a decade and a half and manufacturing jobs are being created at unexpected speed. In spite of the Governor’s worries about the inexperience of the Tory leadership and their advisers, the Coalition is doing rather well with its monetarist approach. Time for Washington to come on a fact find to London perhaps? Time for the deficit deniers to come up with a better plan.