Going to London, and missing the story
COMMENTARY | May 25, 2011
President Obama has gotten a lot of coverage on his trip to the UK, but the big story, the lesson the President and the press should be bringing home, is hardly noticed, writes Henry Banta. It’s the unfortunate consequences of slashes in spending and taxes – an austerity program – in the midst of a recession.
By Henry Banta
President Obama’s visit to the United Kingdom is getting a lot of coverage – almost all of it for the wrong reasons. The media are focused on his attempts to persuade the UK to hold up its share of our mutual international obligations, and on a little royal pomp and circumstances. What he, and the media, should be looking at are the consequences of implementing an austerity program in the midst of a recession.
It’s not working well.
The UK has adopted the economic policies now loudly advocated by the budget hawks in Washington, policies partially embraced by the President himself. Slash the federal government and cut spending and taxes. Similar policies are in the works across the EU. The madness of all this has been pointed out by virtually every economist who hasn’t been drinking ideological Kool-aid.
The most important contribution to our budget difficulty is a catastrophic recession that has left a staggering amount of our workers, plant, equipment and capital idle, producing nothing and paying no taxes. Cutting federal spending now will, almost beyond a doubt, make the budget deficit worse. This was nicely explained by the Washington Post’s Ezra Klein in a recent posting on his blog.
For the United States, the UK is like the canary in the mine shaft. The UK is a few steps ahead of us in implementing a draconian austerity program. We have the luxury of learning from the consequences of their economic policies. The hardcore ideologues like Chairman Paul Ryan of the House Budget Committee are like the old French aristocracy: “They learn nothing; they forget nothing.” (Ryan actually blamed Ireland’s financial difficulties on its spendthrift government – ignoring that Ireland had a budget surplus prior to the financial crisis.)
The real issue now is what will the President learn in the UK. He might ask, what is their forecast for economic growth? What is happening to their unemployment rate? Why was this April the worst on record for public finance? Never mind troops to Afghanistan, will the Household Cavalry have enough hay for its horses?