Britain after austerity: Verging on 1% growth/Obama wants to emulate that?
With Strauss-Kahn out of the way, the IMF seems to be returning to pure Austerianism, if this article, linked to by Suburban Guerrilla, is any indication, but with a soupcon of tax cuts and quantitative easing if the economy tanks. As it appears to be doing.
Households will be left £1,500 a year worse off for the next five years due to a combination of higher taxes and lower benefits introduced as part of the Government’s austerity drive, the International Monetary Fund warned yesterday.
In a comprehensive analysis of the state of the British economy, the economic watchdog said that, between them, families would have £35 billion less disposable income due to the Government’s attempts to tackle the deficit. In addition, a fall in the value of houses would wipe off more than a tenth of their “tangible” wealth in real terms by 2016, the IMF said in its report.
The forecast for household finances came amid a growing political row about recent slow growth. George Osborne has come under pressure from David Cameron to come up with new ways to stimulate the economy.
The IMF reiterated its support for the Government’s programme of cuts, which it said had “significantly reduced the risk” of a sovereign debt crisis. However, it warned that tax reductions might be necessary if the rate of economic growth did not improve. And although it said the Government had made the right decisions to tackle the deficit, the impact on households would be significant.
The damage to household finances would weigh on the recovery for years, it warned, as consumers had less money to spend on the high street. Due largely to the weakness of consumer spending, the IMF is predicting growth this year of 1.5 per cent — against official forecasts of 1.7 per cent.
Ajai Chopra, the IMF’s mission chief to the UK, reiterated that the Government would have to cut taxes or otherwise ease policy if the economy suffered one or two more quarters of weak growth.
Last week figures showed the economy grew by just 0.2 per cent in the second three months of the year, following six months of poor results.
“It is clear that the recovery has stalled over the last three quarters,” he said. Although he stressed that the IMF believed that the current weakness was “temporary”, he added: “We do expect growth to pick up in the coming quarters.”
If it does not, the report argued, “it will be important to ensure that the slowdown does not become entrenched”, suggesting a combination of temporary tax cuts and an expansion of the Bank’s quantitative easing policy.
Despite its concerns, the IMF again threw its weight behind the Government’s austerity measures.
“The weakness in growth and rise in inflation raises the question whether it is time to adjust macroeconomic policies. The answer is no,” it said.
Paul Krugman wrote in 2010 that the British approch would lead to slower growth, and has predicted the same for the US.
Coming to the US soon: cuts (which will be labeled as ways to "strenghthen" these programs) to the economic safety nets (SocSec, Medicare, Medicare, veterans' pensions ahd health care), slashing services for the middle classes on down, less government funded basic scientific research, higher costs for graduate student loans, less money for regulation of banksters, fewer inspections for food safety, fewer jobs, higher unemployment, and, of course, tax cuts for the wealthy who, the Republicans assure us and now Obama echoes, are the "job creators."
Ah, I love the smell of empire's decline in the morning!
Too bad real people have to be the sacrifice in Obama's, the ConservaDems and Republicans' "shared sacrifice."