Nailing Brown's Big Lie : GDP Can Grow During Fiscal Squeezes

Time and time again during PMQs Brown claims that the Tories would choke off a recovery by cutting government spending.  This he uses to justify the fiscal nihilism that has seen the PSBR hit a record high of £20.3 billion last month.  Suicidal unfunded spending.

The Tories don’t make the case for cuts very well, they don’t feel comfortable doing so and thus they shy away from nailing one of Brown’s big lies – that taxing and spending is the only way to get out of recession.  This chart from Bloomberg shows that the UK economy has previously “enjoyed growth during fiscal squeezes in the early 1980s and mid-1990s, calling into question Prime Minister Gordon Brown’s assertion that cutting the deficit too soon would wreck the recovery.”*

Ben Broadbent, an economist at Goldman Sachs says “… periods of fiscal tightening in the past 30 years — the early 1980s and the mid-1990s — saw quite strong economic growth.” Britain’s budget deficit will peak next year at 13.2%, the worst in the G20 according to the IMF. Yet Alistair Darling says a quicker reduction in the deficit risks “putting the recovery at risk.” History shows that both Margaret Thatcher and John Major cut spending and boosted economic growth…

*From an article by Reed Landberg and Andrew Atkinson (not online).




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