Tuesday, Jan 25, 2011 10:26 PM UTC

Why the GOP should be worried about England

The British government announced huge spending cuts and economic growth promptly went into decline

Speaker of the House John Boehner, R-Ohio, and U.K. Prime Minister David Cameron

Speaker of the House John Boehner, R-Ohio, and U.K. Prime Minister David Cameron

Here’s a radical suggestion for how President Obama should kick off his State of the Union speech: Why not point out today’s news from the United Kingdom — a surprising fourth quarter decline in GDP — and argue that the same dire fate might await the U.S. if Republicans succeed in their dream of sharply slashing the federal budget this year?

Here’s the back story. Wasting no time, the new coalition U.K. government led by Prime Minister David Cameron, made a dramatic package of government spending cuts its first order of business. Many U.S. conservatives have looked with great longing at the austerity surge. The numbers are staggering — an average 19 percent cut for all government departments, resulting in half a million public sector layoffs.

And look! Just as the Keynesians predicted, the economy immediately slumped, apparently proving that the last thing a government should do in a weak economic climate is suddenly kick the legs out of the demand side of the economy. It could happen here, Obama should argue! It’s still too soon, and the U.S. economy is too fragile, to make austerity the watchword of the day.

It would be a risky gambit, to be sure. Not only is the appetite for a full-throated defense of fiscal stimulus virtually nonexistent among the American electorate, but there isn’t even any certainty that Britain’s woes can already be attributed to the austerity drive. Some commentators are blaming a bad winter for depressed construction activity. Others are noting that the bulk of the government cuts have yet to kick in, so the causal connection is thin.

But heck, if Republicans can already claim that their midterm election victory should get credit for recent signs of economic growth, than surely Democrats have every right to at least flash a caution light. The GOP has made its position clear — just hours before the State of the Union address, the House passed a resolution calling for an immediate return to 2008 spending levels, which, if enacted, could be a sucker punch into the gut of an economy just off the deathbed.

Of course, Obama most likely won’t mention the U.K.’s travails, as he tries to portray himself as a fiscal conservative who still wants to build high-speed rail and boost education spending. But the point at which all this will really get interesting is when the data start to come in on the next U.K. fiscal quarter. Because the backdrop to those numbers could quite likely be a fierce political fight over extending the debt ceiling in the U.S. It’s hard to see the likes of John Boehner and Eric Cantor trimming their sails because of anything that might happen overseas, but if the U.K. slips into full-on recession right in the middle of a swing to austerity, that’s going to make the politics of spending cuts in the U.S. a lot more interesting.

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