Washington, D.C. — In a speech today at the American Enterprise Institute, or AEI, and in an op-ed in TheWall Street Journal, Rt. Hon. George Osborne MP, UK Chancellor of the Exchequer, argued that cuts to government spending are driving the United Kingdom’s modest economic recovery. President of the Center for American Progress Neera Tanden responded in a statement:
Chancellor Osborne’s argument that the U.K. recovery is a result of cuts in government spending is wrong on the facts. Nearly six years after the financial crisis put the United Kingdom into a deep recession, the economy has yet to fully recover and gross domestic product, or GDP, is still below its pre-crisis peak.
The austerity program that reduced public investment and raised the national sales tax caused a contraction in GDP and reduced employment by shrinking the number of available jobs at a moment when private-sector demand was already weak. This policy, according to the United Kingdom’s Office of Budget Responsibility, reduced the level of U.K. GDP and has failed in other important ways.
The austerity measures not only did not help, they have prolonged the recession, contributing to high unemployment and a huge expected rise in child poverty. If the government had not slowed the pace of austerity measures and provided support to the housing market in more recent years, the situation would be far worse for families struggling to get by.
In the United States, similar to the United Kingdom, we know that we need more, not less, investment to grow the economy and make sure that we are making an economy that works for everyone and not just those at the very top. Here in the US, we hope policymakers recognize that the U.K. so far has been a cautionary tale for austerity.