01 March 2013

UK's Third Recession in Four Years - Or Why Fiscal Responsibility Comes AFTER Recovery

Among American conservative politicians, there is no one as sharp as the UK's David Cameron. As head of the Conservative Party, he's British Prime Minister. He has cut spending and raised taxes in order to reduce Britain's deficit. Put simply, he's been able to do exactly what so many of my - and your - conservative friends wish we'd do here in the US. However, there has been one little catch.

LONDON (Reuters) - The risk that Britain is entering its third recession in four years grew on Friday with figures showing that manufacturing shrank unexpectedly last month and mortgage approvals for home buyers dropped in January
Gross domestic product fell at the end of last year, bringing Britain within sight of another recession and the latest data suggested the central bank may need to do yet more to revive the economy.
The pound sank to its lowest level against the dollar in more than 2-1/2 years, while prices of British government bonds - which the Bank of England could resume buying - rose after the releases.

David Cameron is sharp but like his Republican counterparts in the US, he's a white man dancing. That is to say, he has all the right moves but has spectacularly wrong timing. The British love Winston Churchill but voted him out of office once WWII was over. They realized that a country needs different leaders for different times and they did not trust Churchill's domestic policy as much as they did his war-time leadership. Sadly, they've shown poorer judgment this time. Cameron would have been a great leader for Britain after it had recovered. His efforts towards fiscal responsibility have, instead, just worsened the economy and - paradoxically - made fiscal responsibility even harder. Nothing helps a government move towards a balanced budget quite like a growing economy.

Want to see David Cameron in action? Here he is debating Labour Leader Ed Milibrand. Hard to imagine John Boehner or Mitt Romney pulling off this kind of performance:

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