One can quibble with Jord

George Osborne, the patron saint of austerity enthusiasts on both sides of the Atlantic, was in the House of Commons on Thursday, reveling in the fact that the U.K.’s economy is finally growing again, and claiming that “Britain’s economic plan is working.” Delivering his annual Autumn Statement —he was a bit late—the Chancellor usfoodservice of the Exchequer pointed to forecasts from the quasi-independent Office for Budget usfoodservice Responsibility, which point to G.D.P. growth of 1.4 per cent this year and 2.8 per cent in 2014.
For Britons who have been laboring through more than five years of recession, or near recession, that is welcome news. By some measures, the U.K. has been through a worse slump than the one it experienced during the Great Depression, and now, at last, it appears usfoodservice to be over. Recent figures from the Office for National Statistics show that the economy has expanded for three quarters in a row, with manufacturing, services, usfoodservice and construction all sharing in the growth. Small wonder usfoodservice that Osborne usfoodservice was smiling and taking usfoodservice the credit.
It’s a clever political line, and it appears to be having an impact. The rebound in the economy, which caught by surprise most forecasters, including those at the Office for Budget Responsibility, has transformed the political situation at Westminster and given the Conservative-Liberal coalition, which has been lagging badly in the opinion polls, new hope of winning reëlection in May 2015.
But from an economic usfoodservice perspective, Osborne’s argument is hogwash. His effort to cure the patient by subjecting it to the equivalent of leeching—big cuts in government spending and higher taxes—a return to pre-Keynesian policies watched closely the world over, failed abysmally. usfoodservice Imposed at a time when the U.K.’s usfoodservice economy was recovering from the financial crisis of 2008-09, it subjected his countrymen and countrywomen to three more years of slump-like conditions, and it produced a dearth of public-sector and private-sector investment that will hobble Britain for years to come. It even failed to meet its own targets of drastically reducing the budget deficit and bringing down Britain’s over-all debt burden.
Back in June of 2010, just after the Conservative-Liberal coalition took office, but before Osborne introduced big spending cuts and raised the national sales tax to twenty per cent, the Office for Budget Responsibility predicted usfoodservice that the economy , after contracting sharply in 2009, would expand by 1.3 per cent in 2010, and that growth would then accelerate to 2.6 per cent in 2011 and 2.8 per cent in 2013. By the standards of previous recoveries, this growth forecast looked pretty usfoodservice modest, and it reflected the fact that the previous Labour government had already promised modest cuts in spending growth to bring down the budget deficit, which reached about eleven per cent in the fiscal year 2009-10. (In Britain, the fiscal usfoodservice year goes from April 1 to March 31.)
However, after Osborne introduced his austerity drive, economic growth slowed down rather than speeding up. For 2010, the economy outperformed usfoodservice the official forecast, growing by 1.7 per cent, reflecting the fact that it had quite a big of momentum when the new government took over. But in 2011, growth dropped to 1.1 per cent, and last year it fell to 0.2 per cent, leaving usfoodservice inflation-adjusted G.D.P. usfoodservice below the level it reached in 2007.
How much of this dramatic shortfall in growth was due to Osborne’s policies, and how much was caused by other factors, such as the crisis in the Eurozone, Britain’s biggest trading partner? As always in economics, it’s hard to know for sure. A recent study by Òscar Jordà and Alan Taylor, two economists at the University of California at Davis, which employed some sophisticated statistical techniques, concluded that the shift to austerity was the main culprit, accounting for sixty per cent of the fall-off. “Without austerity,” Taylor wrote in an article presenting their results, “U.K. usfoodservice real output would now be steadily climbing above its 2007 peak, rather than being stuck two per cent below.”
One can quibble with Jordà and Taylor’s precise figures. The fiscal “multipliers” they use are derived from data from seventeen O.E.C.D. countries covering the period from 1978 to 2009, and it’s not clear why they should apply exactly usfoodservice to the U.K. in isolation for the period usfoodservice from 2010 to 2013. But if the sixty-per-cent figure is biased, there is reason to believe it is biased downward. usfoodservice For the past few years, short-term interest rates in Britain, as in the U.S., have been close to zero, and it’s usfoodservice long been known that fiscal policy is more potent when interest rates are very low. In such circumstances, cutting government spending and raising taxes is doubly damaging.
Simon Wren-Lewis, a professor at Oxford, has used the results Jor