Britain did do more austerity. But…
Douglas McWilliams of the CEBR has very helpfully clarified some of the data that underpinned his argument that the US has endured more austerity than the UK.
The figures come from the OECD’s June Economic Outlook.
Here’s the crucial table:
And this does indeed suggest that over the period 2009 to 2013 the US will have experienced a greater fiscal tightening than the UK. The US will have endured a 6.2% of GDP fiscal correction. The UK will, by contrast, have tightened by 3.9%.
But an important caveat.
The OECD figures show that just over half of the 2009-2013 fiscal consolidation in the US will occur this year alone.
It’s true even using the OECD figures that, as I said yesterday, the UK tightened by more and earlier than the US between 2010 and 2012 (4.3% vs 3%). In other words, the UK’s austerity has been heavily front loaded. And, interestingly, the OECD think that George Osborne is actually loosening fiscal policy this year, which will come as a surprise to many (not least the Treasury).
So whose figures are better? The IMF’s which I posted yesterday? Or the OECD’s? Doug McWilliams points out that the OECD includes the whole US public sector, unlike the IMF. That’s a good point. He’s also probably right that the IMF underestimated the size of the US public spending cuts, known as the sequester, relative to the OECD’s slightly later report. But I’ve also noticed that the two forecasters have quite drastically different views of the size of the output gap in both the US and the UK. That may have affected their view of the size of the fiscal consolidation in each nation, although I’ll need to delve deeper to be sure on that point.
In the mean time and in any case, these OECD figures are perfectly compatible with the argument that George Osborne’s deficit reduction timetable was an unnecessary drag on UK growth – even if we seem to be recovering now and the US is, this year, cutting significantly more.Tagged in: imf, oecd, output gap, structural deficit
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