This is your mind economy on drugs austerity.
The OBR, kinda like the UKs CBO, released their Economic and Fiscal Outlook today, including updated forecasts of key economic variables. They’ve downgraded their forecast significantly for years to come, yet they remain committed to the spending cuts that are partially responsible for the downgrade.
The first figure shows the forecast for slower real GDP growth and higher unemployment as a result of the OBR’s update of their March report. Next year, for example, they expect real GDP to grow 1.8% more slowly—0.7% instead of 2.5%–a large decline and a rate that will give rise to growing unemployment, as you can see in the second figure. That one compares the forecasted unemployment rates from the March forecast with the new ones. The new ones are a lot higher and initially growing instead of declining.
Source: Economic and Fiscal Outlook, OBR, table 1.1
To their credit, Chancellor George Osborne announced some new infrastructure spending but that’s factored into the new forecast already and as you can see, it doesn’t keep things from deteriorating. And that’s partly because they pay for the new spending with new cuts…ones that fall on middle and low-income families (see here).
This unfortunate two-step could quickly become relevant here if R’s propose cuts they’ll trade for an extension of the payroll tax holiday…stay tuned.
At any rate, were they not impenetrable to evidence, this deterioration of growth and jobs in the UK would be instructive to the austerity crowd on this side of the pond.