NP - Toryism (Austerity) Isn't Working.

[David Morris]

http://www.taxresearch.org.uk/Blog/2012/04/25/double-dip-recession-proves-osborne-wrong/

British economist Richard Murphy suggests we are seeing the
self-refutation of British Chancellor of the Exchequer George
Osborne’s very specific predictions that public austerity would
quickly produce private abundance:

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Osborne offered us his vision two year ago. It was of “expansionary
fiscal contraction”.

His argument was that the more he cut government spending the more
people would spend, liberated by knowing that if he succeeded in his
aim of balancing the budget tax cuts would follow, letting them repay
debt they’d take on now to spend. It hasn’t happened. People who face
the prospect of unemployment, increased cost for things that were
previously provided by the state, lower pensions, higher cost of
childcare and the uncertainty of recession have simply stop spending.

And Osborne argued that as government cut back business would rush to
fill the space that he would create in the economy because they would
be liberated from the yoke of government interference in their
activity. It hasn’t happened. Businesses have seen that their biggest
customer is not spending and have cut their investment, reduced their
employment plans, closed their premise, withdrawn from the High Street
and battened down their hatches in the hope of survival: the last
thing that they have done is expand.

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This should be of great interest to Americans who could care less
about British politics, because “expansionary fiscal contraction” is
precisely the Big Macroeconomic Theory of the Republican Party, as
expressed constantly from Capitol Hill to the presidential campaign
trail. It’s the how-to-fight-a-recession doctrine that has supposedly
displaced that bad old Keynesianism. And it’s manifestly “Not Working”
in the United Kingdom.