Tea Party budget cuts in Britain: result a disaster

Johann Hari, Columnist for the London Independent

Margaret Thatcher is lying sick in a private hospital bed in Belgravia -- but her political children have just pushed her agenda further and harder and deeper than she ever dreamed of. The government of David Cameron just took the Tea Party's deepest fantasies -- of massive budget cuts, introduced immediately -- and imposed them on Britain. When was the last time Britain's public spending was slashed by more than 20 percent? Not in my mother's lifetime. Not even in my grandmother's lifetime. No: It was in 1918, when a conservative-liberal coalition said the best response to a global economic crisis was to rapidly pay off this country's debts. The result? Unemployment soared from six percent to 19 percent, and the country's economy collapsed so severely that they lost all ability to pay their bills, and the debt actually rose from 114 percent to 180 percent. "History doesn't repeat itself," Mark Twain said, "but it does rhyme."

George Osborne, the finance minister, has just gambled Britain's future on an extreme economic theory that has failed whenever and wherever it has been tried. In the Great Depression, we learned some basic principles. When an economy falters, ordinary people -- perfectly sensibly -- cut back their spending and try to pay down their debts. This causes a further fall in demand and makes the economy worse. If the government cuts back at the same time, then there is no demand at all, and the economy goes into freefall. That's why virtually every country in the world reacted to the Great Crash of 2008 -- caused entirely by deregulated bankers -- by increasing spending, funded by temporary debt. Better a deficit we repay in the good times than an endless depression. The countries that stimulated hardest, like South Korea, came out of recession first.

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