Commentary Magazine



Jennifer Rubin writes on the confrontation between reality and Obamanomics, namely that the president’s economic strategy consists of piling up mountains of debt, printing money, acknowledging this is unsustainable, and hoping that the rising interest rates borrowers are demanding don’t impinge too heavily on the recovery.

Still, it’s nothing compared to Britain’s mess. A pity there’s no catchy name for Gordon Brown’s policies. But “failure” sounds about right. The markets noticed when Standard & Poor’s downgraded Britain’s credit assessment last week, from stable to negative and implied it might lose its AAA credit rating if it did not mend its ways. This is something I’ve been onto for months. Even the official figures on public debt are alarming. According to the Office of National Statistics:

Public sector net debt, expressed as a percentage of Gross Domestic Product (GDP), was 53.2 per cent at the end of April 2009, compared with 42.9 per cent at end of April 2008. Net debt was £754.0 billion at the end of April [2009].

And that reckons without the liabilities the state has assumed from the financial sector, which the ONS estimated in February would be between one and 1.5 trillion pounds: even the lower range of that estimate would more than double Britain’s debt. When you add in the growth rate of the money supply — between 17 and 19 percent on an annual basis every month this year — you can see why Standard & Poor’s was pessimistic.

Britain is almost uniquely poorly placed to weather the storm: it’s heavily reliant on trade and the financial sector, it has massively expanded the state sectors and their debt burden since 1999, and it has responded to the crisis by spending and printing money at a rate that is only marginally less excessive than that of the Obama Administration.

The curious thing is that none of this is terribly popular. A recent poll in Britain found that 52% of voters agreed with the statement “The government spends too much and therefore taxes us too much.” All economists agree that a simple analogy between an individual budget and a national one is wrong. But when the markets and the people agree that it’s time to cut back, the government and the parties could do worse than listen.

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