Cutting the deficit sooner won't risk the recovery

Would cutting spending “risk the recovery?” This claim is, literally, Gordon Brown’s re-election manifesto. He is hoping that the Tories haven’t learned to use numbers as weapons – so any economic message he has will not be effectively countered. In fact, his claim is very easily exposed as being bogus by a simple look at recent British economic history. Bloomberg’s Chart of the Day shows that economic growth in the past two recessions (white line) was not at all threatened by fiscal tightening (green graph). Even Goldman Sachs – which is acquiring a reputation as the Labour Party’s house broker – is conceding the central point. I hope Bloomberg won’t sue me for copyright if I reproduce their excellent analysis which accompanies their graph.

“The U.K. economy enjoyed growth during fiscal squeezes in the early 1980s and mid-1990s, calling into question Prime Minister Gordon Brown’s assertion that cutting the deficit too soon would wreck the recovery.