Nick Clegg’s odd claim on fiscal policy
People keep telling me we should be doing what Barack Obama did with his fiscal stimulus. What they don’t tell you is that much of what the President had to legislate for, we are already doing automatically. So let’s not allow the caricature of what we are doing go unchallenged.
For almost the entire period since March 2007, and particularly since March 2010, the US has run a looser overall fiscal stance – a more stimulative fiscal policy – than the UK, even taking the full operation of the larger automatic stabilizers in the UK into account. Cumulatively, since 2007Q1, the difference has amounted to 3% of GDP
Clegg appears to claim that UK and US fiscal policy have actually been very similar, and whilst it’s certainly true that the automatic stabilisers in the UK are larger (due to a bigger welfare state), I’m afraid this claim doesn’t stack up at all.
…next year US fiscal policy is due to tighten sharply (although obviously this might be changed). But in 2010 and 2011 there is no doubt that the UK and US were pursuing very different policies – one tightening fiscal policy and one stimulating the economy. The results are pretty clear.