US public spending is cut charply and economy expands well

 

         The first quarter figures for the US shows faster growth than in the UK. They also show that US government spending was cut by 4.1%. Those who say the UK is pursuing a path of public sector austerity and the US a path of fiscal expansion should try looking at the figures. In the most recent quarter UK public spending went up and US went down. The US grew more quickly.

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60 Comments

  1. Vanessa
    Posted April 27, 2013 at 10:07 am | Permalink

    I read today that one of the EU Commissioners wants to make immigration easier across the eu – that should help our growth !!!!

    As these stupid ideas are waived through on QMV Britain cannot veto this or even express her wishes.

    • Nick
      Posted April 27, 2013 at 3:57 pm | Permalink

      Not true. We can stop migration. Here’s why.

      Those who say we can’t, rely on the following in the EU treaties.

      “The European Union’s (EU) internal market seeks to guarantee the free movement of goods, capital, services, and people – the EU’s “four freedoms”

      Now look at Cyprus. With typical EU dictatorship, they have removed the freedom to move your capital around.

      So the immigration problem is solvable under EU law.

  2. lifelogic
    Posted April 27, 2013 at 10:13 am | Permalink

    They are simply not interested in the figures, nor any of the very clear, smaller state is better logic. They are just interested the “too hard too fast risking a double dip” BBC/Labour narrative. That and the expensive carbon devil religion.

    The result is no growth as we have seen. Cameron simply lack a working compass and that is why he lost the sitting duck election. He is driving the party over a cliff like Major and giving the country the two Ed’s to suffer.

    It is surely too late now. We shall see how UKIP do in the elections next week. Even a deal with UKIP is unlikely to work with the “heart and soul” pro EU, big state, serial ratter and someone who calls UKIP fruit cakes and closet racists.

    Of course the US grew more quickly the tax burden is 27% rather than 40%+ and they have much cheaper energy too.

    • Max Dunbar
      Posted April 27, 2013 at 2:50 pm | Permalink

      Well said. The US responds and adapts more quickly and always has done. They don’t suffer from constipation, inertia and inflexibility, and they get results.
      Cameron had his chance and failed. That wasted time and money. With the 2Eds in charge we can afford ourselves some measure of relief because a known enemy is easier to deal with than one who masquerades as a friend and ally.

      • lifelogic
        Posted April 27, 2013 at 4:48 pm | Permalink

        Indeed, at least we know the two Ed are basically the voice of the state sector unions and economic lunacy. With Cameron we initially we were led to believe he was going take powers back from the EU, run a conservative government and increase IHT thresholds to £1M.

        He has just given us soft Labour to be followed in 2015 by hard Labour.

      • Bazman
        Posted April 27, 2013 at 5:25 pm | Permalink

        Many parts of America have third world living standards particularly in the south You can pretend they do not, but in a small country like Britain this would not be acceptable to the majority of right thinking people. lifedodgic does not take into account what would happen to the large numbers facing mass unemployment and loosing their houses. How would the state pay for this? I would not really. I wonder what would happen then? All effected would just quietly go away and any business sent to the wall would just magically reappear? More ‘think’ and chanting. No reply again lifelofic are you a right wing sentimentalist or a fundamentalist who believes that we do not believe enough? (etc-ed)

        • Edward2
          Posted April 28, 2013 at 9:13 pm | Permalink

          Baz I realise USA is the devil for you, but you really need to go and travel in this wonderful nation for a year or two to rid you of your left wing fantasy.

        • max dunbar
          Posted April 28, 2013 at 10:52 pm | Permalink

          At the moment we have a second rate coalition government. When the 2Eds regime takes over, as many on this site predict, then we will have a third rate government to match the third world living standards which they have been so keen to impose on us.

    • lifelogic
      Posted April 27, 2013 at 5:01 pm | Permalink

      Also bank lending, in the US, is slightly up where as in the UK it is still 18.5% below the 2009 peak and at high margins and fees. This at a time when business need more borrowings, due to economic conditions, not less. The failure to even sort out, government owned, RBS/Natwest promptly (or even at all) is perhaps one of the main failures of this dreadful coalition government.

  3. Mark
    Posted April 27, 2013 at 10:36 am | Permalink

    The latest Case-Shiller indices also offer a clue:

    As of January 2013, average home prices across the United States are back to their autumn 2003 levels for both the 10-City and 20-City Composites. Measured from their June/July 2006 peaks, the decline for both Composites is
    approximately 29-30% through January 2013.

    Because the US has let its housing market correct, there is much less risk for banks in lending anew.

    • Credible
      Posted April 27, 2013 at 11:52 am | Permalink

      George Osborne wants to introduce a policy that will put house prices up even more for people who are already unable to afford them.

      • Electro-Kevin
        Posted April 27, 2013 at 10:43 pm | Permalink

        We are house-price obsessed in Britain. The Govt dare not allow a correction because this is what our economy is based on.

        • Mark
          Posted April 28, 2013 at 9:36 am | Permalink

          There is not much evidence of the economy being dominated by house building, but certainly rents – often subsidised by taxpayers – are becoming increasingly important.

      • StevenL
        Posted April 28, 2013 at 2:02 pm | Permalink

        I saw something about 10 year fixes at 3.99% today. If he keeps pumping money into subsidising mortgage lending he might even tempt a house price bear like me to sign up. Still not quite as tempting as the circa 4% 25 year fixes they can get in the US though. As the election looms no doubt he’ll get even more desperate to bribe me.

    • Denis Cooper
      Posted April 28, 2013 at 9:48 am | Permalink

      Can you say whether that is in nominal terms or supposedly real terms, ie adjusted by some measure of general inflation?

      • Mark
        Posted April 28, 2013 at 8:25 pm | Permalink

        Case-Shiller indices are for nominal prices. US prices peaked in 2006, since when CPI inflation has been about 15%, which would take the real decline to close to 40%.

        • Denis Cooper
          Posted April 29, 2013 at 7:22 am | Permalink

          Thanks.

  4. Acorn
    Posted April 27, 2013 at 11:06 am | Permalink

    Talk about being economical with the truth!. The GDP rise missed its target because of public spending cuts. The major spending cuts did not take effect till the middle of the quarter. The public employee lay-offs have only started halfway through the quarter. The consumer spending upturn came from reduced saving and only a little credit expansion.

    The last three weeks of quarter one are indicating that Q2 will struggle to make 1% yoy GDP growth, as the US adopts the sequester austerity plan and gets the same results as the UK.

    Save the bullshit for the doorsteps, it comes over as pathetic electioneering on this site. After listening to (words deleted-ed) Hollobone yesterday, I am thinking the Nasty Party is making a come back. That will not take the common ground or centre ground but an exit to opposition ground.

    • Edward2
      Posted April 27, 2013 at 11:37 am | Permalink

      Acorn:-
      How can you possibly see it as “pathetic electioneering” , when the article is pointing out that the USA is achieving better growth with slightly reduced Government spending and lower energy costs, which contrasts with the UK Government’s policy in both areas.
      So this article is at odds with current official policy that would be stated on the “doorsteps”.

      We shall see what happens in the long term when we will see if the USA continues to grow or not compared to the EU and the UK.
      If you are right, the only way to get growth therefore, will be to print more, borrow more, tax more and then increase Government spending (sorry non PC word “spending” its Government “investment”)

    • Max Dunbar
      Posted April 27, 2013 at 7:04 pm | Permalink

      Refering to the Conservative Party as the “Nasty Party” is not only a tired slander but tells us more about you. You hide behind an appropriate pseudonym though; acorns are bitter.

  5. Andyvan
    Posted April 27, 2013 at 11:29 am | Permalink

    US figures are even more dubious than our own. There are so many ways that US spending is disguised that the statistics are essentially meaningless. Have a look at http://www.shadowstats.com/ if you want a far more realistic view.
    Any discussion that takes government figures as accurate is fatally flawed and is one of the many contributing factors to our current position floating up an undesirable creek minus propulsion.

  6. Terry
    Posted April 27, 2013 at 11:30 am | Permalink

    As the saying goes, “The proof of the pudding…”. And as Jim Callaghan famously said, that you cannot spend your way out of a recession.

    Doesn’t anybody in the Quad, look at history? Why are they pursuing this already proven-to-fail, idea? To quote Albert Einstein , “Insanity: doing the same thing over and over again and expecting different results”.
    And that is where we are at. Insanity.

    It’s time Britain followed the Americans up the path to prosperity. They do not have daft, burdening, Green taxes to hold them back and they have moved away from those tried and failed approaches to the economic problems. Why can’t we do the same?

    • lifelogic
      Posted April 27, 2013 at 8:01 pm | Permalink

      It’s time Britain followed the Americans up the path to prosperity –

      Indeed cheap energy (without any green religion guff), tax revenue at less than 27% of gdp, less regulation, banks that lend and outside the suffocating EU, confidence and vision.

      It is all so obvious. But not to heart and soul ratters Cameron, Osborne and Clegg.

      • Bazman
        Posted April 28, 2013 at 3:08 pm | Permalink

        Much of your own beliefs are ‘religious guff’ founded on things being’ sensible’ or ‘absurd’. You have yet to answer on which and how employment laws restrict business and yet to tell us any credible sources denying global warming. Another main one is that the private sector can just fill the space left by reducing the state. Most of your beliefs are based on this mindless chanting no less.

    • uanime5
      Posted April 28, 2013 at 12:56 pm | Permalink

      You also can’t cut your way to prosperity.

      • Edward2
        Posted April 28, 2013 at 9:15 pm | Permalink

        Seems the USA are.
        But lets not get facts in the way of your closed mind Uni.

  7. uanime5
    Posted April 27, 2013 at 12:10 pm | Permalink

    The US had a huge stimulus between 2008-2009 which they’re continuing to reduce, so it’s meaningless to compare US reductions to UK increases over one quarter when both countries had pursued different financial policies in the preceding quarters. Though a comparison of public spending from 2008-2012 would be interesting.

    • Leslie Singleton
      Posted April 27, 2013 at 4:00 pm | Permalink

      Max–I like that last bit–Better the Devil you know

    • Leslie Singleton
      Posted April 27, 2013 at 4:07 pm | Permalink

      unanime–What an amazing surprise I don’t think–You have managed as ever to drip acid, deny and denigrate all in one short go. And always so heavyhearted–I hope for your sake that in everyday life you see a bit more good in the world.

    • Mark W
      Posted April 27, 2013 at 5:02 pm | Permalink

      I take it you are joking? Have you not seen the tax takes as percentages of GDP!!! Utter utter tommy rot. I know you like to try to knock comments on here by asking for facts, then you completely miss them yourself with an absurd misrepresentation of the facts.

      And as for stimulus the government had the best part of a decade of stimulus with massive borrowing on top of huge financial services and bank tax revenue and bust the country.

      I know you won’t, but I’ll ask to illustrate just how ridiculous your point, what are the tax takes, the best measure of distribution from private to public in the USA compared to the UK in the last decade?

    • lifelogic
      Posted April 27, 2013 at 8:03 pm | Permalink

      Nonsense as usual. They mainly gain from have cheap energy and a state sector that is not so large as to kills the productive sector.

      • Bazman
        Posted April 28, 2013 at 11:40 am | Permalink

        The productive sector often being companies and landlords having the state as often their only customer paying over the odds for sub standard services? Fantasy that you cannot substantiate.

        • Edward2
          Posted April 28, 2013 at 9:17 pm | Permalink

          Become a landlord yourself Baz, see how much profit you will make.
          Not so easy when you try.

          • Bazman
            Posted April 29, 2013 at 7:51 pm | Permalink

            I’ve been a Landlord and it’s not easy this is true, that however does not excuse London often Tory landlords bleeding the system and holding right wing views at the same time.

          • Edward2
            Posted April 30, 2013 at 5:53 pm | Permalink

            I presume then Baz, that if these wicked landlords were Labour or Lib Dem supporters or held left wing views, then you wouldn’t mind so much.

      • uanime5
        Posted April 28, 2013 at 1:00 pm | Permalink

        lifelogic between 2008 and 2009 Government spending increased from 23% of GDP to 27% of GDP at a time when tax revenues fell from 18% of GDP to 15% of GDP. So the evidence shows very clearly that as soon as tax revenues fell the USA introduced a huge stimulus to help the economy. The fact that this doesn’t fit with your right wing delusions about cheap energy and low taxes will not change this.

        http://en.wikipedia.org/wiki/United_States_federal_budget#Major_receipt_categories

        • Mark W
          Posted April 28, 2013 at 10:57 pm | Permalink

          Your source is Wikipedia??? This is simply too funny, what an own goal admitting that.

          But I like the idea of public spending at 27% of GDP. I’m glad you see that as “stimulus”. But Wikipedia oh deary me…

  8. Gary
    Posted April 27, 2013 at 1:05 pm | Permalink

    If you read and believe former Reagan budget director David Stockman’s recent NY Times article “Sundown in America” , then the USA is finished. Total govt liabilities are over $200 trillion, they are printing $1 trillion per year in QE. Hardly a healthy economy.

    • Nick
      Posted April 27, 2013 at 3:59 pm | Permalink

      Quite.

      Now look at the UK.

      1.2 trillion of debts on the books
      5.8 trillion hidden off the books. Even John Redwood won’t/can’t admit to that in spite of an election promise.

      2005-2010 the pensions debts alone went up by 736 billion a year.

      The state is bankrupt here. The state is bankrupt there.

      Pretty simple conclusion. Politicians are the problem, not the solution.

    • lifelogic
      Posted April 27, 2013 at 8:04 pm | Permalink

      Not perfect, but rather sounder than the UK under Cameron.

  9. Normandee
    Posted April 27, 2013 at 1:37 pm | Permalink

    Off topic but you might like to see it, it’s your wonderful Cameron and the tory party at play
    http://www.thecommentator.com/article/3371/exclusive_leaked_documents_reveal_tory_spinners_in_intensive_anti_ukip_media_briefings

    • lifelogic
      Posted April 27, 2013 at 8:08 pm | Permalink

      No surprise there then, from the cast iron, heart and soul serial ratter.

    • Electro-Kevin
      Posted April 27, 2013 at 10:48 pm | Permalink

      The Sun is no friend of the people. It supported Blair and now it is anti-Ukip. This is obvious.

      In this era of anti-politics does it matter what candidates Mr Farage fields ?

      • Mark W
        Posted April 28, 2013 at 11:06 pm | Permalink

        I find it odd that the media go gunning for UKIP candidates when Labour has two confirmed former BNP members and if the Greens were looked into I’d imagine some right nutcases.

        Some of Blairs government were former communists and the Greens spout what sounds like communist ideology. A green in my neck of the woods was wearing a Che Guevera tshirt. Whilst he may be oddly fashionable to people who should know better, it doesn’t alter the fact his movement had blood on its hands and is accountable for political murder. No better than Stalin, Hitler, Lenin or Mao. Why are the Left allowed to revere their tyrants.

    • Denis Cooper
      Posted April 28, 2013 at 10:04 am | Permalink

      Apparently when it has completed all its excellent, detailed, sophisticated policy development work the Tory party still has spare resources which can be used to systematically trawl through the backgrounds of 1700 UKIP candidates and find a few unsavoury cases which can be highlighted by its friends in the media.

      That suggests to me that the Tory party has too much money, while UKIP has too little to do a proper exhaustive vetting of all its candidates.

      The same with Labour and the LibDems, of course; rather than produce sound counter-arguments it may be easier to indulge in a bit of smearmongering and scaremongering.

  10. Paul
    Posted April 27, 2013 at 3:41 pm | Permalink

    Labour/Lib Dem/Conservatives – High spending, high taxation, pro EU, pro immigration, pro green. UKIP – our only hope.

  11. margaret brandreth-j
    Posted April 27, 2013 at 3:54 pm | Permalink

    Can you compare the size of the US and economic make up exactly to come to a logical conclusion such as this?

  12. Richard1
    Posted April 27, 2013 at 5:06 pm | Permalink

    Interesting stats. The US has approx the same deficit and debt/GDP as the UK but much lower state spending / GDP and tax/ GDP. Despite having a left-leaning president the US is cutting its deficit with more determination than the UK. Since the US also has lower taxes and a much more sensible energy policy it is not surprising confidence is much higher in the US. We see this for example in US manufacturing stats. Conservatives should take note. People are intelligent enough to see that this is the way to sustainable recovery.

  13. Bazman
    Posted April 27, 2013 at 5:31 pm | Permalink

    America will not be growing in areas where they depend on defence spending as this has been cut. Many areas like here this is the main and often the only employer. They will of course have become self employed or opened wine and antique shops to sell to all the other self employed wine and antique sellers on benefits no doubt. Or just left the area never to return. Which one or did the other companies clamour to employ the newly released workers?

    • Edward2
      Posted April 28, 2013 at 9:18 pm | Permalink

      One of your more abstract posts Baz
      What are you on!

  14. Denis Cooper
    Posted April 27, 2013 at 6:20 pm | Permalink

    You have to be careful with these GDP growth rate numbers, especially for the US.

    You can get a headline like this in a newspaper:

    “GDP grew at 2.5% in first quarter as consumer spending increased”,

    but further down:

    “The nation’s gross domestic product (GDP) rose at a 2.5% annual rate between January and March”.

    From which I take it that the quarter-on-quarter growth was not 2.5% but about a quarter of that, 0.6%.

  15. Mike Stallard
    Posted April 27, 2013 at 6:42 pm | Permalink

    Mr Redwood, it must be terribly frustrating for you to be constantly passed over. I am not being sarcastic. Also I am not sucking up (why should I?) I am terribly grateful for this excellent peep inside the truth though.
    You put me in mind of Boethius, Gramsci and Machiavelli (a big hero of mine) all of whom wrote their best stuff when out of the limelight.

    However, it is also very frustrating for us all when we see that our government is not doing what it promised to do and what it was formed into a coalition to do. And then the Yanks do it!

    • Mark W
      Posted April 28, 2013 at 12:56 pm | Permalink

      Funny you should mention Gramsci. He was a genius. The Left did eventually figure out he did have the solution to socialist domination. They’ve certainly followed his ideas.

  16. Jon
    Posted April 27, 2013 at 7:55 pm | Permalink

    I suspect also that their liquidity is not as bad an issue, I doubt they are as quick to capitalise the failing banks so soon after the ground fell away.

  17. Andy Mitchell
    Posted April 28, 2013 at 10:03 am | Permalink

    What you forgot to mention is the US central goverment is on a debt buying spree.
    That is buying up trillions of $ of bad bank/company debt.
    The US also as a massive debt deficit and it’s true overspend runs into trillions per year.
    It owes China $6 trillion in bond debts.

  18. behindthefrogs
    Posted April 28, 2013 at 10:59 am | Permalink

    The USA understands the principle that people and businesses pay their taxes in arrears of receiving the money being taxed. In the UK our government is doing the opposite. Thus for example it allows employers’ NI contributions (front end) to increase with inflation but reduces corporation tax (back end).

    One major item affecting companies and individuals is cash flow. Even if the government can’t afford to reduce the tax burden it could make sure that any changes it makes take into account this need to improve tax flow.

  19. Paul Marks
    Posted April 28, 2013 at 4:58 pm | Permalink

    So American government spending is falling?

    What will be total American government spending in 2013 and what was it in 2012?

    Or are we talking about “cuts in the increase”?

  20. Collamore
    Posted April 28, 2013 at 5:28 pm | Permalink

    Redwood’s premise (government spending cuts help the economy) is correct.
    However, US government spending has NOT been cut by “4.1%.” While that 4.1% cut claim has been repeated in the newspapers, a look at the US Dept. of Commerce’s official figures (see http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&903=87) shows that current expenditures for the 1st quarter of 2013 were at an annualized rate of $3.730 trillion–UP from the 3.723 trillion of 1st quarter 2012.

    Reply That is on a different base to the figures correctly quoted.

    • Collamore
      Posted April 28, 2013 at 10:56 pm | Permalink

      Your “different base” reply proves my point.
      First off, the press release with the figures is not a firm or final number. Rather, it is a preliminary estimate. To quote the release, “a 2nd estimate for the first quarter, based on more complete data, will be released on May 30, 2013.” The Obama administration has become notorious for releasing (to great fanfare and much media coverage) rosy preliminary estimates that are later “corrected” downwards.
      Second, the 4.1% figure seems to be based on Table 1, line 21 of the following “advanced estimate” (see http://www.bea.gov/national/pdf/ch9%20govt%20ce&GI%20for%20posting.pdf). This 4.1% refers to an item labeled “Government consumption expenditures and gross investment”–NOT all actual government spending. “Consumption expenditures”, according to the government, refers to “spending to produce and provide services to the public.” It is government spending that effects GDP–NOT government spending as such.

  21. Collamore
    Posted April 28, 2013 at 11:06 pm | Permalink

    US federal government spending, fiscal year 2012 (actual)–$3.538 Trillion.
    US federal government spending, fiscal year 2013 (Obama budget)–$3.803 Trillion.

    The above doesn’t factor in spending by state and local governments.
    Obama’s 2013 budget spending request is greater than his request for 2012.

    Reply: The official figures for Q1 show a decline for that quarter, which is the figure I reported.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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