As Deficit Debate Begins in U.S., Less-Than-Promising Results in Britain

News Analysis
By LANDON THOMAS Jr.
NYT

LONDON — In the United States, the debate over how to cut the long-term budget deficit is just getting under way.

But in Britain, one year into its own austerity program to plug a gaping fiscal hole, the future is now. And for the moment, the early returns are less than promising.

Retail sales plunged 3.5 percent in March, the sharpest monthly downturn in Britain in 15 years. And a new report by the Center for Economic and Business Research, an independent research group in London, forecasts that real household incomes will fall 2 percent in 2011. That would make Britain’s income squeeze the worst two years in a row since the 1930s.

All of which has challenged the view of Britain’s top economic official, George Osborne, that during a time of high deficits and economic weakness, the best approach is to aggressively attack the deficit first, through rapid-fire cuts aimed at the heart of Britain’s welfare state. Doing so, according to Mr. Osborne, the chancellor of the Exchequer, secures the trust of the financial markets — thereby ensuring the low interest rates necessary for long-term economic growth.

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