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British Austerity: The Past Weighs Like a Nightmare on the Brains of Cameron and Osborne Blogging

Note that Nick Clegg and the Liberal Democrats in Britain could end this farce tomorrow, and give their country a chance. It would be the end of Nick Clegg's political career, of course--but his career is over already. It may be the end of the Liberal Democrats--but they have a much better chance if they admit they made a big mistake in selling their soul to the Conservatives for a mess of pottage than if they try to brazen it out and support the current government.

It is long past time for the Liberal Democrats in Britain to go into opposition: for them to cross the aisle and declare that they have no confidence in the Cameron-Osborne government. The longer they delay, the worse for Britain.

Paul Krugman on Britain:

Bleeding Britain: These days, ambulance-chaser economists like yours truly have an embarrassment of riches: so much is going wrong, in so many places, that one hardly knows where to start.

But let’s spare a moment for a disaster that’s being overshadowed by the euro crisis: Britain’s experiment in austerity.

When the Cameron government came in, it was fully invested in the doctrine of expansionary austerity. Officials told everyone to read the Alesina/Ardagna paper (which is succinctly criticized by Christy Romer (pdf)), cited Ireland as a success story, and in general assured everyone that they could call the confidence fairy from the vasty deep.

Now it turns out that contractionary policy is contractionary after all. As a result, despite all the austerity, deficits remain high. So what is to be done? More austerity!

Underlying the drive for even more austerity is the belief that the underlying economic potential of the British economy has fallen sharply, and will grow only slowly from now on. But why?…

[W]hat’s happening in Britain now is that depressed estimates of long-run potential are being used to justify more austerity, which will depress the economy even further in the short run, leading to further depression of long-run potential, leading to…

It really is just like a medieval doctor bleeding his patient, observing that the patient is getting sicker, not better, and deciding that this calls for even more bleeding.

And the truly awful thing is that Cameron and Osborne are so deeply identified with the austerity doctrine that they can’t change course without effectively destroying themselves politically…

Why are Cameron and Osborne incapable of admitting that they made a bad mistake, firing their advisors, and changing their course? I think that it's the fact that they have been raised on the myth of Margaret Thatcher, who Stayed the Course.

But this time there are no crazy Argentinian generals who throw people out of helicopters into the South Atlantic to start a war and serve as defeatable villains...