Last Friday, the United Kingdom’s years-long experiment in economic austerity got results: A credit downgrade from the rating agency Moody’s. This is the first time in the U.K.’s history that it has ever lost a AAA credit rating.
“UK’s economic growth will remain sluggish over the next few years due to the anticipated slow growth of the global economy and the drag on the UK economy from the ongoing domestic public- and private-sector deleveraging process,” explained Moody’s a statement justifying the downgrade. The country’s national GDP has stagnated as of late, declining 0.3% in the last quarter.
Since 2010, the leading Conservative-Liberal Democrat coalition government has been leading the United Kingdom through a protracted series of deep austerity cuts. In the wake of the Moody’s downgrade, Chancellor George Osborne announced that the government would “stick to its course.”
“As a guide to the future, ratings agency judgments are literally worse than useless,” wrote economist Paul Krugman, commenting on the downgrade. However, he described it as a “poke in the eye” for the U.K. government, which has tried to justify austerity on the grounds that it would increase investor confidence.
Meanwhile, the United States is poised to amplify its own experiment in fiscal contraction this week. Unless averted by an act of Congress, the sequester will automatically cut $85.3 billion dollars out of the federal budget on March 1. Analysis by non-partisan government agencies has already indicated that federal spending cuts have become a significant drag on the recovery.
Ned Resnikoff is an urban policy analyst, researcher, writer, and editor. His byline has appeared in a variety of publications, including the New York Times, San Francisco Chronicle, Dissent, and The Nation. He writes the newsletter Public Comment, which can be found at publiccomment.blog.