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Obama should give Cameron an economics lesson

Only one of the two leaders is stimulating the global recovery.

No meeting between Barack Obama and David Cameron is now complete without a joint article lauding the "special" (or, in this case, the "essential") relationship and recalling the two countries' past triumphs. The Washington Post is the venue for today's op-ed and the first sentence hasn't even elapsed before the obligatory reference to Churchill.

Rather than the sections on Afghanistan, Iran and Syria (where there is consensus between the two men), the most intriguing passage is on the economy (where there is not). Obama and Cameron write:

As leading world economies, we are coordinating closely with our G-8 and G-20 partners to put people back to work, sustain the global recovery, stand with our European friends as they resolve their debt crisis and curb the reckless financial practices that have cost our taxpayers dearly. We're committed to expanding the trade and investment that support millions of jobs in our two countries.

That's sufficiently bland to avoid any controversy. But it disguises the fact that while one country (the US) is stimulating "the global recovery", another (the UK) is acting as a drag anchor on it. George Osborne was once fond of boasting that the UK had grown faster than the US, "despite fiscal stimulus in the former and fiscal consolidation in the latter, showing that the problem is not too much fiscal responsibility."

But that's not a claim he can make now. The final figures for 2011 showed that the US grew by 1.7 per cent, while the UK grew by just 0.8 per cent (see graph) - one of the worst growth rates in the EU. On employment, the picture is a similar one. While Obama is putting people back to work, Cameron is putting them on the dole. US unemployment is now at its lowest level since the recession, while UK unemployment is at its highest level since 1996.

A

What explains the contrasting data? Well, while Obama chose to stimulate growth, Cameron chose to strangle it. Obama introduced an extended payroll tax cut, Cameron raised VAT to a record high of 20 per cent. As the ippr's Eric Beinhocker notes in today's Times (£), the US President's tax cut injected $92 billion a year of stimulus into the US economy, with the result that consumer spending increased by 2.2 per cent last year while it shrank by 0.8 per cent in Britain.

When Obama visited Britain last year he refused, to the despair of the Tories, to endorse Cameron's deficit reduction plan. Noting that the pair come from "different political traditions", he added that the "sequencing and pace" of fiscal contraction would be different in each country.

If and when the subject of the economy arises during Cameron's visit, it will be worth watching the two leaders' language. Having been vindicted by the data, Obama has every reason to offer some free economics tuition.

35 comments

John Cheese's picture

Øbama economically leading Cameron - ha!, that's a rich one! He can't come up with a budget or lead the Dem Senate to pass one for over 1000 days. U6 Unemployment at highest levels, Food Stamp recipients way up & he's chasing away domestic energy business! Campaigning on Class & Envy warfare & distracting voters with revenue-neutral Buffett Rule. 0bamacare will be shut down by the Supreme Court- this guy is in way over his head.

Hugh Markey's picture

Yassir, Massa President! Oh, Boy! Let's have no more of that talk about Tony Blair being George Bush's poodle.

Of course there's method in Cameron's madness. HIs party can see that the Republican flakes running for the Presidency have a snowball's chance in hell of getting elected.
Sixty percent of All-Americans are against further military adventures abroad and now Motown is really beginning to hum!
Naturally Obama's team have factored in this special relationship public relations spin. The Republican contenders have buried themselves and now Obama is merely placing a tombstone on each of their graves.
Obama might even have Dave sit in the pilot's seat.

Sucker

Mr Danger's picture

"If I was you, I would invest in a globe, you must understand, the land of Roger Federer and Cuckoo clocks is not the only destination for British Taxpayers looking to avoid tax, have you ever heard of Liechtenstein?"

Why are you correcting me? You were the one who got it wrong.

All I said was that less than 1% have foreign bank accounts, and logically many of them have accounts abroad as they will have family and businesses abroad. In fact people here on short term work who want to qualify for non domiciled status are required to use offshore accounts. That's right, the taxman himself is telling these people to be paid offshore.

"I don't remember you bring up the issue of tax cheats, I have on numerous occasions, unlike you, I am outraged that the state is being robbed left right and centre."

This is another sad attempt at a straw man.

"I find it odd that the right want to give tax cheats a tax cut by abolishing the 50p rate, who say's crime doesn't pay?"

This is totally nonsensical. If they are all cheating what difference would a cut make? And on what basis have you concluded that all high earners are guilty? Are you just extrapolating based on Ken Livingston and David Milliband? Seems hardly fair.

matthew fox's picture

I think it must be a full moon, Mr Dangertomyself is really angry today.

I take it the 500,000 UK nationals who have bank accounts in Switzerland are only on minimum wage?

I would if Tim Geithner ever blamed the snow?

matthew fox's picture

Poor answer MrDangertomyself, please try an pick up the pace.

Please try and understand what you are writing.

Again, why would someone, who is not a UK national, who resides in this country, feel the need to have a bank account located in Switzerland.

I appreciate if they are a Swiss national, logically they would have a Swiss bank account.

So are you telling me all these "immigrants" are Swiss?

Please explain the logic, a say a Canadian or Russian national, who resides in this country, yet has a bank account in Switzerland, it is some sort of biological urge?

I can these being another bad day at the office for you Mrdangertomyself.

Awake!'s picture

Well we could abolish the NHS and welfare state and use the 230 Billion saving A YEAR and spend that on stimulus... not the right thing to do though. What if that was included as 'stimulus'? the article then becomes irrelevant.
UK borrowing numbers out today, they were very good (AGAIN).
Is that why Blanchflower and Krugman and all the other totally bonkers left wing 'economists' gone quiet? Or is it because somehow Europe has stabilised for now and this bodes well for the UK- wait for the left to start saying the upturn was due to outside factors (it will in part). Or are they quiet because of the unemploy,emt DISASTER in europe, one that doesn't even compare to UK numbers.
All the left EVER does is skew and misrepresent information to the detriment of those they are supposed to defend. They need to read the story of the boy who cried wolf because people are sick of their lies-just one stupid distortion after another.
A new real left wing party needed, one that defends the weakest. Oh hang on, that'l be what cameron's doing...

Shinsei67's picture

You should have listened to the discussion on Radio 4 this morning about the US & UK economies and you might have written a less partisan article.

The US and the UK are running almost identical levels of budget deficit (8-9% of GDP) so there is no difference in stimulus between the two countries.

US has seen strong population growth recently which has boosted GDP growth. In terms of GDP per capita the UK has actually been out-growing the US.

US state spending has actually been contracting quite severely as central government has increased. Overall, IMF figures show that public sector spending in the US has contracted at a similar level to the UK, at a shade over 1%.

Dickie1's picture

"...and curb the reckless financial practices that have cost our taxpayers dearly."

There is no way this part is of joint authorship. Cameron would have us believe it was all Labour's fault and refuses to implement changes to the banking system till 2019. He wants to keep taxation on millionaires to a minimum and force people to work for benefits, which rules "...to put people back to work" out of his authorship too.

This is vague enough to be his: "We're committed to expanding the trade and investment that support millions of jobs in our two countries."

Mr Danger's picture

"I take it the 500,000 UK nationals who have bank accounts in Switzerland are only on minimum wage?"

As usual you get the facts hopelessly wrong. It is UK residents, not nationals, and it is foreign banks, not Swiss. It doesn't shock me that a bit under 1% of UK residents have a foreign bank account. Ever heard of immigrants?

In any case, as I said before, if they are all evading taxes they're doing a terrible job of it as they are still paying 30% of the total.

matthew fox's picture

A " Kleptocratic Thugocracy " still winging I see.

Is Canada a " Kleptocratic Thugocracy" too ?

You still not able to explain why " Immigrants " still feel the need to open a bank account in Switzerland. What about Ireland, France, Holland, Denmark, surely have the ability to offer bank accounts to these Foreign Nationals?

I sense your argument is not stacking up Mrdangertomyself.

Do some research before opening your mouth's picture

From what Shinsei67 has posted, it would seem Obama should be asking Cameron for advice, not the other way around.

Mr Danger's picture

"Obama introduced an extended payroll tax cut, Cameron raised VAT to a record high of 20 per cent."

You mean Obama extended a payroll tax cut and Cameron raised the top tax rate 10pp to 50%.

Oh wait no we're not allowed to criticise that tax hike, because it is a glorious class war tax hike.

"US unemployment is now at its lowest level since the recession, while UK unemployment is at its highest level"

And yet UK and US employment are virtually identical, which is why you didn't chart them.

Don't worry George, most people here are too partisan to care if your analysis is swiss cheese.

Shinsei67's picture

@Agent

"and refuses to implement changes to the banking system till 2019."

You seem a little confused. The independent Vickers Commission laid out a number of banking reforms and set a timetable for their implementation.

The coalition is implementing all the proposed reforms and to its timetable.

Bear in mind that the 2019 date is for the completion of all reforms. Many have already been done.

So saying Cameron "refuses" to implement reforms is just staggeringly inaccurate.

Awake!'s picture

Fox
u qualify as a bona fide reason as to why mankind will probably obliterate itself in a nuke winter. Your inability to interpret reality, your repeated insistence on a point and then denial when faced with actually having to back it and refusal to carry ANY logical thought process through to a conclusion undermines your camp. You confuse opinion with fact and have zero mathematical ability or financial understandings, yet it does not prevent you from commenting on economics regularly. You are a village idiot who undermines the very cause he seeks to further but is too unaware to see or feel that.
You'd vote for a pile of excrement as long as it had a red rosette on it.

Dickie1's picture

"You seem a little confused."

Do I really. It would be open to Cameron/Osborne to implement all changes sooner. There is a general reluctance to get on with the job and I seriously doubt that any so-called independent report is either a, fully independent (these things don't exist in a vacuum you know) or b, expressly intended to make the process happen quickly - most politicians and their like and kick things into the long grass if at all possible. How come the NHS reforms are happening so quickly? it wasn't there where the financial collapse was spawned.

"Many have already been done." yes, yes, you invariably find that whenever a report comes out many of its recommendations have already been implemented. It's one of those things you can claim if you procrastinate forever.

I also notice you had nothing to retort about millionaire's tax and working for benefits.

Mr Danger's picture

First of all, you are obsessed with the idea that these are all Swiss bank accounts. As I pointed out, they could be US or Pakistani or Japanese or anywhere. All we know is they are not UK.

"Please explain the logic, a say a Canadian or Russian national, who resides in this country, yet has a bank account in Switzerland, it is some sort of biological urge?"

Because Russia is a kleptocratic thugocracy? Because the Russia tax authorities have been know to not only steal money from people, but to murder anyone who investigates it? Again, what a moronic question!

And were you even paying attention when I pointed out that UK tax authorities REQUIRE you to use an offshore account if you want to be treated as non-domiciled?

"I can these being another bad day at the office for you Mrdangertomyself."

To be fair this sentence makes more sense than most of your arguments. Good effort.

Shinsei67's picture

It's also worth pointing out that much of what counts as "stimulus" in America is stuff that happens anyway in the UK through "automatic stabilisers", such as the various unemployment & housing benefits.

Mr Danger's picture

"I seriously doubt that any so-called independent report is either a, fully independent... or b, expressly intended to make the process happen quickly"

There you go then. By simply sneering at it, you prove it wrong. No need for facts or arguments, which require dreadful amounts of effort.

matthew fox's picture

Come on MrDangertomyself, you really need to understand what your writing.

What do you mean logically, when did you become an expert in people's banking arrangements.

Why would someone move to this country, only to set up a bank account in a country which is hundred of miles away?

As a general rule of thumb, the distance between London and Zurich is over four hundred and fifty miles.

Just explain to me why someone, who is not a Swiss National would set up a bank account in Switzerland?

I hope you are in for the long haul, and please read the link below, it makes grim reading for you, yet again.

http://www.newstatesman.com/blogs/the-staggers/2011/11/tax-avoidance-jus...

Hantsboy's picture

Could it be that Obama is pursuing protectionist policies ?

China's growth is slowing too.

It always comes to this in the end.

Shinsei67's picture

@Agent

"I also notice you had nothing to retort about millionaire's tax and working for benefits."

Why do you expect me to fisk your whole post line by line.

I was only commenting on one bit I particularly disagreed with.

Your piece about "keeping tax on millionaires to a minimum" is so patently silly as to be unworthy of comment. Someone on £1m pays £502,000 in tax. CGT was raised to 28% from 18% by this government. Those hardly look like minimums to me. Personally I'd have a 45% tax rate at 150k or have a 50% tax at 300k.

"Working for benefits". Well, this is largely Labour and Lib Dem policy as well as Tory. Plus opinion polls show overwhelming support that those on benefits should do something for them, if not actively seeking work.

Dickie1's picture

Assuming they pay any tax at all. What are tax loopholes? who benefits from those tax loopholes.

Slavery was popular once.

matthew fox's picture

Thank you for the bombastic attitude Mr Dangertomyself.

I am not surprised you give tax cheats a free pass, stealing from the state is actively encouraged by the right.

I do keep hearing about immigrants, your simple minded friends keep ranting about them.

In any case, the taxes are paid by the honest, not just the rich, please remember that.

Nodbod's picture

I read that the 1% pay 24% of the total income tax take in this country. Whether it is 24% or 30%, it is an enormous amount. It sort of renders the argument that "it makes little difference" rather redundant. I would also argue, because I am a jealous lefty, that they can afford it. £150,000 and beyond as an annual salary is just beyond the imagination of most people. The other thing - that it is a dis-incentive to entrapreneurs - is also rubbish. It is actually a spur as they realise to make a real difference to their income would require a major increase in income, so they try harder. Come on, if they were going to go - they would have gone. It is political posturing. However, back to the point - what have Camoron or Osborne actually done to encourage growth, stimulate industry and get people into work (on a living wage)? Not being antagonistic, I just don't know.

Mr Danger's picture

"I am not surprised you give tax cheats a free pass, stealing from the state is actively encouraged by the right."

But I haven't done either. You were embarrassed to get the facts completely wrong again, so out comes the straw man.

This government says it is against violent crime, yet every year there are thousands of violent crimes. I guess that means they are giving violent crime a free pass? And it proves violent crime is actively encouraged by the right. Or at least according to your "logic".

Awake!'s picture

Matthew fox
Please do us all a favour and shut it with your sanctimonius claptrap about taxes being paid by the honest blah blah blah... preceeding this with some waffle about the right actively encouraging theft from the state. Only a fool would write this AT THE SAME TIME as the labour mayoral candidate is exposed for his hippocrisy over taxes.
You don't even understand the seriousness of what you've writen, how offensive it is, or how you debase any serious debate with such statements.
Matthew Fox you are a monumenmtal cock breath.

Mr Danger's picture

"Assuming they pay any tax at all. What are tax loopholes? who benefits from those tax loopholes."

Assuming they pay any tax at all? The top 1% pay almost 30% of taxes.

Utterly clueless.

WoodyJJ's picture

And what percentage of total income do the top 1% earn?
Without that statistic the fact that they pay 30% of tax means nothing.

Mr Danger's picture

That's a bit harsh!

Mr Danger's picture

"Why would someone move to this country, only to set up a bank account in a country which is hundred of miles away?"

Er... maybe they had a bank account in their home country before they moved here? What a truly idiotic question.

---

Look, I sympathise with the fact that that you are a clueless leftist that obediently repeats the party line without question or thought. You can't be expected to know better.

But tax evasion has existed as long as taxes. It exists in every country at all times. Everyone is always fighting it.

What happens is that whenever there is a budget crisis, the left 'discovers' tax evasion as if it is this huge pot of free money that nobody knew about before and all we have to do is reach out and take it. Problem solved! No cuts needed.

The problem with this idea is that it is utterly stupid and naive. Its like discovering crime and saying "oh lets just solve all crime, that would give the economy a huge boost". Nobody would say anything that stupid about crime, yet every day some moron is telling us about tax evasion as if it were some fantastic revelation and that nobody, until now, thought of putting a stop to it.

I can't make it any simpler for you, so if you still don't understand, please seek help elsewhere because there's nothing more I can do.

Jos's picture

Awake & Mr Danger

you know Mathew Fox is Danny Blanchflowers blogging name?

Mr Danger's picture

They can't simultaneously pay 30% of tax and not pay any tax at all. Surely you can figure this out.

Its rather amusing to have someone demand further facts from me when so far they have provided none of their own. Ah well that's the internet I guess.

matthew fox's picture

Lol Asleep, your really do need help.

But let me correct myself, Mr Dangertomyself, 500,000 British taxpayers not nationals, avoided tax.

If I was you, I would invest in a globe, you must understand, the land of Roger Federer and Cuckoo clocks is not the only destination for British Taxpayers looking to avoid tax, have you ever heard of Liechtenstein?

"In 2009 the UK authorities struck a deal with the government of Liechtenstein, a notorious tax haven.

If UK citizens hiding cash there confess, they will face penalties amounting to just 10% of the tax they have evaded.

They will still have to pay their back-taxes, and interest, going back up to 10 years.

As many as 5,000 British investors are thought to have stashed an estimated £3bn in secret accounts in Liechtenstein "

http://www.bbc.co.uk/news/business-14649194

Excuse me Mrdangertomyself, I don't remember you bring up the issue of tax cheats, I have on numerous occasions, unlike you, I am outraged that the state is being robbed left right and centre.

I find it odd that the right want to give tax cheats a tax cut by abolishing the 50p rate, who say's crime doesn't pay?

No Mrdangermyself asleep isn't being harsh, he seems to be on the same page as you.

How does that phrase go " Great minds think........? "

Awake!'s picture

'I find it odd that the right want to give tax cheats a tax cut by abolishing the 50p rate, who say's crime doesn't pay?'
So everyone who pays 50% tax is also stashing money in Swiss or Lichenstein, so as to, erm, avoid paying 50% tax presumably.
You're a fucking idiot cockbreath who should be put down. In war you would cost people their lives. In peace time you consume scarce resources and should be put down you're that stupid. How the fuck do u know whether people who stashed money abroad are right or left- oh, that's right, I forgot, using your shitass logic it must be right because, to quote you;
'I am not surprised you give tax cheats a free pass, stealing from the state is actively encouraged by the right.'
It's not even logic, and my hamster has more ability than you.

Bill's picture

George; next time you go to the states, get out of the five star hotel and go for a walk. An increasing number of people are in fact po. Not that you would know it from US media.

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