Memo to Duncan Smith: unlike the UK, the US has recovered from recession

The Work and Pensions Secretary is wrong to criticise the performance of the US economy.

It took some chutzpah for Mitt Romney supporter Iain Duncan Smith to declare on BBC Radio 5 Live last night that it was "very worrying" that the United States hadn't "bounced back from this recession". Unlike the UK, the US has more than recovered from the downturn of 2008-09.

As the graph below shows, while the US has grown consistently since leaving recession in the third quarter of 2009 (with the exception of Q1 2011 when output was flat), Britain has only recently returned to growth after three quarters of contraction. Indeed, by one definition at least, we're still in recession. Unlike the US economy, which is now 2.3 per cent above its pre-recession peak, the UK economy is still 3.1 per cent smaller than it was in the first quarter of 2008. Over the last year, while UK output has remained flat, the US has grown by 2.3 per cent.

The divergence in performance is due in no small part to the decision of the US government to pursue stimulus and the decision of the UK to pursue austerity. Barack Obama's $787bn fiscal stimulus, a mixture of tax cuts, infrastructure projects and increased unemployment benefits, is estimated to have increased real US GDP by around 3.4 per cent and to have created or saved 2.7 million jobs (see this study by Mark Zandi, a former economic adviser to John McCain, and Alan Blinder, a former vice-chairman of the Federal Reserve). By contrast, the coalition's (non-expansionary) fiscal contraction is thought to have reduced GDP by 4.3 per cent this year.

Duncan Smith is welcome to invite comparison of the two economies (not least because it aids the case against the government's policies), but he should know that there can only be one winner.

Barack Obama speaks during a campaign rally in Cincinnati, Ohio. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty
Show Hide image

Who will win in Stoke-on-Trent?

Labour are the favourites, but they could fall victim to a shock in the Midlands constituency.  

The resignation of Tristram Hunt as MP for Stoke-on-Central has triggered a by-election in the safe Labour seat of Stoke on Trent Central. That had Westminster speculating about the possibility of a victory for Ukip, which only intensified once Paul Nuttall, the party’s leader, was installed as the candidate.

If Nuttall’s message that the Labour Party has lost touch with its small-town and post-industrial heartlands is going to pay dividends at the ballot box, there can hardly be a better set of circumstances than this: the sitting MP has quit to take up a well-paid job in London, and although  the overwhelming majority of Labour MPs voted to block Brexit, the well-advertised divisions in that party over the vote should help Ukip.

But Labour started with a solid lead – it is always more useful to talk about percentages, not raw vote totals – of 16 points in 2015, with the two parties of the right effectively tied in second and third place. Just 33 votes separated Ukip in second from the third-placed Conservatives.

There was a possible – but narrow – path to victory for Ukip that involved swallowing up the Conservative vote, while Labour shed votes in three directions: to the Liberal Democrats, to Ukip, and to abstention.

But as I wrote at the start of the contest, Ukip were, in my view, overwritten in their chances of winning the seat. We talk a lot about Labour’s problem appealing to “aspirational” voters in Westminster, but less covered, and equally important, is Ukip’s aspiration problem.

For some people, a vote for Ukip is effectively a declaration that you live in a dump. You can have an interesting debate about whether it was particularly sympathetic of Ken Clarke to brand that party’s voters as “elderly male people who have had disappointing lives”, but that view is not just confined to pro-European Conservatives. A great number of people, in Stoke and elsewhere, who are sympathetic to Ukip’s positions on immigration, international development and the European Union also think that voting Ukip is for losers.

That always made making inroads into the Conservative vote harder than it looks. At the risk of looking very, very foolish in six days time, I found it difficult to imagine why Tory voters in Hanley would take the risk of voting Ukip. As I wrote when Nuttall announced his candidacy, the Conservatives were, in my view, a bigger threat to Labour than Ukip.

Under Theresa May, almost every move the party has made has been designed around making inroads into the Ukip vote and that part of the Labour vote that is sympathetic to Ukip. If the polls are to be believed, she’s succeeding nationally, though even on current polling, the Conservatives wouldn’t have enough to take Stoke on Trent Central.

Now Theresa May has made a visit to the constituency. Well, seeing as the government has a comfortable majority in the House of Commons, it’s not as if the Prime Minister needs to find time to visit the seat, particularly when there is another, easier battle down the road in the shape of the West Midlands mayoral election.

But one thing is certain: the Conservatives wouldn’t be sending May down if they thought that they were going to do worse than they did in 2015.

Parties can be wrong of course. The Conservatives knew that they had found a vulnerable spot in the last election as far as a Labour deal with the SNP was concerned. They thought that vulnerable spot was worth 15 to 20 seats. They gained 27 from the Liberal Democrats and a further eight from Labour.  Labour knew they would underperform public expectations and thought they’d end up with around 260 to 280 seats. They ended up with 232.

Nevertheless, Theresa May wouldn’t be coming down to Stoke if CCHQ thought that four days later, her party was going to finish fourth. And if the Conservatives don’t collapse, anyone betting on Ukip is liable to lose their shirt. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.