RENEE MONTAGNE, host:
And in the U.S., there's a lot of talk about budget cutting to bring down the deficit, but few politicians here are willing to provide specifics. Certainly not on the scale of the British plan.
David Wessel joins us to talk about what British-style austerity would be like in the U.S. He's economics editor of the Wall Street Journal, and also a regular guest on this program. Good morning.
Mr. DAVID WESSEL (Economics editor, Wall Street Journal): Good morning, Renee.
MONTAGNE: You know, listening just now. How does the British government's budget-cutting plan compare to what's being talked about even just talked about - here in the U.S.?
Mr. WESSEL: Well, the British government is actually proposing real cuts. In the United States, we just talk about cuts in general, nothing in specific or not very much in specific. But the magnitude is interesting here. The International Monetary Fund says the British Government is trying to reduce its structural deficit that's the part that's not cause by a weak economy by about 1.7 percent GDP in a single year. If the U.S. was going to do that, that would be $250 billion of deficit reduction, tax increases or spending - or spending cuts - in a single year. Think about it this way. That's what the president has asked this deficit reduction commission that's he's appointed to do over four years.
So this is very big. Much bigger than anything that most politicians contemplate in the United States.
MONTAGNE: Although these numbers are a little hard to follow. I mean they're quite dizzying, in both countries. Let's say American politicians really did tackle cutting the deficit. I mean what would it look like here in terms of the sorts of things that have to be cut?
Mr. WESSEL: Well, if you look at what the British are doing and apples to apples comparisons are difficult, since their government is a bigger share of their economy than ours but the British government is proposing to cut one out of every 12 government jobs. That would mean laying off 180,000 federal workers in the United States if we did that. It would mean cutting defense spending and not just getting out of Afghanistan and Iraq but to cut major weapons programs.
The British government is proposing to squeeze the benefits, the entitlements that middle class and upper class British citizens get. If the United States were going to do that, it would mean raising the retirement age on Social Security, it would mean re-opening Medicare to save some money there. It would mean cuts in programs from education to technology in order to squeeze the domestic spending, which accounts for about 1/5 of all government spending in the United States. And frankly, it would mean tax increases and not just on people over $250,000, as the president proposes, but probably on a much bigger set of people.
MONTAGNE: Okay, David. Tax increases. Not also something very popular in this country. Tell us more about what you think would have to be done there to make a difference in the deficit.
Mr. WESSEL: The mix of spending cuts and tax increases in Britain is heavily on the spending side, and some people think that if the Republicans in the U.S. had a coherent budget plan, they would be talking about something like the Conservatives. Of course the Republicans here are dead-set against any tax increases at all. They want to cut taxes. And they haven't come forward with enough spending cuts to bring the deficit down.
We're in a somewhat different political situation than they are, of course. The prime minister proposes and his party pretty much rubber stamps what he does. The president of the United States is going to have to get a consensus before he does anything on the deficit and there simply is no sign now that he can even get a bunch of Democrats to vote to raise taxes, let alone a Congress which is likely to be more Republican.
MONTAGNE: Although can the budget ever be balanced without tax increases?
Mr. WESSEL: It would be it would be heroic. It would take, in my opinion, much deeper spending cuts than the American people would accept.
MONTAGNE: Well, you know, given all of that, I mean why is the British government able to do so much more to reduce its budget deficit than the U.S.? I mean you've just said the Americans won't accept the you know, why do the British, and why wouldn't the Americans?
Mr. WESSEL: Well, I think that the British government is in a different situation than the U.S. government. We can borrow large amounts of money from the Chinese at very low interest rates. Britain's a much smaller, more vulnerable economy. They've been forced into this because they can't count on borrowing as much money from abroad as we can. And secondly, they have a different view of how the economy works. They think the way to prosperity is belt-tightening now and you get benefits later. The U.S. government is much more worried about the fragility of today's economy. They're afraid that such a drastic deficit reduction measure would hurt the economy and it wouldnt bring the benefits in the future.
MONTAGNE: David, thanks very much.
Mr. WESSEL: You're welcome.
MONTAGNE: David Wessel is economics editor of the Wall Street Journal.
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