Scott Sumner writes a rebuttal to Paul Krugman's claims that austerity is holding Britain back:
I see that Paul Krugman is still insisting that Britain’s problems are due to fiscal “austerity,” which would only make sense if they were stuck in a liquidity trap and the BoE was no longer able to hit its nominal targets (whether inflation or NGDP.)
Even worse, he’s still using RGDP data even though NGDP is the appropriate way to ascertain the level of demand. RGDP inappropriately mixes supply-side and demand-side issues. Employment in Britain is hitting record highs (unlike the US, where employment is mired far below the peak under Obama’s policies) suggesting that some of the low RGDP reflects supply-side problems.
In America employment is still more than 3 million below the pre-recession peak. And we have a faster growing population than Britain.