From the The Courier, “Osborne defends austerity measures”:

George Osborne, who has announced plans for a further £3.2 billion squeeze on welfare bill which will hit 10 million of the unemployed and working poor, warned they would be among the ones who would “suffer the most” if there was another crisis.

In Europe, some nations had “backed off” austerity and “here we are in 2014 with a number of those countries facing economic crisis again”.

I won’t recount in detail how misguided this analysis is — Simon Wren Lewis has ably detailed this in detail, most recently here, and earlier here and here. For now, I’ll just show two pictures — per capita income in the US and UK, normalized to the last peak, and last trough.

Figure 1: Log per capita US GDP, in Ch.09$ (blue) and per capita UK GDP, in Ch.2000£ (red), all 2007Q4=0. Long dashed line at 2010Q2, coalition government. UK population is annual midyear data from IMF WEO, interpolated using quadratic match. Source: BEA, OECD via FRED, IMF WEO database (April), and author’s calculations.

Figure 2: Log per capita US GDP, in Ch.09$ (blue) and per capita UK GDP, in Ch.2000£ (red), all 2009Q2=0. Long dashed line at 2010Q2, coalition government. UK population is annual midyear data from IMF WEO, interpolated using quadratic match. Source: BEA, OECD via FRED, IMF WEO database (April), and author’s calculations.

In other words, while the UK downturn was bigger than the US, in per capita terms, the return of the UK economy to recession follows the implementation of austerity measures. Hence, despite the acceleration in UK GDP, from 2009Q2 to 2014Q2, US per capita income has grown a cumulative 3.5% more in the US than in the UK.

As discussed in this post, divergent fiscal policies account for a large portion of the difference.