NEWPORT, Wales — Is this what life on the other side of the “fiscal cliff” looks like?
If President Obama and congressional Republicans fail to reach a deal in the coming weeks, Americans face a fierce wave of tax hikes and spending cuts that could threaten the U.S. economy. Yet Britain has already crashed over its own economic precipice, with the Conservative-led government unleashing a radical experiment in austerity since coming to power in 2010 that has seen public spending corralled and taxes increased on this side of the Atlantic.
Newport fish and chip shop owner Alan Edwards at work in his shop.
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Two-and-a-half years into Britain’s budget-cutting plan, the world’s seventh-largest economy has just emerged from a double-dip recession with economists warning that a third downturn could be on the way this winter. One of the biggest culprits in a nation gripped by the psychology of austere times: feeble consumer spending that has slammed British “High streets” — think American Main streets — and dragged on the national economy.
Consider this hard-hit Welsh city in western Britain, where the shopping district is a shadow of its former self. A litany of chain stores and mom-and-pop shops have gone bust or moved, sending the vacancy rate soaring from 15.7 percent in mid-2010 to nearly 30 percent today. A walk down the city center presents a bleak mix of liquidation sales, pop-up thrift shops and pessimistic merchants mounting meager Christmas displays.
“I was hoping to be reaping the benefits of a life’s work by now, heading to Longboat Key, Fla., to retire,” said Alan Edwards, proprietor of Vacara’s Fish & Chips, which has seen a 20 percent drop in sales over the past two years. Edwards, who is also president of the local chamber of commerce, added: “We just aren’t getting the foot traffic anymore. People aren’t spending money. They keep watching the telly, hearing only that things are bad, bad, bad, so, of course, they’re not going to spend.”
Ending binges of credit-fueled spending was one goal in Britain and other nations after the global financial crisis, which began in the United States. But in a country where consumer spending accounts for roughly 60 percent of the economy, parts of this austerity-hit nation outside of thriving London have suffered prolonged bouts of stagnant retail sales. There are fresh indications of improving sentiment and stronger sales this holiday season, suggesting a possible light at the end of the tunnel. But vacancy rates across Britain remain stubbornly high four years after the height of the crisis.
The results here suggest a tough road ahead for Americans as they seek to slash the deficit, whether accelerated by the fiscal cliff or not. A persistently weak economy has depressed tax collections here, slowing months of gains from painful cuts and leading the government to repeatedly fall short of its deficit targets while triggering estimates of years of slow growth ahead. The holy grail of the plan — to begin cutting the national debt by 2016 — was pushed back earlier this month due to the weak economy by at least a year, and will now require even deeper cuts to achieve.