I’ve always wanted to be Superman – you know, “Faster than a speeding bullet! More powerful than a locomotive! Able to leap tall buildings at a single bound!” Unfortunately, I didn’t look good wearing tights and accepted that harsh reality.
The new UK Prime Minister is Liz Truss, and we wish her well, but I suspect she wants to be the legendary Margaret Thatcher, her predecessor between 1979-1990, who famously cut taxes and attacked labor unions. She and US President Reagan implemented supply-side economics, and both the UK and US economies boomed. Therefore, they “proved” the superiority of supply-side theories. However, both the UK and US economies were weak and moribund at the time. Unemployment was high. There was more concern with deflation than inflation. Those were the right conditions for supply-side policies. Today is not.
Today, the UK is facing strong inflation and weak employment. Truss has already cut taxes and telegraphed her concern about the level of business regulation. In reaction, the pound is plunging, interest rates are rising, and their stock market is sinking. Unemployment is certain to rise.
Good medicine but bad timing! Hopefully, she will accept that harsh reality quickly. A weak UK is a drag on the US!