Markets Are Treating the UK As if it’s a Developing Economy, Paul Krugman Says

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Cutting taxes in the hopes of fueling economic growth is a “zombie” idea, Krugman said. Meanwhile, the US economy took off during the Clinton administration, which raised taxes. 

“But officials still insisted, despite all the historical evidence to the contrary, that their tax cuts would do great things for the British economy. Obviously, I don’t believe their assurances. More importantly, neither do financial markets,” he added.

The turmoil in Britain’s markets could be an overreaction. Still, it is a testament to the “crisis of confidence” Truss has set off overseas, which could be an omen for the British economy in the near future, Krugman noted.

“There is no reason anyone who isn’t a right-wing apparatchik, sealed in a hermetic intellectual bubble, should believe that tax cuts for the rich are the answer to what ails us,” he said.