American exceptionalism is alive and well, much to the chagrin of British Treasury mandarins currently studying the US growth model like alchemists seeking the philosopher's stone. The latest GDP figures from across the pond show an economy that refuses to buckle under the weight of higher interest rates, stubborn inflation, and geopolitical uncertainty. For those of us who have spent decades watching the Bank of England and the Treasury fumble for a post-Brexit strategy, it is a bitter pill to swallow.
Let us first examine the American beast. US third-quarter growth was revised up to an annualised 5.2%, a figure that makes even the most optimistic UK forecast look like a recession warning. Consumer spending, the engine of the US economy, remains robust. The labour market is tight but not overheating. Corporate profits are holding up. It is a picture of resilience that leaves British officials wondering what they are doing wrong.
And they are wondering. Sources inside the Treasury confirm that a task force has been quietly scrutinising US fiscal and monetary policy, looking for clues on how to kickstart UK growth after the Brexit drag. The irony is palpable. For years, Brexiters promised that leaving the EU would allow Britain to forge its own path, to emulate the dynamic Anglo-Saxon model of the United States. Instead, the UK economy has become a case study in sluggishness, with business investment stagnant, productivity flat, and inflation proving stickier than a pint of fullers in a Spoons.
The US success, however, is not without its thorns. The Federal Reserve has hiked rates to levels that would have sent most Western economies into a tailspin. Yet the US economy absorbs them like a boxer taking body blows. Why? One word: fiscal stimulus. The Inflation Reduction Act, the CHIPS Act, and other Biden-era spending sprees have pumped billions into the real economy, fuelling investment in green energy and semiconductors. This is Keynesianism on steroids, and it is working. For those of us who preached fiscal discipline, this is a galling admission.
But let us not get carried away. The US model has its dark side. The national debt has ballooned to over $33 trillion. The Congressional Budget Office projects deficits of over $2 trillion annually for the next decade. This is not sustainable. The bond market, the ultimate arbiter of fiscal credibility, is beginning to mutter. Yields on 10-year Treasuries have spiked, reflecting fears of a debt spiral. Capital flight, that silent killer of sovereign confidence, may yet come for America.
For Britain, the lesson is nuanced. The US shows that strategic government spending, when directed at productive capacity, can stimulate growth without triggering runaway inflation. But the UK cannot simply copy the American playbook. Our fiscal headroom is limited. The gilt market is less forgiving than the Treasury market, thanks to the Truss/Kwarteng debacle that haunted us all. Any hint of unfunded spending plans sends yields soaring and the pound tumbling. The Bank of England, meanwhile, is trapped between fighting inflation and avoiding a recession. Not an enviable position.
So what can Whitehall learn? First, that supply-side reforms are not a silver bullet. Deregulation and tax cuts alone will not unleash the animal spirits if businesses face structural barriers like a broken planning system and a shortage of skilled labour. Second, that fiscal credibility is a precious currency. The US can get away with massive deficits because the dollar is the world's reserve currency and global investors have few alternatives. Britain does not have that luxury. Third, that patience is a virtue. The US economy did not transform overnight; it took years of consistent policy (and, let's be honest, a bit of luck with shale gas and tech dominance).
In the end, the Treasury's study group will likely produce a report full of cautious platitudes about 'learning from best practice' while doing very little. Because the harsh truth is this: Britain's economic malaise is not a technical problem with a policy fix. It is a structural issue born from years of political uncertainty, a self-inflicted wound from Brexit, and a refusal to confront uncomfortable choices about taxes, spending, and the role of the state. Until we face those, no amount of studying the US model will get the British economy back on its feet.
For now, the gilt market will keep its beady eye on the Treasury. Inflation will remain above target. Growth will limp along. And the City will watch, as ever, with a mixture of cynicism and resentment. The US economy may defy the odds, but Britain's challenges are of its own making. And they will not be solved by a Whitehall study group, no matter how many American lessons they take to heart.
