LONDON

--The chancellor of the exchequer has a dry, sly sense of humor. George Osborne, 40, says Britain escaped the sort of housing bubble and crash that staggered America because whereas America recklessly expanded its housing stock, "We were saved by the fact that you can't build anything in this country."

He exaggerates, somewhat, Britain's regulatory impediments to dynamism, just as he exaggerated, somewhat, his prediction, when he became chancellor 15 months ago, that in six months he would be Britain's most unpopular man. His and Prime Minister David Cameron's wager is one that should interest Americans--the bet that Britain can simultaneously shrink the state and stimulate the economy.

Since growth resumed here in 2010, it has been a tepid 2.2 percent. In 2011's second quarter it was 0.2 percent, worse than America's dismal 0.8 percent in the first half of this year. Some say the royal wedding distracted British workers. Really.

The shrinkage of government is supposed to be more severe here than in America, where the supposedly "savage," "draconian," etc., cuts recently agreed to mean that for a decade Washington must scrape by on $43.7 trillion rather than $46.1 trillion. Really.

The British state is morbidly obese. For a third consecutive year, government will spend more than half the gross domestic product--partly because half of all jobs created during the 13 years of Labour Party governance that ended in May 2010 were in the public sector.

Britain's debt, now 62 percent of GDP, is scheduled to rise to 71 percent in 2013-14 before declining. Government devours 47 percent of national income.

The five-year goal of reducing it to 40 percent will be difficult because Cameron has a tepid mandate. In 2010 Conservatives almost suffered a fourth consecutive defeat, and failed to win a majority against an exhausted and unpopular Labour government.