IDS, benefit cuts and making work pay.

Quote

I agree with Zoe Williams when she writes about the Tories:

… the true division of the Conservative party – the ones who are mistaken versus those who are wrong deliberately.

Some of them are simply out of their depth, do not understand the benefits system or a government’s realistic prospects of controlling the economy…Others take the Fox News approach: if you can just get enough misinformation out there, enough people who were only half-listening might half-believe you. Competing claims don’t need to relate to facts, their validity will be judged on the manner in which they’re delivered. You may have to retract later, but what does that matter? Does it even count as humiliation when the only people talking about it are the ones who disagreed with you anyway?

This is politics at its most cynical, its most rebarbative; this is politics pursued purely for personal advancement and for the game, in defiance of the public interest and the long term. I have a feeling that the first type of Tory would despise this second type even more than I do. The trick now is to tell them apart. (1)

It is open to debate as to which camp Iain Duncan Smith belongs, given his latest pronouncements on benefits:

 ‘IDS on welfare reform -how do I lie to thee let me count the ways’

‘from factcheck analysing IDS’s claimed figures which were inflated massively as you can see here

He claimed Labour spending was up 58% when it was 8%!

He claimed massive amounts of public monies being lost to fraud – the fraud rate was 0.7%!

He said tax credits rose by 20% in the last two years under Labour – It was 8.8%

 

However regardless of motivation, as George Eaton writes:

‘… even if we accept Duncan Smith’s baseline, his logic is profoundly flawed. The fact that benefits have risen faster than wages is an argument for increasing wages (for instance, by ensuring greater payment of the living wage), not for cutting benefits.’ (3)

Henry Ford would certainly have agreed with George about the flawed logic of allowing wages to decline in real terms :

I have learned through the years a good deal about wages. I believe in the first place that, all other considerations aside, our own sales depend in a measure upon the wages we pay. If we can distribute high wages, then that money is going to be spent and it will serve to make storekeepers and distributors and manufacturers and workers in other lines more prosperous and their prosperity will be reflected in our sales.

My Life and Work – an autobiography of Henry Ford, pp 86 

Hat-tip – http://www.3spoken.co.uk/2013/01/henry-ford-on-wages.html

 

In other words, Henry Ford understood ‘Keynes’ Paradox of Thrift’ and IDS et al either do not know it, or do not choose to know it.

Fundamental to macroeconomics is a very simple formula which this government seems to completely ignore:

Spending equals income equals output which creates employment.

If IDS and the Tory/LD government really wanted to get people off benefits and into work, they would raise the minimum wage and increase benefits.  That would increase spending because unlike the rich, the poor have to spend all their income on surviving.

The increased spending would create employment which would get people off benefits and into work.  Of course, this would be even more effective if government actively invested in job creation.

And as an incidental, the resulting increased tax revenue would also close the structural deficit that they’re always banging on about.

‘…  if you are obsessed with reducing deficits, the best way is to engender growth. The dumbest thing a government can do if it wants a lower deficit is to impose fiscal austerity. There are a lot of dumb governments out there. The problem is they are aided and abetted by criminal types who know full well it is dumb to cut net public spending but pressure governments to do so as long as the space for spending on them expands.’

http://bilbo.economicoutlook.net/blog/?p=22186#more-22186

As Zoe Williams says:

‘.. this is politics pursued purely for personal advancement and for the game, in defiance of the public interest and the long term. I have a feeling that the first type of Tory would despise this second type even more than I do. The trick now is to tell them apart. (1)

I look forward to her first type of Tory coming out to demonstrate against the cynical political ploys of this government.

1)   http://www.guardian.co.uk/commentisfree/2013/jan/02/iain-duncan-smith-polemic-politics-cynical

2)  http://speye.wordpress.com/2012/12/31/ids-on-welfare-reform-how-do-i-lie-to-thee-let-me-count-the-ways/

3)   http://www.newstatesman.com/politics/2013/01/memo-duncan-smith-low-wages-are-not-argument-cutting-benefits

George Osborne says we’re running out of money ..