IDS, benefit cuts and making work pay.

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 ..

12 thoughts on “IDS, benefit cuts and making work pay.

  1. I’ve said before, in other guises, this isn’t a Tory government, it’s a Toff’s government. I’m pleased to see others are starting to agree. The rank and file Tory, say a local shopkeeper who believes in hard work industry, wouldn’t want anything to do with Duncan-Smith’s hate-filled rhetoric if they had the time to understand it for what is was. I’ve also said the best way to deal with IDS is to hand him the microphone, turn it up load and let him bury himself. Happily, so it’s proving. Duncan-Smith is a bad, bad enemy to the sick, disabled and the unemployed but he’s a far worse enemy to himself. Expect lots more of this as his precioussss, Universal Credit, recedes into the distant future. I fully expect to see him having his breakdown in the glare of the public eye, the sooner the better too. What kind of political system do we have which permits the presence of so damaged an individual in any position, let alone one of authority over a section of society he clearly despises? I’d suggest it’s a redundant one, serving as it does no interests outside its own small circle. It’s time to think again.

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  2. Fiscal policy is about balance…. If you over inflate the economy with public spending, you get inflation and de-valuation. If you under spend, you get inflation on essentials and comoddities and recession on everything else.
    The “re-balancing” of economies, who tend to buy imported goods, turning them into GDP defecit nations vs exporting natios or segments who run a trade surplus.
    Britain used to run trade surpluses….. There are those in the Tory party who want to get a grip on the good old days of Victorian enterprise, at the expense of the poorest.
    There are plenty of career politicians but few real public servants……
    The revolution will not be Televised…..

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    • Fiscal policy is about balance but in the present circumstances, there is little danger of internally created inflation because there are 8m underemployed or unemployed resources (people) whose productivity is currently wasted. After all 375bn of QE was not inflationary. Victorian Britain was able to run a budget surplus because, like Germany today, they were able to export on a huge scale. However, when all nations are trying to export to get out of the recession… it is bound to fail as it is in the UK now.

      I agree ‘There are plenty of career politicians but few real public servants’ and it seems that few of them think it necessary to understand anything about basic economics.

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      • It’s suggested in some circles QE is hghly inflationary as it hands hot money to the banksters who then gamble on things like food prices with it, causing prices to rise. If the money had instead been spent into circulation on shovel-ready wealth creating projects, there’d be none at all (pkay, bar maybe a little technically initially, for the pedants). The Maastricht Treaty stopped the legal possibility of that though, dictating that monies created by the central bank not be spent by the Treasury but by the private banking cartels as they please. No-one in authority seems keen on admitting this, preferring instead to maintain the pretence that if the private banks have their bottom line shored up they’ll be more inclined to ‘lend’ into the community. The banksters, of course, couldn’t care less about the community, and go immediately in search of more instant profit. We need a new publicly-owned banking system as they have in the emerging BRICs countries, one which returns profits made to the communities which makes them.

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  3. “Back on the street I saw a great big smiling sun / It was a Good day and an Evil day and all was bright and new / And it seemed to me that most destruction was being done / By those who could not choose between the two” – Nick Cave: ‘Darker with the Day’

    Great post, as always, Sue 🙂

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  4. Pingback: IDS, benefit cuts and making work pay. | SteveB's Politics & Economy Scoops | Scoop.it

  5. Zoe knows what she is on about. What is staggering is that politicians still can’t understand why we despise each and every one of them; well I do. “If you can just get enough misinformation out there…” and they actually imagine they are getting away with it. Only three things they are interested in – self, self, self.

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