TEN CURRENT ECONOMIC UNTRUTHS

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By Dr Michael Lloyd

 

1. The money has run out; if we spend more on the NHS we must spend less on something else.

Answer: The money has not run out is is simply in the wrong place (e.g. £750 billion cash held by UK companies)

 

2. We need a ‘cap’ on the social/welfare spending budget.

 Answer: We don’t. Pension provision is 55% of the budget and is not welfare.  Housing benefit goes to landlords and should be controlled by private rent control. Disability benefits are just what they say they are and should not be cut. Other benefits are small and vary with the economic cycle, i.e. unemployment benefits’

 

3. We need a cap on the UK’s net public debt

Answer: We don’t. Public debt, i.e. bonds, is actually income provided to the non-government sector, in the form of exchangeable interest-bearing assets, with guaranteed redeemability at the end of the term of the bond.

 

4. We must pay off our public debt or we will leave our grandchildren to pay

Answer: Not true. Our grandchildren will have the same choice as we have, i.e. either to pay off the debt via transferring money from all taxpayers to selected non-government bond-holders or to continue with the debt. There is no final day of reckoning for a country such as the UK.

 

5. We should run public budget surpluses.

Answer: If we do then the private sector, including households, will have to run deficits, i.e. will be forced to borrow. If they do not then recessions will occur (as the historical record shows)

 

6. We cannot increase the minimum wage because we will lose jobs

Answer: Not true. Those on the minimum wage will spend any increase they receive and create jobs. Any jobs lost because companies cannot afford to pay a living wage will be more than made up elsewhere

 

7. We cannot afford higher state pensions because there will be a smaller proportion of the population in work than retired

Answer: Not true. Pensions is an issue about the distribution of national income whatever its size and rate of growth, which depends substantially on capital investment and technical progress

8. High taxation damages economic growth

Answer: Unproven. Historically we have had much higher marginal rates of tax and economic growth was much higher, e.g. 1950s

9. Everyone should have the right to own their own house

Answer: Why? Renting, at modest rates, should be a perfectly acceptable alternative to owning a mortgage. Prior to 1945 nearly 60% of the UK population lived in rented accommodation. The only valid reason for owning a house is as a capital investment.

 

10. Exporting is essential

Answer: Only partially true. One only needs to export to pay for necessary imports. The trouble is that the UK imports too much

 

 

 

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About farmerg13

22, Media Production Graduate (Sunderland Uni) from Hebburn, South Tyneside. North East Peoples Assembly and Coalition of Resistance Media & Communications Officer. Active in Hebburn South Labour Party. Admin of this blog, opinionated is putting it mildly. NUFC fan. Follow me @farmerg13
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