Reforms are neither about AD or deficit reduction, the amount saved is too small to make a massive difference.(Original post by TheStudent1289)
Well if £200 million is not that much, why make the divide in society even bigger? Cuts in benefits will just result in more inequality. And if that sum of money doesn't really affect AD, surely it's not worth cutting the benefits even if it reduces the deficit? Bearing in mind that people's lives will be severely affected? Think about the elderly, disabled, unemployed or the poor who have to decide between switching on their radiators to prevent themselves freezing, or to switch on their cookers to cook a meal for themselves. These are real situations, it should not be happening in the 21st Century.
The cuts will help make the labour market become more flexible, with the added incentives people will be more likely to find employment. produce output, stimulating AD, helping us to close our output gap and create demand for further employment. In the short run the human cost will be hard to shoulder, however this is the price we are paying for the mistakes made in the past. If the price is not paid, things will only get worse and situations like those described above will become ever more common. Without supply - side reform we will not be able to increase levels of employment whilst simultaneously cutting a budget deficit, the other option Keynesian economics requires government spending, which is financed by borrowing, therefore we will not be able to fulfill our main objective : deficit reduction.
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