The Cedar Lounge Revolution

Meanwhile… talking about the Budget… April 10, 2009

I was very taken by the front page of the Irish Times on Wednesday…

And the front page of the Budget supplement from the same edition.

Interesting definitions of ‘ordinary’.

The Budget. Why? April 10, 2009

It’s interesting reading the responses to the Budget, but it’s even more interesting considering what they mean. Because a central question about this remains largely unanswered. How are the measures taken meant to materially ameliorate our position financially? I touched briefly on this earlier in the week, but Michael Taft gives a comprehensive and disturbing analysis on indymedia and the Irish Left Review of just why, even on its own terms, this Budget is going to fail in its goal.

Which makes reading Stephen Collins in the Irish Times such a profoundly dispiriting experience. For Collins appears to be still wedded to an approach where pain is the most important indicator of ‘success’ and in fact is almost more important than the underlying issues at hand.

And Collins, in light of that, makes some startling assertions. For example:

Politically, it would have made more sense to get more of the pain out of the way this year. The balance in Tuesday’s Budget package was roughly 60 per cent tax and 40 per cent spending cuts.

Fine Gael suggested almost the exact opposite, with two-thirds coming from cuts and one-third from tax increases.

And then neatly contradicts himself when he argues that:

There are two reasons for the Government’s heavy reliance on extra tax this year – one is political and one is economic. On the political front, tax levies are the easiest and surest ways of raising necessary revenue quickly. The taxpayer has no choice: the money simply disappears from pay packets. By contrast, spending cuts take time to implement and almost inevitably provoke a much more hostile reaction from those affected. The street demonstrations of the pensioners last October frightened the Government, and Ministers were determined to avoid a repeat this time around. The nightmare scenario was widespread protests and strikes in opposition to spending cuts that could have paralysed the country and made the economic situation worse. In Greece, that prospect has got in the way of action to solve its equally bad economic problems.

Okay, so if the Government had attempted to get the ‘pain’ out of the way we’d be living in Athens now? That doesn’t seem a ‘sensible’ political approach.

Actually reading the above Collins does something rather odd which is to raise a question and then not answer it.

Consider the opening sentence: “There are two reasons for the Government’s heavy reliance on extra tax this year – one is political and one is economic”. He tells us at great length about the former. But…what is the economic reason then?

Well, he continues:

The reaction so far would indicate that taxing people was the easier political option. While callers to the Pat Kenny programme on RTÉ Radio yesterday took out their frustrations on the Minister for Finance, there is no sign of organised protest against the tax increases. The trade unions have always favoured tax increases rather than public spending cuts that directly affect their members and so are in no position to really object.

In other words only if there is baying for blood in the streets is there evidence of ‘hard’ decisions being made. It’s an interesting thought. But still no discussion of the economic reasons.

And continues:

The Government’s immediate priority was to get the Budget through the Dáil and implemented as quickly as possible in order to stabilise the public finances for the year ahead. The reaction to the Budget would indicate that it can achieve that objective, even if there is a great political cost in the longer term.

And continues… in much the same vein.

Any reader will be disappointed to learn that he never explicitly addresses the point.

But he does argue that:

Stabilising the public finances this year is only the first step. The Minister is already preparing the ground for serous cuts in public spending next year. His decision to establish a review body on higher remuneration in the public sector to benchmark pay against that in similar-sized EU countries is clearly the first step in a reverse benchmarking exercise.

Clearly Collins would appear to see the public sector cuts as arguably more important than financial stability. And think again about his phrase above as regards ‘taxing people being the easier political option’. Easier than spending cuts which he admits would take time to implement. Which, in a crisis, hardly merits comments.

But then what of this?

The Government’s central problem is that its own policies have contributed significantly to our current economic woes. The problem was not just the dependence on the construction industry and the creation of special incentives to keep it booming. The adoption of a deeply flawed and politically dishonest benchmarking process helped propel the public finances into a crisis from which it can only emerge when spending is brought under control.

For my money Collins gets it precisely wrong. It was the dependence on the construction industry that was at fault. A dependence which the newspaper that Collins writes for was happy to support through its low tax mantra right through this period. And the crisis isn’t due to crazed public finances. In contrast to other European states our size we have a poor provision of public services. It’s due to a near crazed aversion to tax appropriately across the society. And he conveniently forgets to mention the Commission on Taxation whose remit is precisely to address this inability to tax appropriately.

And the sheer oddness of this continues when he writes:

However necessary much of the Government’s budgetary policy, the public will be deeply reluctant to accept painful solutions from the people who created the problem in the first place. That is something the Fianna Fáil-Green Party Coalition will have to live with.

Which is strange considering that the Fianna Fáil/Progressive Democrat Party Coalition was instrumental in overseeing this process to almost no complaint at all from the IT. And one might question why ‘painful solutions’ are more acceptable from other parties… not least a Fine Gael party which appears to tilt economically even more rightward than Fianna Fáil (quite some trick I think we can agree).

But Collins concentrates on the political arguing that the fact that the tax increases will first manifest themselves in pay packets in May spells bad news for the Government. Perhaps so. Or perhaps the media consensus has stifled debate and critiques of the Budget. I’m told that complaints to representatives of the Government are running at a much much lower level than they were after our last Budget which indicates if not tacit acquiescence at least some degree of exhaustion at this process. Still, there’s never enough pain for some.

For he suggests that:

It would have been politically impossible to impose public service pay cuts this year, on top of the pension levy. But next year is a different matter. The same applies to serious cuts in the welfare budget which will also be required if taxes are not to rise again by a similar amount in 2010.

There is strong evidence, evidence that the US government has explicitly supported through policy (and indeed the Australian government too which has just gifted its citizens $900 to spend as part of a fiscal stimulus package – I’m not sure that’s the best way forward but at least they seem to get it) that it is precisely these measures that will stifle the already subsiding demand in this economy. The multiplier effect appears to be strengthened by giving monies to those at the lower end of the socio-economic scale. But that small point appears to elude these champions of the smallest possible state and diminishing economic activity.

And it’s not just Collins. Read the letters page of the Irish Times and it remains the public sector as the villain of choice for many. We are treated to letter after letter where we suffer from a bloated and rapacious public sector that through bench marking has somehow destroyed the economy and whose evisceration is the only strategy that can bring us back to economic success. Which is odd, not least because none of those correspondents appear to have read the OECD report which even (even!) Brian Cowen has referenced which demonstrates that our civil service (and public sector) is in terms of size and expenditure small in European terms. Which raises a further oddness. If – and I’m not averse to the idea – our public sector should be “benchmarked [in terms of pay] against that in similar-sized EU countries” that suggests that the opposite dynamic should exist. Why should Ireland drop further down the list of European countries in terms of expenditure on a public service. How is it that we are sui generis and are the only one, this former Lichtenstein on the Liffey as the Guardian puts it, to be unable to afford the basic elements of a modern advanced capital democracy.

But such thoughts are abroad elsewhere. I’m indebted to EWI for drawing my attention to the following.

Spare a thought for a small oppressed minority of right wing economists, not the least amongst them being Constantin Gurdgiev who toils away… look, why should I speak for him?

The media reaction to the Budget is hardly surprising.

Irish intellectual milieu is based on a vicious pursuit of any independent analysis and thought with a goal of eliminating any possibility of serious dissent. Anyone with a point of view departing from the consensus is left jobless and/or branded as a hack or a generally diseased mind.

Hmmm…

How many dissenters are ever asked to advise or brief the policymakers? None. How many non-consensus economists work for the Government? None. In our Universities? A handful and then only on junior posts. How many differing opinions does the Irish Times feature in its main pages? Virtually none, unless they can be comfortably pigeonholed into some agenda slot.

There are some who would demur at the notion that the Irish Times under its former Progressive Democrat editor has become a citadel of vogueish left wing theories. But he continues:

Hence today’s reaction. But also the continuous drift of consensus opinion to the La-La land of pseudo intellectualism of some of our left-of-centre pontificates. This is not reflective of any public opinion in the streets, but it is reflective of the incestuous nature of our public policy discourse.

A discourse which is firmly planted on the right. But perhaps not quite right-wing enough for him as he continues, for this concerns dissidence of course.

At least in the Soviet Union they respected dissidents enough to physically hunt them. Here, we are simply growing immune to independent thinking.

So what does independent analysis do for one? Where does it leave the sturdy dissidents of the right? Well, surprisingly – despite his complaints – his proscriptions are hardly out of step with the consensus described above…

Following the Budget last night, Irish media has gone into an overdrive. The simplistic terminology and naive analysis dominate the space between print, radio and TV with commentators heralding the Budget as:
‘tough’ – nothing tough about slicing off an odd €3bn off a deficit that is so vast. We will have to borrow half of our annual spending requirement this year – primarily, to pay welfare rates and public sector wages. In family economics, such budgeting is known as ‘reckless’ or ‘subprime’. In Lenihanomics it is known as ‘making hard choices’ (at the expense of others);’fair’ – there is nothing fair about the budget that has taken the pain of adjustments required by the serial failure of this Government (in its various past incarnations) to reign in its own cronies’ spending and dumping it all onto the population at large. Nothing can be further away from being fair than an idea that you soak the private sector to insulate and even gold-plate more the lives of the true Irish elite – the public sector dons;’timely’ – there is nothing timely about the Budget that delivers in April 2009 the corrections promissed in July 2008;’far-reaching’ – aside from ‘deep-reaching’ into yours and my pockets, the Budget failed to deal with the most pressing issues at hand. The actual deficit problem remains unaddressed. Reform of public sector – unaddressed. Economic stimulus – unaddressed. Banks financing – unaddressed. You name the topic.

Hard to put a sheet of paper between those views and those expressed by Collins and others for whom whatever the impacts on actual people this Budget can never be ‘painful’ enough.

Ah to be a dissident in such times.