Don’t tell the children… that public address to the nation… and… joy in heaven for ever sinner who repents (even just a little). January 28, 2009Posted by WorldbyStorm in Economics, Economy, Irish Politics.
I like John Gormley, I genuinely do. He’s one of our more thoughtful and sensible politicians. That he sits at the Cabinet table, even in the current circumstances, is no bad thing, whatever about the lack of clear positive outcomes or influence on issues close to our hearts. But one has cause to wonder… like yesterday… for reading his thoughts on the calls for a television address to the nation by the Taoiseach there’s something a little odd about his response…
…speaking on RTÉ’s Morning Ireland , Mr Gormley, whose Green Party is in Government with Fianna Fáil, appeared to signal he was against such a move, saying “a state of the nation address has echoes of Charles J Haughey”.
Which is bad how?
Mr Gormley said he was mindful of public anxiety concerning the economy but insisted Government and the social partners were engaged in a process to take corrective measures.
Well, that doesn’t answer the question.
He said: “The situation will be dealt with. There will be €2 billion in cuts. The political class will lead and we will have to take cuts ourselves.”
And nor does that. What’s particularly odd is that he comes from a political background which elevates discussion and consensus to an almost infeasible level. Look at the discussions prior to the entry of the Green Party to the current Coalition. And, let it be said, that can be a good thing.
So it’s curious to see him taking the opposite tack here. Although of course to suggest that an address to the nation is quite the same as a consensus drive approach is – of course – not entirely correct.
But, consensus led decision making does require one basic ingredient, that being information. And it is clear that Gormley recognises this when he makes mention of the ‘public anxiety’.
Let’s also be clear… it’s not just ‘anxiety’, it’s profound concern. And to me this points to the scale of the problems that the political class faces. As I noted on the comments to a previous thread, it seems more like the incomprehension of the political class rather than an incomprehension by the public – and incidentally isn’t that an unlovable little notion that is doing the rounds, that somehow we ‘don’t get it’. Problem is that we do, and what we appear to be being served with is reheated neo-liberalism dressed up in the glad rags of the economic crisis. In other words, let’s cut the state because there is simply no sense of an alternative path.
I’m not suggesting that that is the view of John Gormley, but I am suggesting that the narrow focus by the Green Party in this government on very specific ambitions, and an equally narrow conception of a broader public good (to the point that the noises on the Dublin Bus issue have been simply lamentable) has left them terribly exposed to the depredations of their larger Coalition partner.
And think about it. On the one hand this isn’t 1979, and yet on the other we are continually told by our media that this is the worst and most intractable crisis that we’ve faced in a generation, in two generations, since the foundation of the state… take your choice. Nor has the government been coy about making such claims.
Note yesterday’s utterances from the Taoiseach:
During the debate, Mr Cowen warned the country is facing a “huge economic challenge” that would require major expenditure savings and taxation changes.
Mr Cowen said the scale of the challenge is such that we cannot say with any certainty that any constituency or cohort of people will stay immune from impact of the adjustment.
Mr Cowen last night told the Fianna Fáil parliamentary party that cuts of up to €15 billion would be needed over the next five years.
Now either this is serious serious stuff, whatever our views on the best way to tackle it… or it’s not. And if it is the former then the very least we as a citizenry are entitled to is a basic outline of the facts as the government sees them. Not mediated through the Dáil but in clear and concise terms.
But, we’re not hearing that. Instead we’ve been given the opportunity to listen to various proxies whinge about the public sector and bemoan our feckless and ignorant populace.
Still… what’s this? The Irish Times series on the economy, the equally unlovably titled “What’s To Be Done?”… such jokers… actually had something worth reading in it.
Alan Ahearne of NUI Galway made some half-decent points, and a couple of not so decent ones. But let’s consider the former.
For here is a man willing to state the bleeding obvious…
One issue is the difficulties that wage reductions may create for households with large mortgages and personal debts. International evidence shows that the main cause of debt defaults is unemployment. Keeping as many people in employment as possible through wage reductions will minimise financial distress. Reducing average public sector pay will go some way towards addressing the situation in the public finances.
So far so typical of our econometariat.
…an often overlooked point is that even large-scale public sector pay cuts would only have a moderate effect on the fiscal deficit.
Well, overlooked by some. Pray do continue Mr. Ahearne.
A 10 per cent reduction in public sector pay and pensions, for example, would reduce Government spending by €2 billion. But when account is taken of the associated loss of tax revenues (both direct and indirect), the net reduction in the budget deficit would be a little more than €1 billion.
Now granted this point was raised here on the CLR yesterday, but it bears repetition. As does his next thought…
Comparing that figure to the €16.5 billion in spending and tax revenue adjustments that are required to restore fiscal balance by 2013 underscores the enormity of the task facing the Government. Reducing public sector pay is a necessary part of the effort to improve Ireland’s cost competitiveness, but fiscal consolidation will require many other adjustments.
But if you like that, even in part, then you’ll love this…
I suspect that much of the rhetoric in the media about public sector pay and reform is an attempt by some of the least well-informed commentators to distract attention from the main source of our economic woes. The mess in which the Irish economy finds itself largely stems from the house price bubble, not from problems in the public sector. It is probably not a coincidence that some of the most vocal critics of the public sector today were among the most conspicuous cheerleaders for the housing boom.
Ahearne can’t resist lapsing a little…
That is not to say that major public sector reforms are unnecessary. During the boom, surging tax revenues from the property sector allowed the Government to meet the increased demand for public services without major improvements in productivity.
Or indeed this…
The meltdown in the public finances means that a more radical programme of reform is needed if spending cuts are not to translate into excruciatingly painful reductions in services. Parts of the public sector are wedded to archaic structures and systems that act as barriers to improvements in efficiency and sap employee morale. A more agile and entrepreneurial public sector is sorely needed.
An aside. What exactly would the shape be of an ‘agile and entrepreneurial’ public sector? HSE staff stepping across the midlands in tight formation selling pills and potions? Dole office employees leaping in one bound across counters to wrestle malefactors to the ground. How does it work? It sounds good… I’ll grant you that. But it is essentially meaningless.
There are good structural reasons why the public sector is not ‘entrepreneurial’. And a clue is in the name.
Anyhow, there’s not much different in Ahearne’s prescription, despite his nod towards the public sector than in McHale’s the previous day.
The international experience provides evidence about how best to approach fiscal consolidation. Studies suggest that consolidation is unlikely to be successful if it relies on reductions in productive capital spending. Cuts in current spending and transfer payments usually result in a faster escape from the fiscal doldrums.
Still, he has some thoughts on the presentation which are worth considering in light of the aversion to an address to the nation.
Second, the consolidation programme was designed as a comprehensive package. Presenting the consolidation measures in one package made it clear to all interest groups that they were not the only ones being asked to make sacrifices.
Third, the government communicated honestly with the public while the programme was running. As a result, the public knew that large sacrifices from everybody in society were required.
And he points also to another obvious issue…
There is a strong argument for broadening the tax base using a residential property tax, as recommended recently by the National Competitiveness Council. Income tax rates should not have been cut during the boom when the economy was overheating, and will now need to rise. The higher tax band will likely have to be increased to a level well beyond the 48 per cent rate favoured by the Irish Congress of Trade Unions if the current budget deficit is to be eliminated by 2013.
Yet he notes something that many of our more red-blooded commentators seem to willfully ignore as they urge us to soak up the ‘pain’.
Public acceptance of this painful medicine is critical if we are to avoid the social unrest that is occurring in Greece and Iceland. The public will presumably not be willing to put their shoulders to the wheel unless the burden-sharing associated with the fiscal consolidation is perceived as equitable. That means requiring those who benefited most from the property bubble to make the largest contribution.
Extraordinary gestures of sacrifice from our political leaders and other figures of authority who oversaw the bubble and whose misguided policies contributed to the current crisis would be helpful in securing social solidarity…Those who are responsible for the horrible economic morass in which we find ourselves must be held to account.
That’d be nice.