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“This is not normal…” And Brian Cowen didn’t think to tell us the news about tax on Saturday? March 3, 2009

Posted by WorldbyStorm in Economics, Economy, Irish Politics.
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Got to hand it to Eamon Gilmore. The line “This is not normal…” in the Dáil today, used to sum up the announcement of a mini-Budget in all but name… Fianna Fáil being utterly unable to articulate it (even hapless Batt O’Keefe on the Six One News attempting and then sort of giving up in resignation)… was quite brilliant.

Cutting through the hype, the earnestness, the evasions and the conceits it neatly skewered a Government front bench who had the appearance of men and women who would rather be somewhere, anywhere, else.

And it carefully articulated a sense of disbelief that in this, as all else, during the financial crisis this administration has had to be dragged kicking and screaming to carry out actions that have been self-evidently inevitable by all other observers. Indeed at every step of the way this government has been reactive, temporising where possible, ignoring where not.

So now…

Extra taxation is to be imposed in an emergency Budget from the Government by the end of March, following the publication of disastrous tax revenues.

How much? Who knows? George Lee was talking about a point or two on the lower rate, another point or two on the higher rate and perhaps the introduction of new higher still rate.

And the ridiculous aspect of this? Had the Government come clean last October, had it attempted to make a serious effort to reposition the tax base and do it in such a way that it was equitable and the inflows were seen to be directed towards fiscal stimulants, sure, it is unlikely that the opposition would have been satisfied, but arguably the social partners might have found their way to accept it.

All that time wasted. All that time gone. And still we have to do what should have been done from the off. Because at the root of the Governments inability to change has been their sense that all was still as it was before. That you can run an economy with even the half-assed level of public provision we currently have on low taxation and the sniff of gasoline from the construction sector.

Well, we now know for certain just how wrong that assumption was, even if many of us contested their approach from the off.

Nice though, had Brian Cowen admitted as much over the weekend rather than subjecting us to yet another evasive speech.

Still that said, note the response from the Small Firms Association…

The Director of the Small Firms Association Patricia Callan said the ‘damning’ Exchequer returns clearly showed that the private sector simply ‘could no longer afford to pay for the public sector.’

“The reason that tax revenues are so down is that the private sector economy is being decimated by the recession and the Government has no choice but to implement a minimum of €2bn extra cuts in the public sector, if it is to have any hope of realizing its target of 9.5 per cent GDP deficit in 2009, ” she said this evening.

No hint of an apology at the craven attitude of the series of FF-led governments who allowed this situation to develop, none either on behalf of parts of the private sector who ran rings around this state, its institutions and finances. But most curiously no sense as to what after you cut the public sector further happens to the parts of the private sector which service it…

This is not normal. It sure ain’t.

Comments»

1. smiffy - March 3, 2009

“And the ridiculous aspect of this? Had the Government come clean last October, had it attempted to make a serious effort to reposition the tax base and do it in such a way that it was equitable and the inflows were seen to be directed towards fiscal stimulants, sure, it is unlikely that the opposition would have been satisfied, but arguably the social partners might have found their way to accept it.”

True, although it could be argued – and no doubt the Government would argue – that the full extent of the likely deficit wasn’t known and wasn’t forseeable in October. What strikes me as even more ridiculous is actually as you say, but brought forward to just a few weeks ago. An actual commitment towards increased and more sustainable taxation coming out of the negotiation which resulted in the ‘pension levy’ which isn’t might have saved the talks and allowed for an agreed programme, but allowing the Union leaders (who clearly wanted to come out with a deal) to save some face and point to an actual achievement on their part.

For what it’s worth, I think it’s broadly a good thing that those talks failed. Not because I think the upcoming industrial action will be successful (I doubt that very much), but because to have rolled over at this stage would have sent a clear signal to the government parties and ICTU that the public sector, and other, unions would take whatever was thrown at it in the coming years, and the final outcome – in the longer term – might well have proven much worse. At least now they’ll know in advance that they’ll have a fight on their hands.

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2. WorldbyStorm - March 3, 2009

Absolutely agree with you and I think you’re more than likely right that there is some benefit of the doubt to be given as regards the situation in October. That said, even their the ridiculous imposition of a ‘levy’ at the Budget undermined (and underlined) their approach.

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3. Niall - March 3, 2009

I think you’re missing the big picture here guys. Should it cost us all of homes, businesses and women, we must stand firm against the onslaught of greedy public sector unions!!! Who cares about creating sustainable sources of tax income??? We need to shaft those greedy nurses and teachers!!!

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4. smiffy - March 3, 2009

Public sector unions which, for the sake of brevity, can also be described as the vanguardist shock troops of the glorious People’s Republic.

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5. Niall - March 3, 2009

I didn’t know that until the Sindo told me, but you can bet yer bottom dollar I’ll have the holy water out next time that one of those reds comes to my door!!!

Merciful Jesus! Those transparent commies have even infiltrated the home of Eoghan Harris? What other possible explanation could their be for the fact that Sindo is not only the nickname of the Sunday Independent, but also a region of North Korea (the spiritual home of those Godless public sector unions)! Good Lord, could even Harris’ reform have been a ruse?

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6. WorldbyStorm - March 4, 2009

Hmmm more than likely. Everything else he did seems to have been a ruse!

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7. CL - March 4, 2009

The rate of economic decline is now accelerating. To the extent that the govt. succeeds in narrowing the fiscal deficit it will increase the pace of the downturn. The economy is imploding in a downward self-reinforcing spiral. A ‘mini’ budget,-or a mini anything else-is not what is required. The rate of increase in unemployment is much faster than the rate that occurred in the U.S in the depths of the Depression. A peaceful, well-organized massive mobilization is necessary to halt this calamitous trajectory.

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8. WorldbyStorm - March 4, 2009

Yep. Can’t disagree.

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9. Joe - March 4, 2009

“A peaceful, well-organized massive mobilization is necessary to halt this calamitous trajectory.” Expand please.

It does seem to be going from worse to terrible but then again I still have enough for a bag of chips for lunch. But the rule books seem to be getting thrown out the window. A national government (of the right) is a possibility. Betya some people are wondering whether Dermot Earley would be a safe pair of hands.
Harris says it’s a revolutionary situation. But I don’t see the far left getting any increase in support. Gilmore and the Labour Party could be the big winner especially if the unions don’t get back into bed with this government and hitch their wotsit to Labour’s wagon instead.

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10. D. J. P. O'Kane - March 4, 2009

‘This is not normal’.

Congratulations folks – we are now officially living in a David Lynch movie.

Joe – this ‘Dermot Earley’ of whom you speak – who he?

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11. ejh - March 4, 2009

Possibly financial crises bring on this sort of thing. Some years ago I attended a meeting at Oxford Town Hall called because the local professional football club were some thirteen million quid in debt. At some point some fools in the audience started demanding that a collection be taken and in the ensuing confusion a dwarf (I am not making this up) was seen running hither and thither collecting coins and notes in a hat. At which point a friend – admittedly a Lynch aficionado – turned round to me and said “Christ, it’s turned into a David Lynch movie”.

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12. Eagle - March 4, 2009

The rate of economic decline is now accelerating. To the extent that the govt. succeeds in narrowing the fiscal deficit it will increase the pace of the downturn. The economy is imploding in a downward self-reinforcing spiral.

We need to devalue. Significantly. I can see no other option. We should have left the euro last September. We’d be better off pegged to the pound. (And we’d still be pretty sick, but not terminally ill.) The euro is killing us. Unfortunately, we’re incurring new euro debt at a tremendous rate making it harder for us to leave.

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13. CMK - March 4, 2009

Dermot Earley = Chief of Staff of the Defence Forces.

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14. Joe - March 4, 2009

Dermot Earley = Chief of Staff of the Defence Forces.
Correct. But also former star Roscommon midfielder… safe pair of hands, geddit?
I’m against being pegged to the pound. What was Easter Week all about?

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15. alastair - March 4, 2009

– We need to devalue. Significantly. I can see no other option. We should have left the euro last September.

It’s working a treat for Iceland!

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16. WorldbyStorm - March 4, 2009

Yeah, I’m no fan of devaluation. I think it would leave us at the very tender mercies of currency speculation that an open exposed economy like ours needs like… well, like a banking crisis.

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17. CL - March 5, 2009

Joe,-The essential precondition for a solution to the crisis that’s favorable to the working class is that the oligarchy that controls Irish political economy be ousted from power.
The solvency of the state is under threat because of the manner in which the political wing of the oligarchy, Fianna Fail, aided and abetted the economic wing, their bankster/propertied/developer cronies: a banking guarantee more than twice Irish GDP, and a systemic banking collapse still a probability because of inability to deal with huge banking loans collateralized with fictitious capital,-rapidly declining property ‘values’.
Mass peaceful, disciplined protest rallies, and enough general strikes as are necessary, until the government resigns.
(and comrades forget about Eoghan Harris: since the Provos became constitutional the Senator from Planet Bertie has become a pudding without a theme).

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18. Eagle - March 5, 2009

We are already at the mercy of “speculation”. Only it’s debt speculation. Hedge funds betting on our default, the rising cost of our borrowing, etc. Speculation is not to blame because speculation arises where there are stresses and the perfomance of our economy and the value of our currency are a tremendous source of stress.

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