Makes no sense at all…

Reading Stephen Collins today I was much struck by the following, really a part of his there is no alternative mantra.

The sombre prospects ahead were emphasised by Taoiseach Brian Cowen at the start of the two-day Fianna Fáil parliamentary party meeting at Hodson Bay on the shores of Lough Ree, where he warned his TDs and Senators that he would not shirk the stark realities facing his Government in the days and weeks ahead.
Whether his backbenchers got the message is a moot point.

Hmmm… what ‘message’ could that be?

While most of them spoke at some stage during the “think-in”, a number warned the Minister for Finance against making the kind of cuts in public spending that are likely to provoke strong public opposition.
Ah!

Even those who accepted the need for deep cuts argued for a sensitive approach in the budget.

Now, isn’t that an telling throwaway line? Collins appears – at least to judge from the use of the word ‘even’ in the sentence above to dismiss the idea that a ‘sensitive’ approach is a good idea.

I’m not really surprised. In the world of macho economics, or, to put it another way, let’s inflict cuts that we personally won’t experience to anything like the same degree as those on lower middle and lower incomes will (and let’s be clear, writing for our paper of record is the sort of job which while – admittedly – there have been cuts those at the middle and higher reaches won’t be overly exercised by upcoming tax increases) there’s no end to the rhetoric.

It seems that many backbenchers are an accurate reflection of the continuing public mood of denial about the kind of decisions that have to be made. In broad terms they accept the need for substantial cuts in public spending but they don’t want to accept any of the individual spending cuts recommended in the McCarthy report.

I’ve mentioned this before, this trope of ‘denial’ is an interesting one. There is of course the alternative that the public mood is one where they simply disagree with the proscriptions of Collins and others and seek alternatives. That’s not, in my book, ‘denial’ but a rational approach to our situation. That Collins et al seek to close down any alternatives effectively before they’re articulated is but another reason – perhaps – why many many are dubious of the current ‘solutions’ being put forward.

So, let’s remember that McCarthy and the McCarthy report focused on a figure that was reiterated by the Taoiseach…

During his pep talk the Taoiseach said: “This country is borrowing almost €400 million a week. That cannot continue.” The message was fine but, going by accounts of the meeting, which was held behind closed doors, it seems many TDs didn’t quite get it. They still seem to think that public spending can be slashed in some painless fashion that won’t be noticed. A number of them spoke of the need for a political approach to the budget spending cuts as if pain can actually be avoided.

Now, I’ve noted that there’s some disagreement about that figure. But what I’ve also noted is that even if we take that figure as accurate the the implementation of €3bn ‘savings’ from McCarthy would see a drop to €343 million. However as noted by Michael Taft and others such savings would be unrealisable. A more realistic figure, and one which appears to be underpinned by the ESRI projections is in or around €371 million.

Somehow the sole trader in me – for yes, that’s been part of my shtick too – doesn’t find the line ‘This country is borrowing almost €371 million a week… and that can continue” highly persuasive – and that’s before the socialist in me gets to the issue of what we lose societally for that €29 million saved. And particularly not at the cost that Collins appears to think acceptable.

The mood of the meeting convinced some of the senior figures in the party that the implementation of the detailed recommendations in the McCarthy report will simply prove impossible to sell to the backbenches, never mind the public.

The alternative is to adopt a strategy focused on a few big cuts that will deliver the €3 billion in savings required by Brian Lenihan for next year rather than fight a line by line battle over the 1,000 cuts recommended by McCarthy.

So how does Collins recommend that that occur?

“The only way to deal with this is to cut public sector pay across the board and probably do the same with welfare payments. There will be war, of course, but at least we will face a straightforward battle and not a whole range of debilitating skirmishes that will ultimately leave us weaker politically and probably not get the job done anyway,” said one Minister.

Except there’s a problem there. The figures don’t add up. Even a 5 per cent cut across the board, as advocated by John McHale recently (and note our Stephen is remarkably sanguine about the deflationary effects of such an act) would only save €0.7bn or to put it another €13 million saved a week if it were lashed in in one year, or €6.5 million per week if it is introduced across two. I mention that last because McHale argues for the policy introduced across two years although he is no man of the left – perhaps because he’s a little less sanguine about the deflationary effects… And by the way that would deliver at best .3 per cent reduction in the borrowing requirement.

Which would mean that the €400 million would drop to… €387 million. As I noted not that long ago, I’m feeling safer already.

And here he delivers what he sees as further evidence of ‘denial’ and even outright LMF (or should that be L of economic MF) from the political front line…

The indications are that the parliamentary party doesn’t really have the stomach for the big bang approach but then again it doesn’t want the incremental approach either.
Theirs a mutiny in the ranks… the cowardly bastards are cutting and running because they won’t accept ‘cutting’.

“Cutting welfare is just out of the question,” said one TD.

My God, they’ve even, some of them found hearts… closely connected it would appear to their political brains…

“It goes to the heart of what this party is about and we won’t do it,” he added, but didn’t have any alternative to suggest.

Yes, well. Ask an FF backbencher an economic question and expect a partial answer.

That, in a nutshell, is the problem facing Fianna Fáil and facing the country. Everybody can agree that something drastic needs to be done but nobody wants to do it.

But his proscription seems to be essentially cosmetic. The ‘drastic’ action would result in rather less than spectacular results, financially speaking, while still seeing nothing near a significant reduction in our borrowing requirement. Perhaps a bit more ‘denial’ would be no harm. No harm at all.

BTW…Worth noting as well that Collins appears to be swinging back towards a position where he just barely acknowledges the coalition can weather the political storms ahead. Interesting.