Contradiction piled on contradiction… December 5, 2012Posted by WorldbyStorm in Economy, Irish Politics.
The SBP editorial this weekend calls for the following in today’s Budget:
Government expenditure simply must be reduced. For all the cacophony about cuts, and all the noise from public sector unions about how much pain their members have taken, there are a few important facts: public spending has not been reduced as a share of the economy. No public servant has lost his job involuntarily
How the involuntary loss of jobs assists our economic situation is unclear. It continues:
But given the enormous constraints within which the government operates, we believe it must place a much greater emphasis on growth. Yes, we must get our deficit down. But unless we expand our economy, the adjustment will be longer and more painful and more damaging to social fabric than it already has been. The government’s policy must be: growth at all costs, even if the cuts have to be deeper in the short term.
Will further austerity further depress the economy? Of course it will. Is there a realistic alternative to further cuts in public expenditure? No, there’s not. Is there anything to be gained by delaying the cuts in the name of fairness, or substituted tax measures that will depress growth and job creation? We believe not.
So. The measures proposed will do nothing to create growth. They will, in fact, ‘depress’ it. And yet the SBP suggests that economically this is a good thing. Yet again it resiles from telling us how much we can expect the measures it advocates as regards the Public Sector to ameliorate our situation. All it can offer is the following:
The private sector will be the engine of recovery and job growth. But it won’t be able to do that if it is strangled by taxes and regulation. Allowing the private sector to recover must be the priority for the budget.
But a private sector with yet more spending sucked out to of the economy is a private sector that can’t grow. Let me quote a voice from the SBP’s pre-Budget roundup of business people…
“They can’t take any more from the PAYE worker because they are being squeezed far too much, therefore the disposable income isn’t out there. As such, there will be pressure on retail. Our biggest challenge is to sort out the current situation with the troika and try either to extend our loans or get relief on our debt.
“There isn’t any hope if we continue to take money out of the economy. The economy is at breaking point; you can see shops closing around the country. There is only so much that people can take.”
Pat McDonagh, founder and managing director of Supermac’s, the fast food chain
As it happens I hold no candle for the public sector, other than a concern that attacks on public sector conditions and pay will inevitably result in yet further attacks on private sector conditions and pay – and having spent most of my working life in the latter area I’m all too well aware how that dynamic works and how painfully poor provision is for workers there. But PS workers are PAYE workers too.
And the contradictions pile up. Austerity will depress the economy. So full speed ahead with cuts. And alternatives?
This means no new taxes on employment. No changes to the sick leave status quo, forcing employers to bear more costs. In the future, maybe, but not now. No more red tape – and more aggressive action to reduce the burden of regulation and sometimes ludicrously intrusive labour laws.
We are assured that the budget will be fair, as if that will satisfy people. But what’s really fair? Strangling the country with high taxes and red tape and consigning a generation to high unemployment and emigration, or doing everything you can to generate the growth that will give governments the resources to protect welfare and social spending in the future?
But what works? The current approach can’t. Kenny refused to answer Shane Ross last week in the Dáil chamber when he was asked if the debt was unsustainable, but the general consensus is that it is not – a consensus, by the way, which stretches all the way to the editorial writers of the SBP. That being the case, and given this economic analysis here that suggests tax increases are only slightly less damaging to an economic recovery than expenditure cuts – with the consequent point that they are less damaging to the society itself and social solidarity, then what is the case for the SBPs adherence to the latter? Surely it couldn’t be ideological?
Sure it could.