Michael Taft: I would say this debate is turning for the worse, but that would be incorrect. You need to have two sides in a debate. All we get is an orthodox drumbeat, calling forth the animal spirits of just one side. Still, let’s at least celebrate some of the more surreal contributions in this one-sided debate.
Take Cliff Taylor, for instance, writing in the Sunday Business Post. He warns that too much agitation in the streets will undermine international investor confidence. No surprise there – spooked international markets is a basic ingredient in the deflationary stew. What is really eyebrow raising, though, is this little treat:
‘We got some international kudos for taking steps to get our public finances back in order.’
I didn’t realise that was what Fianna Fail has been doing. I didn’t realise that’s what it’s called. Let’s run through the chronology
• In October last year Fianna Fail introduced an income levy and some cuts to social welfare in order to hold the fiscal deficit at -6.5 percent
• A few week later they said they would hold the fiscal deficit at -9.5% by cutting public sector pay by €1.4 billion and some education cutbacks
• In another few weeks, fearful that the fiscal deficit would blow out over -12 percent, Fianna Fail introduced even more levies, cut spending even more to maintain a new fiscal target: -10.7 percent
26 weeks – three different fiscal targets, one lower than the other.
And now? Well, that last target has bitten the same dust. The ESRI projects the fiscal deficit to be 12.9 percent at year’s end. They project next year’s deficit to be 12.8 percent – and that’s counting the €4 billion contraction planned for the upcoming budget.
Only in Ireland, only when discussing public finances, would missing three targets in one year, would seeing your original target balloon over double its size, be called ‘getting our public finances back in order’. There are other phrases that more readily come to mind – gross incompetence, failure, public finances disorder.
There are two processes at work here in this one-sided debate presented in the media. No one should be allowed to question the desirability of pursuing fiscal measures that actively cut growth during a time of contraction (or if they do, they are to be accused of not being serious, of being a vested interest, of not facing reality).
No one should be allowed to ask why, when investment is collapsing, the government should cut investment further. Or why, when consumer markets are being hit, the government should cut disposable incomes through either tax increases or public spending cuts. Or why, when unemployment is rising, the state should do nothing to create new jobs – even if for a short period.
Essentially, no one should be allowed to question the desirability or the workability of deflationary measures in deflationary times.
But there’s another, more unnerving process at work: we are being asked to forget. There is an insistence that we forget about all these targets that were set and missed. If we remembered, we might start asking those inconvenient questions – about growth, investment, consumer spending and jobs. If we forget, then commentators can call what is happening ‘putting our public finances back in order’. And we all nod and go back to sleep.
So, even if we disagree about how to proceed, at least let’s remember. War is not peace, freedom is not slavery, ignorance is not strength,
And a fiscal shambles is not fiscal order.