Monday, 8 March 2010

All the wrong options have been pursed: open letter in today's Irish Times

28 economists, social scientists and economic analysts (many of them familiar to PE readers) have written an open letter, published in today's Irish Times, arguing that the Government's economic strategy is failing, and warning that the current approach of spending cuts combined with tax increases on low and average income earners will bring about a low-growth, high-debt future. The result, they say, will be a joyless, jobless recovery. Instead, they argue, we need a reversal of policy and a new investment strategy which can not only address our serious economic and social deficits but can generate employment in the short-term. Investment coupled with a restructuring of taxation and expenditure in a progressive and expansionary manner to ensure a job-rich recovery - this, and not the current deflationary strategy, is the road to prosperity.

Click here to read the full text.


Proposition Joe said...

along with general tax increases on low and average pay

Are ye guys looking at an entirely different budget to the rest of us?

In reality, the tax increases were heavily skewed in favour of those on low pay.

In fact that's one of key imbalances threatening the long term stability of our tax system ... Irish people on low and average incomes pay far too little income tax.

That's not to say that those in the higher deciles shouldn't pay more also (as they have done already, and will no doubt be called on again).

Michael Taft said...

Joe - for a single person on €30,000, €1,200 was taken off them in the October/April budgets; for someone on average pay, the amount was €1,400. To do this in the middle of the biggest collapse in consumer spending incurred by any Euro zone country was irrational. Targetting the 'spenders' depressed demand resulting in more businesses out of business (we're still feeling the shocks)and, consequently, further increased unemployment. Hence, the phrase 'short-term and reactive'. The first rule of fiscal policy in a recession is to shorten the duration and lessen the impact of the downturn. I agree we need to raise the level of Government revenue - but you don't start with the spenders in a recession. And what is desperately needed is a debate over the kind of taxation architecture we need - a debate that has not commenced. Hopefully the TASC article will hasten the start of that badly needed debate.

Anonymous said...

There was nothing about the banks:
"All this becomes even more necessary given the potential capacity of Nama to pile up considerable debt; at the same time there is little evidence of credit being freed up for investment purposes."

Also no mention of how spiralling land etc costs swallowed public money during the boom.

It is a blueprint for a better future. But with the discredited, corrupt, incompetent present government in office even their adopting it will make little difference. Mary Coughlan and Noel Dempsey as our saviours? Yikes.

Anonymous said...

Fairly comprehensive critique of the open letter from Constantin G.

Id like to see if his criticism can be rebutted.

Paul Hunt said...


I have an idea you could be waiting for a comprehensive rebuttal. It's far easier to attribute the current disaster to "free market" ideology and to use poorly defined comparative data to argue for "more government" than to address the collusion of government, the permanent government, big business, the professional classes and the unions that landed us in this mess.

Nat O`Connor said...

I have posted a response to Dr Constantin Gurdgiev's comments here.

I welcome any feedback.