Accountability

According to Brian Cowen, “most economists now say that the Government’s strategy for the public finances is the right one”.

What a cheek.

Yes, most economists — indeed practically all economists — agree that the Government has to do everything possible to avoid State bankruptcy, and that the Government is now taking required action on the public finances.

However, the fact that the Government is cutting expenditure and raising taxes as severely as it now has to, thus lowering aggregate demand and worsening unemployment at the worst possible time imaginable (we can argue about the size of this effect, but its sign is in no doubt) is a damning indictment of Fianna Fáil/PD fiscal policy over the past few years.

19 thoughts on “Accountability”

  1. Cheeky indeed.

    I also doubt that many would agree with the Government’s mix of spending cuts, tax increases and asset management. I would not have increased labour costs as much as they have and cut benefits more, and I would have begun privatisation in energy and transport.

  2. “most economists now say that the Government’s strategy for the public finances is the right one”.

    Not only that, the recession is nearly over and we’re about to get back to a period of rapid growth next year.

    Methinks it has more to do with desperation for voting next week!
    Won’t help when everyone sees their payslip this week.

    I’m not an economist so presumably it doesn’t matter what I think but most business people would want to see some serious inroads into cutting public expenditure before they agree with the government strategy.

  3. I’m sorry – but what serious good would a privatised transport service be? All it would produce is a fragmented and partial service, with large swathes of the country without proper linkage, and only then after mammoth and disputatious battles with unions, the opposition, the public, etc. Look at the horrendous state of British Railways. Seriously – spinning words that sound nice is the work of poetry, not presciption.

    And sure, cut benefits – let’s really get cracking on the weakest and most vulnerable members of society.

  4. That such a statement could be made at all, never mind that it’s let pass largely unchallenged (the honourable exception of Kevin aside), not only speaks volumes for the poverty of our political discourse, but highlights the utter contempt our richly paid governing class have for our intelligence.

  5. So it depends on what way you define strategy.
    I think that the situation would be helped if there was some mechanism for the views of economists be accurately gauged. So say you vote on either the FF or FG plan for the banks or maybe competing recommendations on some public policy issue from economists. Then you can be very precise on what economists agree with.
    I cannot understand why such a mechanism is not implemented. Is it because it is too much effort to do such a thing?

  6. He obviously feels that, as economists did not call the bubble, they will row in behind him, donning the green jersey.
    He appears to have a low opinion of economists. And probably anyone who was not on his team.

    Remember Iceland.

  7. @ P J FitzPatrick

    The only problem with evidence is that it is frequently used to hang the guilty…….

  8. @ Richard Tol

    Remember that he doesn’t get the shiny car unless he can sell this pig to voters. Lotsa, lotsa lipstick!

  9. @Pat
    So keep the inexact science inexact! That’s fine but i do think input from the economic community is important in the current economic environment and every effort should be made to make this input more coherent and relevant.

  10. Even by the standard of electoral rhetoric, that statement beats Banaher.

    The dangerous thing is that he actually believes it.

  11. Its like NAMA. I was on with Matty McGrath, FF. He claimed loads of economists supported NAMA. I asked him to name one independent person who though NAMA was a good deal…….silence.

    they are in delusion-ville, USA

  12. I suspect that some of the hostility directed at An Taoiseach here is less to do with the not very important point of whether any economists agree with him, but rather that An Taoiseach is at last spotting some green shoots. I beat him to it by about 3 months.

    As figures out this week show, Ireland’s manufacturing output and exports continue to perform amazingly well. Manfacturing output was 5.7% higher in 2009 Q1 than in 2008 Q4, the only country in the EU to record manufacturing growth in that quarter. Likewise, merchandise export values were up y-o-y in 2009 Q1, against a 20% fall for most EU countries.

    The big black spot has been consumer spending and tax receipts. Now An Taoiseach says the falls here are bottoming out. If that is correct, and I have no reason to doubt him, a lot of economists are going to look silly by this time next year. Hence the hostility.

  13. Delusion is clearly a problem for you too, John.

    “Irish” exports include such things as Microsoft licensing fees, the earnings from that great “Irish” invention Viagra and many other products and services which are booked for accounting and tax purposes through Ireland.

    Strip out the proceeds of these money laundering transactions and we are in a sorry state. The current Government have decided to increase our dependency on these type of activities by the amendments relating to IP in the Finance Bill. Our future is not as a producer of real goods and services but as the Delaware of the EU & OECD countries.

    It will take the natives perhaps ten years to repair their balance sheet. Even as they start to pay down a very small part of their debt, deflation and a decline of perhaps 20% in GNP & income will increase it in real terms.

  14. “Yes, most economists — indeed practically all economists — agree that the Government has to do everything possible to avoid State bankruptcy, and that the Government is now taking required action on the public finances”

    This is semantics as I don’t think you meant it as it might be literally interpreted. I don’t agree that required action is being taken. Our recession response could easily have been drafted by accountants and is devoid of much if any economics input. If the pessimistic conclusions about the relation between announcements and outcomes dont hold true for Ireland then we might get the public sector deficit into something consistent with solvency. This would not be a small achievement but for God’s sake if this is the limits of our ambition then the funding devoted to economics teaching and research really has been wasted.

    Until a government leader stands up and gives a well researched and articulate recession recovery speech that integrates current spending reform, education and training response, capital expenditure redirection, active employment policies, household mortgage measures and begins to articulate clearly some of the problems being created by the massive downturn in housing prices in some regions then we do not have a required response.

    Obama’s plan has a lot of pork alongside sensible employment stimulus and Edgar Morgenroth has done a good service by pointing out that the cost per job of many of the hair-brained schemes floating around Ireland is too high to be a defensible response for a country in a financial crisis. We can avoid some of the mistakes of the US stimulus plan. But one thing we should emulate from Obama is the sense of a leader at the helm with an integrated view of how the various different functions he/she is in charge of need to adapt. Whoever that leader is, the SMART Economy document should not be on the government’s website as a renewal plan. It should be there as a statement of medium term strategic direction. We need a recovery plan, one that is credible and that people can rally behind.

  15. @Liam
    “Our recession response could easily have been drafted by accountants and is devoid of much if any economics input.”

    Actually no it couldn’t. There’s no cost control.

  16. Liam – that’s a good post. Sadly, I don’t think it’s going to happen. Key word – ‘leadership’. I just don’t see any – seem to see plenty of clutching at straws though. Joseph

  17. Another issue not adressed above is that the government is not cutting spending, but actually increasing it.

  18. Look through your history books ,This cowen flubbery is classic Fianna fail tactics, Heres the mantra ,Deny the mess and blame it on “OUTSIDE FORCES BEYOND OUR CONTROL” and then take credit for the recovery!Ya cant lose! If things get worse or stay shitty you say that the government have had to take strong measures for the long term future and this makes you sound stoic and patriotic,if on the other hand the economy by luck and China starts to pick up sooner than expected ,you change tack and say it was Fianna Fail Genius all along,Its classic; and meanwhile dont forget to play the whinging victim card, blame RTE for bias agin ya and George Doomster Lee for the killin of the poor tiger! Its a sure fire thing!

  19. On semantics, the OP does not contradict Cowen’s statement that the Govt is on the right track “now”. It is a blunderbuss criticism of past policy.

    The depth of insight and analysis in the replying posts speaks for itself, or rather would speak for itself if it existed. Sorry to be ratty, but this is a very disappointing discussion.

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