By Karl WhelanMonday, August 31st, 2009
On Morning Ireland today, Garrett Fitzgerald again criticised the opinion article signed by the 46 economists. However, rather than focus on the article’s principle arguments about the government’s banking policy, Dr. Fitzgerald concentrated on what was essentially a parenthetical comment about the budget deficit. Among other things, he said:
Moreover, the statement made that we’re moving towards a deficit of €30 billion was quite irresponsible and that destroyed my confidence in the 46 economists.
Even leaving aside that the fact that the size of this year’s deficit is nowhere near the key issue in the 46 economists piece, is it indeed the case that this figure was irresponsible? One way to check is to look at the forecasts of that highly responsible body, the Economic and Social Research Institute. Their most recent Quarterly Economic Commentary, based on data available through July 9th, predicts an exchequer deficit of €25.7 billion.
Since then we have had the publication of the July exchequer returns (Irish Times story here) which saw tax revenues falling behind the targets set in the April budget. It would certainly not be extreme to add another billion or so to the projected deficit forecast on the basis of these figures, putting it at about €27 billion. To the extent that these shortfalls relate to unanticipated weakness in the economy, it is likely that social welfare payments will also come in ahead of target, perhaps pushing the projected deficit up to €28 billion.
Even ignoring the fact that deficit forecasts have been coming in too low now for some time, it seems to me that this is already enough evidence to justify the statement in the 46 economist piece that
We now look to be on course for a Government deficit of close to €30 billion.
Note incidentally, the sentence is projecting a deficit “close to” not “equal to” €30 billion.
I’m afraid here that, as with Dr. Fitzgerald’s claim that the piece failed to distinguish between different classes of bank debt, this criticism seems to be largely unwarranted.
The pity, of course, is that far more people read the Irish Times and listen to Morning Ireland than will ever read this blog. So, unfortunately, the damage to professional reputations done by being branded “irresponsible” and “destabilising” by a respected public figure will not be easy to undo.