Anyone who doubts the severity of this crisis should take a look at this chart.
These are now out. The general government balance for 2009 is now projected at minus 12 percent of GDP.
This statement was published yesterday (hat tip to Jonathan Westrup) and contains many proposals for developing regulatory capacity in Ireland. Amongst the most interesing are the proposal to increase the transparency of strategy and results for regulators and to enhance the monitoring capacity of departments over agencies, new networking arrangements between departments and agencies (an annual forum) and between agencies and stakeholders and increased support (within current resources, of course) for research and training in regulation. The statement is underpinned by a report on economic regulation in Ireland completed earlier in the year by the Economists Intelligence Unit and also published yesterday here.
The CSO has released a multivariate analysis of the 2007 National Employment Survey which shows broadly similar results to the recent ESRI study (which used data from the 2003 and 2006 surveys). I imagine that next week’s ESRI seminar should stimulate some interesting debate on this important topic.
With the Lisbon debate now over bar the voting and counting, I’m hoping that despite widespread exhaustion with the topic of NAMA, we can now have a debate about this issue that doesn’t involve misleading spin about IOUs, free money from the ECB, support from international organisations and the like. It’s with that in mind that I have written this article for today’s Irish Times.
Reading it now, the tone seems a bit more strident than my usual approach but I think it’s important that misleading spin be seen for what it is so that we can return the focus to the basic questions of correctly diagnosing the problems with our banking sector and designing fair and efficient ways to deal with them.
For that reason, I don’t plan to engage in a comment-fest here on the various distractions that have been been central elements of the government’s PR campaign on NAMA. If you don’t agree with me about free money, IOUs, ECB, international organisations, or frogs and locusts, fine, but I’ve said my piece on these and don’t see much benefit from repeating myself any more.
Awarded to the entire police force of Ireland for issuing more than 50 penalties to a man they supposed to be the most persistent driving offender in the country: a Mr Prawo Jazdy, whose name in Polish means “driver’s licence”. An investigation held earlier this year revealed officers had mistakenly taken down the wrong details from motorists’ documents.
Awarded to the directors, executives and auditors of four Icelandic banks: Kaupthing bank, Landsbanki, Glitnir bank and Central Bank of Iceland, “for demonstrating that tiny banks can be rapidly transformed into huge banks, and vice versa – and for demonstrating that similar things can be done to an entire national economy”.
The Green New Deal is a stimulus plan for the economy: 3.7 billion euro a year for the next two to three years. We all wish Ireland had that sort of money for a stimulus.
Comhar proposes to finance the Green New Deal from the revenue of a carbon tax (400 million Euro a year), from the auctioning of carbon permits (which will not start before 2013), and with new borrowing (but with “green” bonds, so that’s alright).
The aim of the stimulus is not just to revive the economy but make it environmentally sustainable too. Most experts reckon that the transition to a low-carbon economy will take 50 years (give or take a few decades) but Comhar seems to think that 2.5 years is enough to make a dent.
The stimulus comes mostly in the form of subsidies for “green” investments. A carbon tax has the wonderful property of equalising marginal costs across all emitters, and being robust against special pleading. Subsidies break the principle of uniform pricing, and politicians have been tempted to pick winners. This is double regulation, and half of it is bad regulation.
The Green New Deal is meant to create jobs, just like the original New Deal. It would. The Green New Deal would create jobs a plenty in certain sectors, but these jobs would be at the mercy of state intervention. There would be more subsidy junkies. The Green New Deal would destroy market-based jobs in other sectors. Because the Green New Deal would raise the price of energy and keep labour taxes higher than needed, the economic recovery is slowed down and jobs are destroyed. Similar policies have been tried elsewhere, and there are natural experiments too. The empirical evidence is clear. A plan like the Green New Deal would destroy more jobs than it creates. Net unemployment would go up.
If there were money for a stimulus, then we should reduce VAT rates and labour taxes.
The Green New Deal does not stop there. The carbon tax revenue would be put into a National Decarbonisation Fund to be managed by the National Treasury Management Agency — as if absorbing NAMA isn’t enough. Anglo-Irish would be turned into a “green” bank. Anglo-Irish should maximise its return to the shareholders (aka the taxpayers), and placing constraints on the type of loans it can give and the type of investments it can make would reduce its profitability — higher taxes in the future, therefore. Comhar also argues that the pension funds should be forced to invest greenly. I would argue that pension funds should provide pensions, and to that end they need to invest in whatever gives the highest risk-adjusted return, regardless of whether it is green or blue or yellow.
In short, Comhar’s Green New Deal for Ireland is full of bad economics. It also has all the right buzzwords, so expect glowing endorsements from our dear leaders.
The trend continues, with the distinguished macroeconomist Narayana Kocherlakota (Nair-ah-yah-nah Koach-er-lah-ko-tah) appointed as President of the Minneapolis Fed. The press release is here.
He recently made a very interesting recent contribution to the debate on macroeconomics research – but his note seems to have been ‘delinked’ since the announcement of his appointment.
Organised by the University Philosophical Society at TCD, Hernando de Soto will give a talk on his book (The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else) and there’ll be a short Q & A afterwards.
Time: 12.30-2 on Monday October 19th
Venue: Ed Burke Theatre, Arts Block, TCD