Behaving Like Teenagers?

This post was written by Karl Whelan

A development that I have noticed lately in the comments section of this blog is the tendency to argue that the Irish people deserve little sympathy from our European partners because we are somehow unwilling to implement obvious solutions to our problems.

Every story about public sector inflexibilities (such as the silly business about the privilege days) is taken as evidence of mendacious insiders and nasty trade unionists defending their ill-deserved high salaries while the nation heads towards sovereign default. Similarly, stories about cuts in pay for politicians or academics are merely greeted with outrage that the cuts are not big enough.

Discussions of welfare rates provoke the question of how dare we ask for improved bailout while we pay higher benefit rates than elsewhere. Similar moral outrage is applied to the corporate tax rate discussion and, less often but occasionally, to the fact that (even after recent increases) Irish rates of income taxation for low and middle-earners are still low by international standards. A call for immediately cutting the deficit to zero so that we would not need a bailout was greeted very positively by many of our commenters, who clearly take the view that this can be done easily if only we had the will.

The conclusion often reached from these discussions is that the Irish people are a feckless and inflexible lot who are “behaving like teenagers” in looking for help from Europe.

I understand the moralistic instinct that underlies these comments as well as its implicit faith in simple solutions. With the country effectively in administration, this belief—that solutions are clearly sitting out there, but cannot be implemented because “other people” are feckless, inflexible and pampered—provides a lovely warm blanket of indignation in which to wrap oneself.

In my opinion, however, this kind of commentary is based on a gross misunderstanding of the challenges posed by the scale of the Irish fiscal adjustment. It is also extremely unfair to the Irish people and acts to undermine valid arguments for looking for additional help from the EU.

Let’s start with a hugely important fact that tends to receive little attention. The Irish adjustments thus far have been enormous by international standards. Prior to the December 2010 budget, the government implemented a combined €14.6 billion in adjustments from summer 2008 to December 2009. With Irish GDP estimated at €157 last year, these adjustments added up to over 9 percent of GDP, with the vast majority of the underlying impact distributed about equally between 2009 and 2010.

To get a sense of how big these adjustments are, consider the chart below. The numbers on the x-axis are the IMF’s estimates of actions taken to reduce fiscal deficits in 15 advanced economies during 1980–2009, while the y-axis shows the change in the cyclically adjusted budget deficit. The paper in the IMF’s World Economic Outlook argues strongly that its fiscal action measures are superior to simply measuring the change in the cyclically adjusted deficit when considering the stance of fiscal policy.

The IMF chart shows the Irish 2009 fiscal adjustment as the largest across the sample of advanced economies over the thirty-year period studied  (measured against GNP it would not have been a close race with Italy 1993). The paper was prepared before they could enter in the 2010 adjustment but by my calculations, it was about the same size. Then the government implemented an additional €6 billion in adjustments in the December 2010 budget.

Consider this for a second. In 2009 and 2010, the Irish public experienced the two biggest years of fiscal adjustment anywhere in the advanced economic world over the past thirty years. And this left Ireland with a budget deficit of nearly 12% of GDP. After another budget implementing adjustments similar in size to the previous two years, the public then elected a government consisting of parties who proposed a further €9 billion in cuts over the next three years in the case of Fine Gael or €7 billion in the case of Labour.

By the time the stabilisation programme is supposed to be finished, the cumulative fiscal adjustment will have been close to 20 percent of GDP. Previous academic studies of large adjustments reported cumalative adjustments of 10 percent of GDP as the outer limits of what had been achieved (see here and page 17 of this paper).

I’m my opinion, those who wish to characterise the Irish public as feckless teenagers have it exactly wrong. Fiscal adjustments are extremely difficult to implement. Every society in the world has powerful institutions and organisations designed to protect vested interests and various types of status quos. Many of these societies would respond to one year of fiscal adjustment on an Irish scale with mass public protests and strikes.

In Ireland, however, we have largely accepted three years of these adjustments without serious disruption and then voted in a government charged with implementing further large adjustments.

So pick on Irish public servants and trade unionists if you want but if you think that their equivalents elsewhere would have been open to larger pay cuts, you’re kidding yourself. Irish public sector workers have seen enormous reductions in take-home pay via cuts in gross pay, a pension levy and tax hikes and many are now struggling to meet their mortgage commitments. Yet there hasn’t been a single strike of notice because these workers and their union leaders understand the gravity of the fiscal situation.

And of course there are inefficiencies and waste in the public sector and people who are paid wage rates that are out of line with common sense. But show me the large organisation, public or private, that doesn’t have such inefficiencies. To be fair to our political processes, the current crisis has brutally exposed a wide range of public sector inefficiencies and the people elected two parties that have both committed to public sector reform.

And rail against welfare benefits being too high if you want. But these are the least well off in our society and they have put up with consecutive cuts in their modest incomes without serious protests.

And you can compare Irish income tax rates for low and middle-earners with other EU countries and reckon there’s room to raise more income there. However, the vast majority of these people have entered into commitments (mortgages, car loans, childcare payments) that cannot simply be reversed at the drop of a hat and many are already under enormous pressure. This is why fiscal adjustments are so small and gradual elsewhere.

No doubt many of our commenters will continue with their negative characterisations of the Irish people. However, I think the past few years have showed that we are a strong people who have displayed great courage in coping with immense adversity. Requesting a small amount of assistance from our European partners (particularly in relation to the repayment of loans made to insolvent banks by the ECB and European bondholders) to help Ireland avoid a sovereign default—this shouldn’t be too much to ask for if European solidarity is to be more than just a cheap slogan.

Tags:

140 Responses to “Behaving Like Teenagers?”

  1. Paddy the American Says:

    Hear, hear.

  2. Finbarr Says:

    Way to go Karl!

  3. Edward Says:

    I agree with these sentiments, particularly at the end of the post.

    Remember that only eight other countries share our position of being sovereign liberal democracies since 1922, even if you count the denial of votes for women as “democratic”.

    That improves the quality of our civic society and I believe it explains the absence of Irish riots relative to other countries. We complain about and protest government policies, but underneath our complaints, we really do accept the idea that political change happens at democratic elections. Certainly we accept it more than many of our European partners. If you look at the list of our fellow long-term democracies, like the UK, Sweden and Switzerland, I think their people would respond to our spending cuts and tax increases like we did. Greece and France are another matter.

  4. OllieTwist Says:

    I am being serious when I ask are you for real with the above article?

    We cannot continually plead the poor mouth when the numbers and bottom line do not stack. All the theory and rhetoric re cuts, no growth etc are irelevant. The reason the EU are putting the boot in is that we refuse to address simple A+B=C.

    When or if we commit to doing it properly then we could reasonably ask for help, and I would say we would get a more than favourable response.

    Until then it is the the long and miserable road to a default, no growth, just stagnation. The rest of the world has moved on. Time we (and by we I mean Ireland) did the same.

  5. Karl Whelan Says:

    See what I mean people?

  6. Kevin O'Rourke Says:

    Thanks Karl. Our fiscal adjustment has indeed been enormous, when viewed by the only sensible benchmark out there, namely historical experience. There will obviously have to be a lot more of it. But expect lots of comments from our more economically illiterate commentors to the effect that there obviously hasn’t been an adjustment since we still have a large deficit…

  7. Jagdip Singh Says:

    Looks like a great piece of work Karl but that chart is not easy to read but I guess we need read the World Economic Outlook.

    We will have taken eight years from 2008-2015 to get our deficit under control. Do you have any idea how this compares with other countries that have tackled large deficits?

  8. Brian Woods II Says:

    I certainly disagree with the moralising tone of some commenters. Many in our society have endured lots of pain, including the PS, and as Lenny famously reminded us we did not burn down public buildings as they would in similar circumstances in France, say.

    But the stark reality is that we do even still have too high a public service pay and pension bill and too high social protection rates - in relative terms.

    We are in deep fiscal touble, all of our own making, but the most we can ask of our EU partners (who have not made our mistakes) is to give us time. That is exactly what they have given us - time. I think it is unrealistic to ask that they give us money as well to sustain our excesses.

  9. Tomaltach Says:

    Karl,
    Very well said and you made the point crystal clear. I think Ireland does deserve to be cut some slack given our honest and stoical approach as nation. We mismanaged our boom badly, yes. But we are making extraordinary efforts to claw our way back. Furthermore we have been a nation committed to the European project and worked its institutions very professionally and diplomatically. We are not always causing trouble and upsets. True, two important referenda failed here, primarily because of poor engagement first time round by the political elite. On both occassions, however, we had a fuller debate second time, and the depth of our support for Europe was made clear. In parallel, referenda have failed in some of the bigger nations, through similar failings, but the elites there either did not have balls for a rematch or had no faith that their peoples could be persuaded to endorse the proposals in a second round.

    This is the important context which ought to provide a preamble to our discussions with Europe. The other context of course is that the banking-turned sovereign debt crisis is a result of European as well as national failure. One the one hand the larger EU players acknowledge the latter point - they want to renew the economic and financial apparatus of the Union in order to make it more robust, but on the other hand they refuse to allow the extent of European failure to have any bearing on the way the current crisis is resolved.

    It seems now that the French and Germans are determined to squeeze a concession from Ireland in return for any adjustments to terms of the rescue package. Whether you agree or disagree with the proposals for a CCCTB, the manner in which Merkel and Sarkozy have hard-balled a small and compliant member state over rescue terms will not go unnoticed in other corners of the Union. It also runs the risk of turning one previously Europhile nation which began to waver into a commited Europhobe. The whole episode has been unseemly and I think very damaging for the union in the medium term. But Merkel and Sarko have no medium term in minde - they both face electoral meltdown in the short term and will place any tricks, however nasty, in the meantime in the hope of shoring up a piece of support.

  10. OllieTwist Says:

    @ Karl,

    I am self employed, my partner works in public sector. We have a mortgage. One kid, another on the way. We are the middle class strugglers with committments you refer to above.

    I do not wish to continue to stagnate or see this country stagnate. Ideally I would like to see us in a position to tell our EU partners to politely get lost when it comes to the bank bailout and protection of bondholders.

    The fact that we cannot do this is down to our own annual deficit, to ourselves. If we had dealt with deficit quickly and not remained in denial then we would be much the stronger for it. We are reliant on others at present, not a pleasant position to be in would you agree?

    We still have options available, some not pleasant, but the sooner we stand up for oursleves and make these choices the sooner we may have some semblance of control over our own destiny.

    And I also believe we would all feel a hell of a lot better for doing it.

  11. David Blake Says:

    Ireland has been disgracefully treated by the ECB and by the Franco-German bloc. I think the right solution for Ireland was default and avoiding that was done to protect the interests of the ECB and banks outside Ireland rather than Ireland itself. Ireland is not being punished for the stupidity of Irish banks nor even for the stupidity of the previous government in giving the guarantee. It is being punished for the stupidity of German, French and British banks in facilitating the bubble.

  12. Hugh Sheehy Says:

    Interesting that we’ve moved on to dissent with an established view being proactively described as “insulting the Irish people” and “economic illiteracy”.

    Get that smack in quick, eh?

    Anyone remember the Bertie moment? Cribbing and moaning on the sidelines.

  13. Michael Hennigan - Finfacts Says:

    Karl,

    Most of the ‘commentators’ you refer to would likely agree with you if you are referring to Dublin mainstream media ones.

    You use global data but you may have little familiarity with the typical victim of this brutal recession in the private sector.

    I for one have never compared any group with teenagers as my view is that vested interests tend to be more calculating.

    As for the ’silly business’ of privilege days, the point really is that if a bankrupt country cannot implement such small changes among an elite group when tens of thousands of people who want to work face years of misery and depression on the dole, maybe it’s the latter you should fear in terms of civil strife.

    Do you not consider the bonanzas arranged by ministers in the last government a disgrace in a small country where the majority of private sector workers do not even have a basic occupational pension?

    Yes you may ask, where is the outrage?

    Do you know how long this programme of reform has been ‘in process’?

    Since 2002 and even the head of the Labour Relations Commisson referred to the ’scenic route’ when commenting on progress on talks about ‘transformational’ reform under the Croke Park agreement.

    Do you get angry when lawyers as public contractors earn up to €10m - some of them investigating bribes equivalent to what they earn per day?

    Do you get angry when you hear that the cost of litigation in Ireland is double the level in Germany?

    Why does the VHI need to increase premiums by up to 45%?

    Why are Irish hospital consultants paid double the level of counterparts in Norway - one of Europe’s richest countries with a sovereign wealth fund worth more than $500bn.

    You should get a copy of the Bord Snip report from your colleague Colm and put it on you reading list.

    If we cannot get progress on 2 Victorian era special days for civil servants, what chance have we in reducing for example 88 planning authorities?

  14. Tomaltach Says:

    OllieTwist,
    We ought to accept that we live in a society and in a democracy. Our solutions have to be worked through the intricate political economy of our various institutions. This places huge constraints on what is possible - but valuable limits on what society might otherwise deem to be excessively cruel or unfair. Put in context - as Karl has done - there is no doubt our progress towards correction has been impressive. Indeed our social cohesiveness has been particularly remarkable.

  15. Karl Whelan Says:

    “you may have little familiarity with the typical victim of this brutal recession in the private sector.”

    “You should get a copy of the Bord Snip report from your colleague Colm and put it on you reading list.”

    Wow Michael. Impressive arrogance. Congratulations.

  16. Rory O'Farrell Says:

    @ Karl Whelan

    Is this the correct interpretation of the graph:
    despite austerity measures, the structural fiscal situation of Ireland in 2009 and Finland in 1992 actually worsened?

  17. Shay Begorrah Says:

    Thank you Mr Whelan.

    Let us not forget that the pro bailout/austerity, anti progressive politics/poor choir have powerful allies in capital and in the larger EU and have always, always, been in favour of dismantling the welfare state and rolling back the advances in workers rights of the last fifty years. They see the current crisis in capitalism as an opportunity for some creative destruction of the state, an opportunity they have grabbed with both claws.

    This was always going to be a tough battle to win, we can now at least see who is willing to fight, not just for Ireland but for a just world.

  18. zhou_enlai Says:

    That’s a great post by Prof Whelan.

  19. Michael Hennigan - Finfacts Says:

    Even Charlie McCreevy himself had ambition for reform at one point but like the Civil Service Arbitration Board yesterday, under the chairmanship of a senior counsel (presumably a wealthy lawyer) said the savings on the privilege days were not worth the ‘grievance’ they could cause and that has been the typical reaction

    In November 2003, McCreevy said in a speech in reference to the 2002 benchmarking report “while the Government is committed to honouring benchmarking, I would like to stress that the payments are dependent on compliance with the terms of the agreement. If the conditions are not met in
    any sector, grade or organisation then the payments will not be made in that area.”

    http://www.finfacts.ie/irishfinancenews/article_1019286.shtml

    It took until 2009 for the Government to take action in a situation where it was paying €1.6bn for drugs that had a factory gate price of €1bn.

  20. seafóid Says:

    Thanks Prof Whelan.

    This failure has many fathers and reading Munchau as well as other comment in the FT on a regular basis leads me to conclude that the panjandrums in the EU share much of the blame for the method in which this disaster has unfolded.

  21. Brian Woods II Says:

    Maybe off topic. I am just listening to the Moriarity Tribunal report. Michael Lowry in particular is totally lambasted. This guy continues time and again to top the polls. He escapes any sort of accountability. And Karl complains that we are accused of behaving as teengers!

  22. OllieTwist Says:

    @Tomaltach

    I accept that but a democracy or otherwise must live within its means. Maybe at another time in any given cycle we wouldn’t be so badly pressed but given the nature of the bank bailout my argument is simply that until we have our own finances on order we will be at the mercy of others.

    The EU would argue, correctly, that the reason our correction is so large is due to our own largesse. I think this is difficult to refute.

    Time is pressing and needs must.

  23. Brian Woods II Says:

    Unbelievable corruption! And we expect sympathy from our EU partners!

  24. Michael Hennigan - Finfacts Says:

    It’s easy to dismiss people as economically illiterate or anti-progressive but many of the necessary reforms are not necessarily needed because of the spending involved but as part of a modernisation programme and good goverance.

    Who,s in favour of a quango model of 14 directors and 25 staff and a chief executive who earns as much as the Taoiseach?

    How many councils do we need, planning authorities etc?

    The conservative option of doing nothing will always have many supporters.

    As to austerity, its the 255,000 people who have lost their jobs and the tens of thousands of self-employed who would have experienced income cuts of 60%+ if they survived in business.

    @ Karl

    I did not wIsh to convey arrogance. You may not have read the Bord Snip report.

    People appointed judges in their 50s and getting full 40 year pensions and so many other hair raising revelations.

    I would like to see a fairer society in Ireland and I’ve no aploogies for it.

  25. Kevin Donoghue Says:

    Many thanks to Karl Whelan. Not only a superb rant, but highly informative as well. Economics blogging at its best.

  26. pongo Says:

    Karl impressive article

    tho one thought is bugging me
    Our adjustment (ie fall) was “impressive” but so was our bubble?

    How do we compare on the way up?

  27. Paul MacDonnell Says:

    It’s true that the experience for PS workers has to be a little more nuanced than many on the ‘right’ claim. For starters they may be married to non PS workers who have lost their jobs and they have, as Karl says, for the most part taken serious hits in their pay. Given that they will have on average greater debts than their private sector counter parts - I’m guessing but I believe it follows from the fact that they earn more - then these hits to pay will be all the more painful. However presenting an overall picture that talks about adjustment in relation to GNP for Ireland and then eliding into Public Sector workers suggests that Public Sector workers and ‘Ireland’ amounts to the same thing.

    And that’s the trouble right there - that’s where Michael H. nails it. If we’re so concerned about the ‘naysayers’ and those who ‘talk down Ireland’ and ‘optics’ etc.. then what about the optics of an unreformed public sector, of hundreds of millions being paid to consultants for - er -whatever it is they do, to lawyers and so forth..?

    The truth is that the Irish public sector and its Social Partnership creature + many amongst the organised an orgy of looting of the Irish treasury and, at the senior level, they are holding onto those gains.

    Let’s just say that inordinate and unearned privilege at the top of the public sector and ancillary professions seems to be repugnant to most people.

    Can we agree that such privilege is repugnant and that unless we are willing to tackle it then there is something dysfunctional about Ireland? Is that OK? Is that ‘insulting’?

  28. pongo Says:

    @Karl see table on page 18 “increases in public allocations 2000-2008″

    http://docs.google.com/viewer?url=http%3A%2F%2Fwww.finance.gov.ie%2Fdocuments%2Fpublications%2Fother%2F2011%2Fnatrecplanlatest.pdf

    GDP growth: +71% (I am not economist but doesnt increasing govt expenditure increase GDP as well?)
    Total Expenditure: +141% !!!!
    of which
    Health: +186%
    Welfare: +160%

    So the question that is bugging me is.

    “Do our cuts so far look as impressive when put in the context of a decade of out of proportional expenditure increase orgy?”

  29. hoganmahew Says:

    Like burning bank bondholders (even the guaranteed ones), it is not a question of morality, it is a question of practicality. If we want to be able to reduce the overall level of debt, we are going to have to show that there is no other course of action open to us. That means squeezing all sectors of society. More taxes? Absolutely. Cuts? I’d prefer not, but I don’t see a way around them. Domestic default? It’s already happening and will go further.

    What I don’t really see is fairness. Middle incomes are being unmercifully squeezed. Higher public servants get to keep their privilege days, treat their bonuses as salary and avoid responsibility for policy under their control. Lower paid public servants get to pay the pensions levy without ever receiving a pension (beyond the state pension) - they are subsidising their superiors.

    Squaring commitments that people have made with the likely (and already happened) impacts to their income is difficult. A private company has the luxury of abrogating responsibility - it can make people redundant without considering their situation. For 10% of the working population that has already been the case. The state is in a different position. It has to consider the consequences, but not just the immediate damage. The long-term damage that an unsustainable debt burden will cause, the long-term effects of the unbalanced economy (the gap between GDP and GNP), the long-term sustainable level of government income and spending. Without considering these, the state runs the risk of driving carefully off the edge of a cliff.

    I don’t believe it is about morality, indeed, if it was, then your post would have merit, for it is immoral to take away that which has been freely given and we would have a moral argument to use with our ‘partners’ in Europe. It is about practicality and fairness. Utilitarianism isn’t pretty; it isn’t popular; it is, though, effective…

  30. Dave W Says:

    @ Michael Hennigan

    “How many councils do we need, planning authorities etc?”

    I don’t know, I’ve never actually looked into it in real detail. Have you?

    Have you looked at the international comparisons, to see if we are over represented or under represented? I would be keen to know the actual facts of this rather than just a bland unjustified statement?

  31. hoganmahew Says:

    PS I’ve yet to see a coherent breakdown of the 14.6 bn adjustment that has so far been made? Does anyone have a link?

  32. Joseph Ryan Says:

    In the article there is a strong argument for perspective in recognising the progress made but is there a hint that progress made to date obviates the necessity for some fairly radical adjustments yet to made?
    A few points.
    1.

    Prior to the December 2010 budget, the government implemented a combined €14.6 billion in adjustments from summer 2008 to December 2009.

    The annual current budget deficit reduction is surely the benchmark for cutting expenditure, not a cumulative figure?
    2. The IMF chart shows Ireland making a much greater adjustment than other countries. But an adjustment from a higher level of expenditure.
    3. I am glad that the pay cuts of both lower paid workers and the unemployed are emphasised. That is important. Many small business people have also lost virtually everything.
    4. Yet high profile public salaries remain a legitimate and galling sore point with both general Irish public and presumably European citizens. This need to be acknowledged and addressed. In simple terms these are the ‘Salary Bondholders’ that are still living off the largesse of the State, State banks, and semi-State organizations.

    5. We are not all in this together while ESB and other ‘State’ workers get off scot free, while the poorest of poor suffer.
    6. The original and continuing cause of the disparity between lower paid and higher paid need to be addressed. Since the 1970’s, the continuous application of percentage pay rises has made better paid people very comfortable while consigning lower paid people to poverty and misery. The chief beneficiaries of these percentage pay rises were those on both sides of the table negotiating them.
    7. There needs to be a complete redrafting of public sector salary scales above €50,000 pa to undo the favouritism given to these people at the expense of the less well off.

  33. Hugh Sheehy Says:

    Karl, I used to have a similar discussion years ago with my grandmother. She’d often comment on something in Ireland and say “Ah, sure things could be worse”. My response - from the time I was a kid - was always “Things could be better”.

    Excusing Ireland’s continued sloth by making comparisons with Greece or France is as irrelevant as the well established habit of indexing house prices based on their reduction from the peak. I do not aspire to seeing Ireland as well run as Greece. I aspire to seeing Ireland as well run as it could possibly be. Similarly it doesn’t matter how much the house is down from its peak. What matters is the price now and its likely future.

    Returning to your post, looking at simple facts is easiest.

    You seem to agree that our Public Sector is still overpaid, our social welfare is still too high and our income tax rates excessively “progressive”. You also seem to agree that there is continued resistance from and protection of a variety of insiders in Irish life. OK so far.

    However, you then assert that adjustment should be slow and gradual and that we should get credit for the progress of our adjustment rather than criticism for the fact that we’re still hugely “above par” on many measures.

    But, here’s the key domestic point, if you wish to continue to protect people in the public sector or welfare recipients by maintaining excessive pay or welfare then you must choose to penalise someone else, to make them less able to afford a home or to afford car or childcare payments. There is no free lunch. Protecting some will require hurting others. The hurt may be less visible, but it is still there. The damage to people who are unemployed for a year longer than they needed to be is easy to hide. The lost savings or pension of a family working in the private sector is easy to hide. These groups are less well organised than the PS unions or other groups, but they are still real people and the damage to them is real.

    By continuing to borrow vast amounts of money with almost no aim other than maintaining the excessive PS pay and welfare rates that apply, some sections of the country are effectively given permission to continue “stealing” money from other people in our own country. Net taxpayers are the ones who will have to pay this money back, and the slower the adjustment the longer and harder you penalise those people.

    Who are they? People in competitive industries. People whose income is volatile and uncertain. Young people graduating and entering work today. How long should they be forced to subsidise other citizens, many of whom are significantly better off than they are themselves? My point of view is that this should be “as little time as possible, on grounds both of justice and economic efficiency”. Yours seems to tend towards “as long as is possible, on the grounds that we want not to upset powerful vested interests”.

    The key international point (and there is no need to characterise it as “insulting the Irish”) is the simple fact that we are still trying to borrow money - and simultaneously threatening not to repay it - from people who live in countries that have lower PS pay, lower welfare and where taxation rates are effectively higher for the vast majority of the population. This is not an insult, it is a fact. It’s a fact that the lenders see all too clearly and their perception is not that we’ve adjusted a lot, rather that the position from which we are adjusting was truly astonishing.

    Ultimately I entirely disagree with the idea that aspiring to a better Ireland in the future equates to “insulting” the Irish today. Ireland can be a far better country than it is today but there are still too many vested interests slowing change; still too much concern about protecting some people over others; not enough fairness or consistency in the rules.

    Ireland’s people are not feckless teenagers. Some, like those who reelect our more disgraceful TDs deserve worse descriptions, but most are ordinary decent people. However, many powerful groups in Ireland are cynical and selfish and persistent and do not care about others. Their efforts are, frankly, to delay adjustment as long as possible. It suits them nicely. In my opinion it damages too many others and is immoral in the highest degree. By the time we finish paying back the debts accumulated from a slow adjustment we’ll have accumulated 20 years of brute injustice.

  34. Karl Whelan Says:

    @ hogan

    http://www.budget.gov.ie/The%20National%20Recovery%20Plan%202011-2014.pdf

    Page 16

  35. michael burke Says:

    Talk of ‘vested interests’ applied to public sector workers, low and middle income workers and those on benefits is a case of what the Freudians call ‘projection’.

    The vested interests that are being feather-bedded are the banks, firstly Irish and now EU. Talk of even moderate burden sharing in the crisis is shot down with tales of all the damage that would ensue on the very same financial sector at the centre of the crisis.

    Surely, if this vested interest is too fragile to accept the normal market disciplines re the pricing of their assets, then it is no longer fit for purpose? In which case robbing taxpayers, that is workers, consumers and viable businesses, of their incomes in a vain attempt to prop them up is worse than a scandal- it is unworkable.

  36. seafóid Says:

    It seems to me as though Ireland is entering the zone of zero choices anyway regardless of what Trichet or the rest of them say. It is either a digout or a default. It would be fabulous to bring the deficit to zero next week but that would like cutting 2 legs off the greyhound and lead to another set of crises ending up at the same question of debt sustainability.

    I have yet to hear a deficit slashing plan that will maintain a decent quantum of GDP growth from the current level of GDP.

  37. Paulo P Says:

    The adjustment has been impressive alright but we still have such a long way to go and I think things are going to get tougher for everybody, including those who made the right decisions during the last 10yrs and didn’t buy that house, go on that holiday etc. This of course means they may have a right to be peeved and moralise although of course that won’t get us anywhere.

    It all just goes to show we were never as well-off as it seemed- the adjustment is really nothing more than our adapting down to that real standard of living we can actually sustain. The inflation of such an incredible bubble is an indictment of those who governed us (and we who elected them).

    It would be a beautiful world if only costs (and debt) weren’t so sticky but the bottom line remains…so what are we going to do, if not adjust some more?

  38. Ludwig Heinrich Edler Says:

    The core argument here seems to read like this:

    the Irish have accepted large cuts since their 2007 position, without much public protest; therefore they should be entitled to free money from the EU.

    I’m not sure I agree with this logic in quite this form.

    The fact that the fiscal position was so outrageously out of control in 2007 is the reason why the 2008- 2010 consolidation has not already closed the gap.

    That is poor logic. If a man murders six people one year, you cannot call him a saint for only murdering one the next year, no matter how hard it might have been for him to refrain from strangling those other five victims.

    I am more sympathetic to the argument (Prof Lane) that distinguishes between fiscal and bank-related debt, seeking help for the latter in return for a clear plan - however hard to implement - that we will deal with the former. After all, a credible argument can be made that the ECB shares the blame for the Irish government’s reckless decision to nationalise bank debt.

  39. Tomaltach Says:

    When a catastrophe like ours happens there is a tendency to see everything in the negative and see only what’s wrong. The problem with that is that we attempt to make changes on too many fronts. For sure, there is a massive litany of structural and financial problems in Ireland - from state quangos, to protected professions, from public service to the apparatus of government itself. But we will end up runnning around in circles if we erupt when every single flaw in our institutions, governance procedures, and administrative culture is mentioned. Only so much can be taken on at a given time and given the reality of vested interests, without doubt some battles for change will have disappointing results. But we cannot demur attempting to sustain the mood for change that has accrued.

    Michael Hennigan is right: many of our institutions need modernisationa and overhaul urgently.

    And rather than facilitating the modernisation of government and administration via benchmarking, the Celtic Tiger masked the deep legacy problems that needed to be addressed.

    But having said all that, we need perspective (of the kind which Karls post provides). One commenter so far has highlighted the huge increase in spending during the Celtic Tiger. Yes, much of that went into highly inappropriate levels of pay and was locked in to badly designed institutions. But not all of it was simply waste. Health and education were mentioned: yes pay was and is an issue there, but we shouldn’t forget the enormous increase in personell in these fields, many of whom were required. Take the expansion in special needs and language assistants. Or the extra spending on disadvantages schools. Enormous efforst were made in these areas to bring us from a position of shameful neglect to something approaching an honest attempt to address the problems. Health too: despite all its flaws, and there are many, the Health service now delivers a far higher output than it did ten or so years ago.

    Point 1: not everything was waste, not by a long shot.
    Point 2: broad, high level swipes yield nothing. Each area must be examined in more detail to locate the main problems.

    The big issues need to be identified and fixed. But not everything can be addressed at one time, and to even try will guarantee failure. This is why the current government will need to create a shortlist of significant areas and stay focused on those. They cannot open battles on too many fronts.

  40. Mark Dowling Says:

    @Prof Whelan, I was mostly with you until your conclusion:

    “Requesting a small amount of assistance from our European partners”

    1. Small compared to what?
    2. “From our European partners” - apart from Germany which European partner is going to make a substantial contribution to this “small amount of assistance”
    3. We’re not the only ones looking for a “small amount of assistance”
    4. The largest non-EU contributor to the “small amount of assistance” just had a catastrophic natural disaster which exposed significant errors in infrastructure protection, but I don’t think I’d be alone in saying absent that event they’d have been better off paying down their own significant external debt and thereby mitigating their budgetary pressures rather than lending money to profligate Europeans, not to mention doing something about their century-long mistake of having two separate electricity grids in the same country.

  41. Brian Woods II Says:

    Our fiscal crisis is due to paying far too much PS pay and pensions and Social Protection and our banking crisis is due to paying a very wealthy few far, far too much for their land. We need to reverse both processes and find it very difficult to do so. Oh how nice it would be if the EU allowed us to hold on to these ridiculous imbalances by subsidising us and forgiving our debts. Only teenagers would expect that sort of bail out.

  42. Karl Whelan Says:

    @ Hugh

    “My point of view is that this should be “as little time as possible, on grounds both of justice and economic efficiency”. Yours seems to tend towards “as long as is possible, on the grounds that we want not to upset powerful vested interests”.

    I pretty clearly didn’t say anything of that sort.

    My post also did not focus only on public sector workers or those on welfare. I also discussed private sector workers who are now paying much higher tax rates than before. You and others choose to ignore that perhaps because you prefer pigeon-holing people with opinions you enjoy disagreeing with.

    “By continuing to borrow vast amounts of money with almost no aim other than maintaining the excessive PS pay and welfare rates”

    You view the marginal euro borrowed as being shovelled towards “other people” and, as I noted, this allows for the comfort of indignation. However, the reality is that a major element of this marginal euro is also keeping your income taxes lower than they would otherwise be and preventing the immediate introduction of things like property taxes.

    Also Hugh, you may not be aware of something called macroeconomics. Your call for a zero deficit — even if wholly implemented via public sector pay and welfare cuts — would devastate many of the private sector businesses you claim to support because of the impact of the instant loss of spending power inflicted by the cuts.

    Be careful what you wish for.

  43. Al Says:

    Well said Karl!
    Now if it could be put to music we have our next entry to the Eurovision song contest?

  44. Ludwig Heinrich Edler Says:

    @ Al

    All in all it’s just a -
    ‘nother bank in default
    HEY, TRICHET,
    LEAVE THEM MICKS ALONE

  45. Tonto Says:

    Great post by Prof Whelan.

    I have always understood that economists as with businessmen should be aware of actions being taken “at the margin”, meaning that there is a certain amount of action you can take in one direction before you reach a point where further action becomes counter productive.

    Lets call it the marginal return on cuts. In terms of out deficit of course.

    Continuing cuts will at some point tip over into counter productivity. There are clearly as M. Hennigan has said inefficiencies in the system but it amazes me how so many apparently well versed commentators seem to think 14% in cuts on a 14% deficit will mean a balanced budget, this ignores the effect cuts have on the tax base, consumer confidence and importantly people in negative equity. So far we have achieved large efficiencies through cuts however there will come a point where further cuts will in effect deepen out problems and create more problems like those outlined by Prof Whelan.

    Reform is no doubt needed however its important to be mindful that “cuts” as a means unto themselves must be conducted with the “margin” in mind.

  46. Al Says:

    @ LHE

    Maybe due to performance considerations there needs to be a two tier eurovision song contest also…

  47. jackh Says:

    “Irish public sector workers have seen enormous reductions in take-home pay via cuts in gross pay, a pension levy and tax hike and many are now struggling to meet their mortgage commitments.”

    Enormous, one of Joe Duffy’s favourite pandering to the audience adjectives.

    I thought the pension levy + pay cut averaged around 12-13% - gross. Probably around 6-7% net for median earners? Enormous?

    Fine there’s tax changes on top of that which were worse, but they affect everyone and are of course partly to reduce the extent of cuts on the public sector. Also higher and lower earners got hit worse in net terms but the bulk of workers are around the 50k level.

    Wonder what Joe-Duffy adjective would need to be dug out to describe the 2000-2008 run up in public sector salaries which gave room for the soft response to the relatively modest cuts.

    I too would be interested in a breakdown of the adjustment made, I hope it’s not the case someone thinks that by reducing spending by 1B for 20 years you’ve solved a 20B deficit.

  48. Hugh Sheehy Says:

    @Karl
    I neither enjoy pigeon holing, nor did I do it.

    As for the “comfort of indignation”, it’s small comfort when placed against the reality of everything else that’s going on.

    Finally, we will have to have more than a zero deficit. We’ll have to have a surplus if we’re going to pay all this money back. The more money we borrow, the more money we have to pay back and the bigger the flow of money out of the economy will have to be, for longer. I’m no economics PhD, but sucking even more capital for even longer from the potentially wealth creating sections of the economy seems like bad economics.

  49. The Alchemist Says:

    From the quality of some of the rebukes directed against those outside academic economics, I can only conclude that nerves are frayed. It is never helpful to use abusive and dismissive language. And it certainly is dismaying to read ad hominem disparagement - ‘economically illiterate’.

    Welfare rates are too high in certain categories relative to the scale and types of employment needed to make a dent in the live register. An unemployed man with several children is unlikely to find a job offering a wage that would compensate for the loss of welfare allowances. This is needs to be solved. I have direct experience of men turning down jobs because of this anomaly.

    The cost of living is high in Ireland. Wages aren’t going as far as they were three years ago for all the well-known reasons. But personal and domestic debt is still how high - probably about 40 miles high in €100 euro notes.

    I firmly believe that the unless some form of debt resolution programme is rolled out nationally the country is sunk and all the corrections between here and the hereafter won’t save it. Whatever is devised will need to be radical, probably something suspended between the unimagined til now and the unimaginable. If the nation can talk all day and night about the default abroad, perhaps some energy could be devoted to working out how a default at home could contribute to righting wage and spending levels.

  50. Michael Hennigan - Finfacts Says:

    @ michael burke

    Talk of ‘vested interests’ applied to public sector workers, low and middle income workers and those on benefits is a case of what the Freudians call ‘projection’.

    Why do you think that the traditional trade union movement, headed by an individual who was a central bank director for 15 years - - all through the boom and beyond - - has had nothing to say on change and reform of the system controlled by their wealthy counterparts along the spectrum, representing protected professions also dependent on tax funds?

    Is it that there is a tacit understanding by the conservative groups along the spectrum where all fear change and thus the Mexican stand-off?

    Why do you refer to those on benefits?

    What is needed is a jobs strategy to provide people with worthwhile jobs not public sector trade unions wanting the status quo for insiders with unique protections (maybe everyone in the economy should have their job guaranteed?) while supporting more welfare payments for the private sector unemployed.

    @ Dave W

    I would be keen to know the actual facts of this rather than just a bland unjustified statement?

    This is a blog post but anyone who reads my articles on Finfacts will see that I do not make assertions unsupported by facts.

    You may not regard 88 planning authorities, where experienced staff have to be employed, as excessive in Ireland and why would you need an international comparison to confirm this?

    As for councils, read the Bord Snip report.

  51. Tomaltach Says:

    Jackh,
    Leaving aside the semantics about what constitutes ‘enormous’, middle-paid public sector workers have seen their take home pay reduced very significantly and certainly to the extent that many of them have now extremely tight household budgets given that, as KW mentioned, they are locked in to outgoings such as mortgages. Is any of this as bad as losing the business you spent ten years building? No. Or as bad as being forced to uproot your young family from Rural Ireland and emigrate? No. Nor is any of this as bad as having your family swept away in a tsunami, but that is not the point. The issue is not about where the financial strain of public sector workers lies in the spectrum of possible human misery. The issue Karl was raising was how, as a managed response to a fiscal shock, the Irish response has been remarkable for the depth of the correction that was possible without either a breakdown in order or the necessity of government backing off. Irish government and society has managed an adjustment that has been large in comparative terms and where the only real dissent has been grumbling and an electoral meltdown instead of burning cars and broken windows.

  52. seafóid Says:

    I came across Morgan Kelly’s bank loss excel sheet from 2010 the other day. He had optimistic losses at €76bn and realistic at €106bn. Has anyone run the numbers recently and if so what do they look like ?

    Presumably a zero deficit policy would drive the losses even higher feeding back into the debt sustainability loop via the transmission mechanism that has the taxpayer as liable for everything.

  53. michael burke Says:

    @Michael Hennigan

    Maybe everyone in the economy should securitise their future incomes and then lend them to Anglo? That way, they would be guaranteed.

  54. Jon Ihle Says:

    I’m reminded of something Cit’s global head of credit strategy (and wingman to Mr Buiter) Matt King told me last year: austerity is extremely difficult in democracies, especially when both the level and speed of cuts must be high, because those affected (the people) have the power to reverse course without the permission of the people charged with imposing the austerity. Argentinians went along with it for years. Until they didn’t.

  55. What Goes Up... Says:

    Meh.

    Bovvered?

    Whatever!

  56. Jesper Says:

    I’m not sure if this table is of interest, it shows the income distribution in Sweden in 2009. To qualify to be in the top 10% income earners (P90) in Sweden the amount was SEK 452,012. The euro seem to be hovering around 9 SEK. Marginal rate of tax in Sweden is 70%.

    http://www.scb.se/Pages/TableAndChart____306604.aspx

    Ireland, as is its right, seems to choose a different way than Sweden.

    Ireland will come out of the current crisis one way or another. What (if any) changes and/or reforms would the people of Ireland like to see implemented in Ireland by then? What will be the new ‘normal’?

  57. Liam Delaney Says:

    Excellent Karl.

    The equivalent of the irisheconomy blog on the Guardian website has the following today. The quotes below are not unrepresentative. It was good to read your dignified and informed piece this morning and I hope your view gets more widely read than this type of “analysis”.

    http://www.guardian.co.uk/business/ireland-business-blog-with-lisa-ocarroll/2011/mar/22/ireland

    “Ireland may well be the laughing stock of Europe this week as it gets brushed off by France, yet again, in its attempt to get a renegotiated bailout deal.

    But it made a mockery of itself yesterday when it emerged that civil servants still get a day off to celebrate the King’s birthday. Yes, the King of England’s birthday. And to make matters worse, they are entitled to a second day off to mark the wonders of the British Empire.”
    ….
    Ireland’s bid to get a renegotiated deal appears to be going badly to say the least. Its refusal to increase the controversial low corporate rate of tax has left it out in the cold – EU finance ministers backed an expanded bailout package agreed for post-2013 but pointedly refused to agree any new deal for Ireland.

    French finance minister Christine Lagarde was more than direct when she told reporters last night: “Today we decided nothing on Ireland because we had no indication from our Irish colleague of any kind of modification [to the corporate tax rate].”

  58. Ordinary man Says:

    @ All

    Lets hope our two ‘new pilots’ are provided a very good ‘Check List’ by the collective wisdom of all contributors to this site.

    See below

    ‘Merkel’s helicopter’ almost crashed.

    BERLIN - A helicopter used by German Chancellor Angela Merkel came close to crashing last week when both engines failed just after she had disembarked, a government spokesman said Sunday.

    The Super Puma 332, which reportedly only entered service in December, suffered double engine failure at an altitude of 1,600 metres (5,250 feet) on Wednesday in southern Germany, the spokesman said.

    According to the Bild am Sonntag weekly, the pilots only managed to get the engines going again a few hundred metres from the ground as the helicopter plunged downwards.

    The incident happened on a flight between Offenburg, where Merkel alighted to campaign for an upcoming local election, and Oberschleissheim near Munich, the paper said.

    “It is a precarious situation when both engines fail one after the other,” an unnamed policeman told the Bild am Sonntag. “The crew followed the checklist exactly as they should do and restarted the engines.”

    by Gildas Le Roux
    (c) 2011 AFP

  59. Sporthog Says:

    All very well and good, but a few facts.

    A secondary school teacher with 17 years experience earns around 52 K gross, which equates to 33 k net approximately.

    A unemployed person with 3 kids, and full entitlements is capable of earning 36K for doing no work at all. Which activity is the state trying to encourage here?

    In a economy which is spending 2/3rds of tax revenue on social welfare something has got to give.

    Not that I am for slashing and burning social welfare entitlements, but the crazy cost of living has got to be brought down. If the cost of living is brought down then it is much easier to reduce social welfare entitlements.

    Its going to be very interesting to see how Mrs Joan Burton squares this circle!!

  60. Eamonn Moran Says:

    @ Karl Whelan

    I think when judging the levels of austerity that countries have managed to achieve you have to first of all compare the size of the bubbles that preceded them.
    Ours was monumental. The level of debt as a % of GDP(bank, other corporate and personal) that the Irish society was allowed to take on in such a short period of time due to the cheap euros is surely almost unique. That our fall is now equally unique should not be surprising. I find myself more in agreement with Ollie twist and Hugh Sheehy. We need to get deficit down faster than it seems many (are you a recent addition to this list?) are prepared to contemplate. It is for one very obvious reason. So we have the ability to separate the bank debt from sovereign debt. We wont have that ability until then.

    “Also Hugh, you may not be aware of something called macroeconomics. Your call for a zero deficit — even if wholly implemented via public sector pay and welfare cuts — would devastate many of the private sector businesses you claim to support because of the impact of the instant loss of spending power inflicted by the cuts.

    Be careful what you wish for.”

    But thats just it Karl many of us don’t wish for this but we do see it as a better than any other alternative.

    More conservative people believe that maintaining the current trajectory will be better for the status quo in the country. But thats why I am not conservative. I don’t want to maintain the status quo. Michael Hennigan is correct when he says that there are to many overpaid people all over various protected parts of our economy.
    These people need to be challenged. It will lead to a healthier more equal society in the long run.

  61. Joseph Ryan Says:

    @Liam Delaney

    At what point will economists propose a rational, fair and equitable proposal to adjust higher level public salaries to private sector equivalents?
    As it stands it is the lower paid Irish, both public and private sectors, that are the stock being laughed at, by the bondholders and the salaried bondholders.

    @Sporthog
    re

    A unemployed person with 3 kids, and full entitlements is capable of earning 36K for doing no work at all. Which activity is the state trying to encourage here?

    In a economy which is spending 2/3rds of tax revenue on social welfare something has got to give.

    Perhaps the blind person should be cut again!

  62. Tomaltach Says:

    Sporthog,

    Where did you get those figures? They are deeply suspect. Can you give a breakdown?

  63. Ger Says:

    Couldn’t agree more Karl.

    I certainly do not feel ashamed of our collective willingness to make necessary adjustments.

  64. Aidan R Says:

    Great article. Refreshing. We need more economists in Ireland arguing the same, particularly at a European level. The problem, in my humble opinion, is associated with misplaced assumptions about the cause of the Irish crisis and the assumptions governing economic models of ‘rent seeking behaviour’ when analysing public spending.

    The first misplaced fiscal assumption is that Ireland has a spend rather than a tax problem. This assumption has guided most analysis of the Irish case since 2008. It feeds into the worn out narrative (witnessed excessively on Irish economy treds and the Indo) that trade unions, civil servants, welfare recipients are rent seeking parasites who gobble taxpayers money. It is also the assumption guiding the ECB approach to the crisis. It assumes the problems in Ireland, Greece etc are all the same and directly attributable to an increase in public spending.

    The truth is that Ireland did experience an increase in public spending during a period of excessive growth. That is democracy. Despite this, public expenditure as a percentage of GNP is lower than the EU average, significantly below other small open European economies. The crisis hit Ireland badly because of a reckless tax policy that was extremely dependent and vulnerable to a downtun in retail and construction activity. This is clear for all to see. This is directly attributable to successive policy decisions by FF/PD, and a philosophy that most who lead the charge against the public sector etc still buy into.

    I am currently at the University of Amsterdam and it is clear for most progressive Europeans to see - Ireland is reeping the cost of poor tax policy decisions. No amount of cutting expenditure will solve this problem. This is why all of the focus is on the corporate tax rate. Most Europeans find it hard to fathom that Irish citizens will accept the massive austerity succintly outlined by Prof Whelans post but not ask the corporate sector to increase its contribution, particularly when the cause of the crisis originates in reckless private market behaviour.

    The only solution to Irelands problem is one based on Euro-solidarity. This will not come from the ECB or the Commission because they buy into the same assumptions of ‘rent seeking’, ‘vested interests’ and ‘bloated public sectors’ that underpin so much of what passes for analysis in the Irish case.

  65. Alan G Says:

    Fantastic piece Karl and spot on.

    Just because someone can identify an anomoly somewhere or even a lot of anomolies does not justify self-righteous contempt for the country and its people when the facts as a whole are taken into account.

    It’s classic prejudice. Take a small % of the truth, ignore everything else and damn everyone based on the evidence of that small %.

  66. Ger Says:

    The pay cuts of recent years, especially at the bottom, have created something of a welfare trap. Even though welfare rates fell, those falls only restored rates to where they were in 2008 (Lenihan raised rates in his first budget, even though the country was going down the tubes).

    There is a genuine problem at the bottom of the labour force where paycuts have made it unattractive for some unemployed people to find work. The cut to the minimum wage has done nothing to help this. Contrast the rate of cut to the minimum wage and the rate of cut to social welfare rates and its clear we are creating a problem for ourselves.

    However, despite this little problem, I do not want to take away from Karl’s main point that significant cuts have been borne by everyone (although some more than others) without the country grinding to a halt.

  67. Karl Whelan Says:

    @ Liam

    http://www.guardian.co.uk/business/ireland-business-blog-with-lisa-ocarroll/2011/mar/22/ireland

    “He told her, without any prior warning, that he had introduced a bank guarantee, exposing European banks to something they had no hand or part in. ”

    Funny in a macabre kind of way. Ireland is in trouble with Ms. Lagarde because it decided to bankrupt the state to ensure that European banks got paid back?

    “exposing European banks to something” — ah yes, exposing them to getting paid back when they probably shouldn’t have been.

    Is this really the best the Guardian can come up with in its Irish coverage?

    Sad.

  68. Bork Says:

    Great post Karl.

    Some people here have been pointing out that excessive areas of public spending such consultant salaries, an Bord Snip etc that are still to be cut, and cut they should be.

    However, they will not close the deficit half enough at the current interest rate of the bailout. Getting a reduction in the interest rate is vital because it should save us from the most savage of the cutbacks in vital frontline services. You know, the ones that save peoples’ lives.

  69. The Other Andrew Says:

    Appealing to percentage changes is all very well (as in ‘look, house prices are down 60%, they must be a bargain’), but levels are more important.

    KW’s post boils down to: we’ve taken a lot of flak, give us a break….well, looking at levels, we’ve got a lot of flak to take…so rather than praise our own resilience and forebearance, let’s be realistic and steel ourselves for the ongoing squeeze.

    I understand people are feeling raw, but would suggest pejoratives on both sides of the aisle can be lumped in the bin.

  70. Joseph Ryan Says:

    Adjustments?
    Another company gone today in Cork.
    Waters Glass & Glazing, Togher.
    The workforce are facing an adjustment this evening.

  71. Eamonn Moran Says:

    @ Aidan A
    I completely agree the vast majority of the gap in closing the deficit needs to be made on the Tax side.

    I think one of the reasons this is sometimes overlooked by some (but not by people like Karl Whelan) is because many in Ireland see themselves as the 51s state of the US. Like the US we seem to have very little regard fort the lower echelons of our society. I guess we are just not as civilised as most Europeans. Universality is a dirty word in this country.
    Still no property tax in ireland.

    Did anyone see the frontline last night?

    One lady suggested a wealth tax to try help our current plight.
    Pat Kenny told her that if we did that, all the wealthy would leave Ireland.
    Pat makes this comment quite regularly on his programme.
    He then quickly went to Stephen Kinsella to get Economic conformation.
    Stephen says wealth taxes are shown to have worked in the past and that there are plenty of examples of it working but Pat then just presumes Stephen has agreed with him and carries on lambasting the woman.

  72. Yields or Bust Says:

    Eamon et al

    This all sounds great but the problem, as Karl has eluded to, is that people on both sides of the house i.e. Public and Private have taken on enormous (that word again) obligations most particularly crazy mortgage debt.

    How can ordinary citizens be expected to take all the pain on the income side and yet debt obligations remain at bubble levels? Perhaps I’m missing something but this balance sheet will, sooner or later not balance, and what then? We already know the actual numbers on default or near default but what about the thousands just below the fault lines who are supposedly affording the mortgage burden. Define affording?

    I’m with the Alchemist above - the most pressing problem is nothing to do with austerity its domestic debt in all its forms. Deal with the debt problem first.

    Agree a mechanism for individual debt write downs and most of these ‘competitive’ solutions will look like easy street. I’d suggest re-pricing all domestic mortgages written in the past 8 years based on net long term yields at 7% and calculating the difference to the house price against this metric and writing off the difference. To pay for it tell Matt and Pat that Ireland is a Basel III free zone until this is complete and use the IMF/EU cash for this purpose i.e. crystallise the mortgage losses by marking down the mortgages – not just the banks assets – so the end consumer sees the benefit.

    By the way the much discussed new fast track Bankruptcy regimes to me seem altogether unfair and unnecessary when many individual bankruptcies are as a direct result of real bank failures and the costs of which are being borne by ordinary citizens.

    I doubt I’m unique in thinking that this seems incredibly daft that the banks, which mis sold and mispriced residential property in the country for the best part of a decade, have any moral authority in forcing bankruptcy on any citizen if their plight is as result of their crazy mortgage lending practices. Why should anyone have to bear the tag of a bankrupt because some lending officer in one of beloved banks hadn’t the balls, the wit or the intelligence to say no.

  73. Hugh Sheehy Says:

    @Tomaltach
    I can’t give you 2010 numbers, nor numbers for families with three kids, but if you look at the link below you’ll be able to see the 2009 numbers.

    If I’m using the tool correctly (i believe i am) on those numbers an unemployed Irish family with two kids has an income only about 800 Euro lower than than a similar family in Germany on the average industrial wage and more than such a family in France.

    Factor in costs of childcare, transport, etc., and it’s clear that the two career paths are hard to compare. One is far more remunerative than the other.

    Also, that German family is paying about 8500 Euro in taxes and the French one about 5000, which is perhaps part of the reason that they might have strong opinions about Ireland at the moment.

    That’s part of the context of our “adjustment” so far.

    http://stats.oecd.org/Index.aspx?DataSetCode=FIXINCLSA

    Now, the separate issue, which Michael Burke and others raised, is Ireland’s responsibility for the banking debts. That’s an argument our governments all seem determined to lose. Comparatively minor issues like the civil service’s celebration of Empire Day would be funny if many people at home and abroad didn’t feel that they represented a continuing, larger, and almost unbelievable reality. Such symbolic issues, and our apparent ability not to deal with them, is hardly helpful in that other argument.

  74. TRP Says:

    The EU/ECB are playing poker with us except the stakes are particularly high for the ECB and certain French/German Banks. However, Ireland has a duty to live within it’s means, leaving aside the Bank Bailout part of our deficit which effectively the ECB is currently funding, if it is to have any credibility in International circles.

    What has infuriated most people in the Private Sector is the unbelievable Pension pots dished out to all and sundry recently especially to Failed Politicians. Cowen for example got a pot of around €6 - 7 million. You do not need to be an Actuary to work out that this package cannot be matched anywhere in the West.

    You are not behaving like a “teenager” to be grossly unhappy with this largesse being dispensed by a country in IMF Bailout. If the new Government is to have real credibility then this type of carry on has to be reversed. Do we now understand why Christine Lagarde does not have much time for Ireland !!!!

    There is still anger out there and the new Government will feel it’s full force if it does not introduce real reforms. Will the next round of anger if it comes spill on to the streets only time and the actions of our Government will tell.

  75. Liam Delaney Says:

    @Joseph Ryan
    I am blogged out for this week and disengaging now to get back some focus but I don’t disagree with you. The more we can do for people who really want to work the better and people at the margin of work should be the key focus of this government even if it means being harsher elsewhere, including at the higher end of the civil service and in universities. I am seriously thinking about this issue, particularly with respect to unemployment. The current situation is devastating for people with debt and low-pay and we need to do a lot more even with the smaller amount of money available.

  76. Caroline Simons Says:

    Your public interventions are always measured, instructive and timely. Many thanks for all your work.

  77. Kevin O’Rourke Says:

    @Jon Ihle: you would enjoy Dani Rodrik’s latest book, which is all about this!

  78. Brian Woods Says:

    Ha! So the math is starting to make sense at last! Income out must equal income in. So less ‘borrowing’! Now, I fancy that we have a tad of a predicament.

    The ittsy problem with credit (and there is precious little info in the econ textbooks on this) is that once emitted it spontaneousy metamorphoses into debt - which immediately starts to ‘grow’, exponentially. Aggregate economic growth has to accelerate, also exponentially, to keep pace. No can do! Laws of Thermodynamics prohibit exponential growth in a closed, finite physical system. Economic growth slows - may even stop, but the debt just keeps on growing at an accelerating rate.

    Debt grows without any sustenance what-so-ever - its a miracle! Economic growth on the hand requires copious and increasing increments of both credit and energy in order to grow at the accelerated rate required. Energy just got a lot more costly. We may have a problem.

    BpW

  79. BeeCeeTee Says:

    Excellent post, Karl. Congratulations.

    While nothing you have written moves me towards thinking we are progressing fast enough towards a positive fiscal balance for our own self interest, all you have said makes a useful contribution to the debate.

    For me, the case for immediately cutting the deficit to zero is neither an issue of morality nor a matter of the good opinion of our European partners. It is simply a matter of practical national self interest.

    My perspective is that while delaying the cuts for a few years means less pain while the adjustment is underway, by the time we hit 2015 or whenever the process comes to an end, there is no major respect in which we will be better off, and will be a number of major respects in which we will be worse off than if we had moved faster. We will have substantially higher debt, and we will probably have made less progress towards the effective devaluation that we need to boost competitiveness so as to get people back to work.

    It will also give our government more freedom of action in negotiating with EU partners. As long as the government depends on them to pay its bills, it is at the wrong end of a patron-client relationship.

  80. BeeCeeTee Says:

    I thought I might throw in a couple of bullet points from that excellent IMF report you quoted:

    • Fiscal retrenchment in countries that face a higher perceived sovereign default risk tends to be less contractionary. However, even among
    such high-risk countries, expansionary effects are unusual.
    • Model simulations suggest that over the long term, reducing debt is likely to be beneficial. In particular, the GIMF simulations considered here suggest that lower government debt levels reduce real interest rates, which stimulates private investment. Also, the lower burden of interest payments creates fiscal room for cutting distortionary taxes. Both of these effects raise output in the long term. Overall, the simulations imply that for every 10 percentage point fall in the debt-to-GDP ratio, output rises by about 1.4 percent in the long term.

  81. Tomaltach Says:

    Hugh Sheehy,
    The figures on your sheet show the German family on AW about 800 to 1000 euro per month better off than the unemployed Irish Family with two kids. You mention child care - why? only one parent working. Even taking for transport, 800 to 1000 eu per month provides you with a very different standard of living than someone on subsistance. Plus, Irish welfare rates have dropped since that and what way will German wages be moving?
    Furthermore, the welfare rates paid to an unemployed German family aren’t much different though they get the benefit of excellent services which in this country we might only dream of.

  82. Peter Matthews Says:

    Excellent article & courageous to go against the herd

  83. Hugh Sheehy Says:

    @Tomaltach
    Not “my” sheet, it’s the OECD’s.

    When I put a married couple with two kids in the tool it outputs a net income of 31689.4 on welfare in Ireland, and a net income of 32413.71 in Germany for a similar family with one earner on average wage and a second one not working. That family has also paid about 8k in net taxes/charges. That’s a difference of 800 euro per year for working in Germany compared to being unemployed in Ireland.

    The welfare level in Germany the tool generates is above 20k, but nothing near the same as Ireland.

    As for childcare, if only one parent is available to be at home there’ll be more occasions when childcare is needed than if there’s two. It’ll add up. Similarly, transport costs will eat up that 800 Euro pretty quickly.

    That’s the family we’re borrowing money from, or at least that’s the archetype Merkel and Sarkozy will be talking about on the stump.

  84. Kevin Walsh Says:

    It’s a minor point, but in the interests of accuracy I feel obliged to point out that privilege days were Holy Thursday and December 27th, not Empire Day or the Queen’s Birthday.

  85. Pahóm Says:

    Rural town residents protest EU/IMF bailout

    http://www.breakingnews.ie/ireland/rural-town-residents-protest-euimf-bailout-497956.html

  86. a punter Says:

    This just does not compute except as an appeal to nationalistic sentiment designed to render clear societal divisions opaque.

    The lower middle / poorest are the ones that are put ‘under enormous pressure’ and this shows that ‘WE’ ‘The Irish’ are a strong people with ‘courage’ etc.

    I don’t think that that ‘we’ can bear the load it is carrying in your argument. Can the ‘WE’ = those with the ‘courage’ to primarily put the less well off under ‘enormous pressure’ AND = those with the ‘courage’ to stomach the effects of the grossly inequitable methodology being utilised on them for the purposes of fiscal correction.

    That’s the kind of unstable WE that can suddenly blow up in everyone’s faces - see Greece/Iceland for example.

    It’s not a ‘moralistic’ instinct that is driving the commentary you are critiquing - It’s a class warrior instinct.

  87. paul quigley Says:

    Many thanks to Karl for another great post, and to all for a most informative debate.

    @ Brian Woods II

    ‘Our fiscal crisis is due to paying far too much PS pay and pensions and Social Protection and our banking crisis is due to paying a very wealthy few far, far too much for their land’

    @ Hugh Sheehy

    ‘By continuing to borrow vast amounts of money with almost no aim other than maintaining the excessive PS pay and welfare rates that apply, some sections of the country are effectively given permission to continue “stealing” money from other people in our own country’

    Landowners did makes massive gains, but so did a tribe of property professionals, advisers in suits, and wheeler dealers. Another tribe of retailers and lifetyle promoters puffed up on the cash and credit which was spun off the notional asset values. Much of the middle class was sucked in to the process. All very quiet now.

    The inevitable banking losses were socialised in order to protect the gains made in that way. Private vested interests forced the government guarantee, in the same way as they had previously brought about a lax regulatory regime.

    I wouldn’t use the term ’stealing’, but the actions of those ‘players’ were clearly wrong. That is to say, they were hugely inimical to our economic development and our social cohesion. The fact that the ECB collaborated in both exercises illustrates how far the failure of governance extends.

    The current borrowing of ‘vast amounts of money’ does allow the PS bill to be paid, but that is not all it does. It also serves to dampen the natural public demand for review and redress. It also obviates the need for heavy taxation of gains which can be described, euphemistically, as ‘windfall’.

    There is nothing wrong with the notion of public private partnership, it’s just that some people are wrecking it for everyone. Let us by all means have vigorous reform of the public sector and social welfare system. If colleagues with a private sector orientation can embrace corporate governance equally seriously, we could be coooking with gas, as the saying goes.

  88. Joseph Ryan Says:

    @Yield or Bust

    By the way the much discussed new fast track Bankruptcy regimes to me seem altogether unfair and unnecessary when many individual bankruptcies are as a direct result of real bank failures and the costs of which are being borne by ordinary citizens.

    It may seem unfair. But rest assured, the new fast tract bankrupcy is not prompted by a desire to help the ordinary man or woman with his or her loan or mortgage.
    The reason for its introduction is to allow our magnificent elite, who gambled and lost, to come back to the gaming table and to show us all how its done. Again.
    It like having a winner at Leopardstown and/or at Cheltenham but ye olde ODCE and Company Law stands between you and all harm.

  89. David O'Donnell Says:

    AAA_Austerity … ain’t workin! And this KW post shows scale …

    Socialization of bankin_system … ain’t workin!

    Std economics … ain’t workin!

    Pro_cyclical or counter_cyclical …?

    Something is not adding up … there is a fundamental flaw somewhere …

  90. Ernie Ball Says:

    What would be possible if the considerable energy that the Sindo expends lying about the public sector were instead devoted to applying pressure to the grocery cartel?

  91. Kevin Walsh Says:

    Looking at the report in more detail gives rise to grounds for pessimism that fiscal adjustments can actually have any positive effect at all on budgetary outcomes. The ratio of budgetary adjustments amounting to 1% of GDP to 0.5% falls in GDP assumes floating exchange rates and a national central bank, or at least interest rates that are correlated to inflation and output levels. We have neither in this country. In the circumstances, budgetary adjustments amounting to 1% of GDP will, if the IMF paper is correct, probably cause falls of GDP in the region of 1-2%.

  92. Gavin Kostick Says:

    @ Karl

    Great post.

    @ Hugh

    Congrats on 194 votes!

    When there was work we had full employment, and more people coming to find it. People want to work. I’ve always tried to avoid it, sadly not successfully.

    Name those “vested interests”. Sometimes I struggle with the terminology.

    I have it down as:
    Vested interests = people with beards (not likeable)
    Stakeholders = people who drink Starbucks at breakfast meetings (annoying people)
    Interested parties = nice people.

  93. Kevin Walsh Says:

    @Rory O’Farrell

    Yes. Tax rises and spending cuts were paired with falls in the current account balance in Ireland in 2009 and Finland in 1992.

    See pp. 120-121 of the report for more detail.

  94. Kevin Walsh Says:

    That should be the government’s current account, not the national current account.

  95. hoganmahew Says:

    @Karl Whelan
    “http://www.budget.gov.ie/The%20National%20Recovery%20Plan%202011-2014.pdf

    Page 16″
    Yes, I’ve read that. I even read the budget documents for each of those budgets.

    We’ve cut capital spending, which doesn’t count towards the primary deficit, IIRC. We’ve cut PS increments for a couple of years, but they’re back now? Some benefits have been cut, with child benefit cut more than most, but even most of the child benefit cut was to remove the ludicrous early childhood gift.

    Taxes have risen, for sure, but there has been, since 2007, what, a half-billion reduction in spending? Or is it still an increase? We don’t know what tax rates for the working population have become (i.e. tax wedge), because 2008 is now the most recent figures that the revenue have released. How bloody hard it can be to release some up to date numbers I don’t know. Perhaps they didn’t get that laptop back.

    My feeling is that the 14.6 bn number is largely spoof. Not spending money you planned the previous year does not count as a cut in my book. I must be wrong, though, because many eminent people that I respect keep using this figure.

  96. Oliver Vandt Says:

    @Karl Whelan
    A marvellous contribution, heartfelt and wise.

  97. hugh sheehy Says:

    @paul quigley
    There’s plenty of appetite for good governance in the private sector and among people with a “private sector orientation”. Most of the private sector lives with it every day. Most.

  98. hoganmahew Says:

    @Karl Whelan (again!)
    “Also Hugh, you may not be aware of something called macroeconomics. Your call for a zero deficit — even if wholly implemented via public sector pay and welfare cuts — would devastate many of the private sector businesses you claim to support because of the impact of the instant loss of spending power inflicted by the cuts.

    Be careful what you wish for.”
    Have you ever been to a bust country? One where the money ’stopped’?

  99. David O'Donnell Says:

    @hugh sheehy

    … most?

    http://www.irisheconomy.ie/index.php/2011/03/07/renewing-the-regulatory-state/#comment-130873

    @Sarah Carey

    … bit more o dat blue slip showin … tone is a bit blu_er imho.

  100. Kevin Walsh Says:

    @hoganmahew

    Increments never went away. What was cut was the rate of pay at each point on the pay scale. And it’s a genuine cut because it applies during (a) the pay period in which it’s imposed - you get less money than in the previous pay period and (b) in all subsequent pay periods, you get paid less money than you would otherwise have been paid.

  101. grumpy Says:

    Karl,

    Not sure I can agree with much of this. Hence the length. Either prop your eyelids up on matchsticks now - or don’t bother reading.

    “A call for immediately cutting the deficit to zero so that we would not need a bailout was greeted very positively by many of our commenters, who clearly take the view that this can be done easily if only we had the will.”

    That doesn’t really tally with my recollection of how discussion of the primary deficit has evolved on this blog. As I recall it came about in the context of discussions about Ireland’s negotiating hand (you may recall, more publicly, Colm McCarthy’s view that there really wasn’t much of one in October). Some have tried to point out the transparent weakness of a negotiating team publicly pre-committed to a gradual and Croke Park obligated adjustment programme and the total failure of any politician with prospect of power to even discuss the idea of getting out of that straight-jacket by readying the public for the idea that they may have to go to surplus quickly.

    Even getting pubic support for the idea that the country would be willing to do this would strengthen the negotiators’ hand immeasurably. As it is everyone, literally everyone knows there would be riots on the streets if the government didn’t keep the credit line available. The public have been told Ireland just has to be a bit stroppier and the EZ will cave, because of the hand grenade – that nobody is prepared to use – because the EZ will just cave.

    Personally I’m with the Keynesians on this. There is a classic debt spiral and it is not sustainable, but indignance and haughty comments about economic illiteracy are about as helpful as a fart in a space suit. The creditors want to see Ireland make the kind of effort that can be banked and presented to their electorate. It ain’t happenin’ in their view, and they have the money.

    Their electorates are entitled to ask “if you don’t think the deal is good enough, why take the money” – and enough of them are.

    Today the 2yr yield closed at 9.87% up 0.622. There was a rumour of a missed coupon. I reckon you could tell the emergency creditors to get stuffed and issue 2yr gilts tomorrow at about 20% without Trichet mopping up. Off you go.

    “The conclusion often reached from these discussions is that the Irish people are a feckless and inflexible lot who are “behaving like teenagers” in looking for help from Europe.”

    I noticed someone used the teenager analogy yesterday on this blog. If it is used “often”, I have missed it – I thought yesterday was a first, or more or less. Similarly I haven’t noticed anyone accusing the Irish people of being “feckless”, though I have noticed a few people using the word in an attempt to caricature the arguments of those urging speedier reform – along the lines of your own observation earlier about a commenter:
    “You and others choose to ignore that perhaps because you prefer pigeon-holing people with opinions you enjoy disagreeing with’ Hmm.

    “I understand the moralistic instinct that underlies these comments as well as its implicit faith in simple solutions.”
    Is that fair? Maybe you have the idea that urging the country to focus on its primary deficit and its relevance for negotiating strength, default, the skewing of its economy towards public and semi-state sectors etc – with a view to replacing drift with decisions- makes one a member of some sort of rabid, GOP- style conservative, socialist-hating cult.

    “In my opinion, however, this kind of commentary is based on a gross misunderstanding of the challenges posed by the scale of the Irish fiscal adjustment.”
    In my opinion, you should consider whether your opinion might be based on a gross misunderstanding of “this kind of commentary”. As maybe one of the founder members of the dare-to-mention-the-primary-deficit club I put it to you that the deafening silence there was about this a few months ago and during the election campaign, combined with the cheap talk about “playing our hand” and “playing hardball” and the untouchable nature of Croke Park despite the clearest “unforeseen budgetary deterioration” you could possibly imagine - was “ based on a gross misunderstanding of the challenges posed by the scale of the Irish fiscal [situation]. It [was] also extremely unfair to the Irish people and acted to undermine [sensible discussion about realistic tactics] for looking for additional help from the EU.” Just a thought.

    “Let’s start with a hugely important fact that tends to receive little attention. The Irish adjustments thus far have been enormous by international standards.”

    Yes, but lets add another fact that tends to receive little attention within the Irish debate but, importantly, is known by the emergency creditors.. The Irish boom and run up in costs and payroll was enormous by international standards. There is a marketing trick in the fund management business used to sell more volatile funds. Pick a starting date that corresponds with a turning point – usually a trough obviously; compare the performance to other less volatile funds; point out the out-performance. You see the problem. I don’t think anyone has sensibly suggested the Irish fiscal adjustment from peak is planned to be or has been other than very significant, but outsiders cannot ignore the extraordinary froth that their attention was so loudly drawn to at the height of the craziness.

    Some got trapped by that “economic illiteracy” and are going to need write-offs. Not though presumably, economics lecturers.

    “In my opinion, those who wish to characterise the Irish public as feckless teenagers have it exactly wrong” – I’d be happy to join you in that - if I came across any actually doing so and appearing to mean it.

    “Fiscal adjustments are extremely difficult to implement. Every society in the world has powerful institutions and organisations designed to protect vested interests and various types of status quos. Many of these societies would respond to one year of fiscal adjustment on an Irish scale with mass public protests and strikes.”

    Part of the point of raising the public spending and “P”oltical economy aspects is to try to draw economists into the debate about this very point. Irish society could be sleepwalking into notable social change. What possible reason – surely not inconvenience – is there to write papers about it afterward when the public could be better informed as it happens and have a better understanding of what is going on, why, and where it might lead?

    Different sectors have different capacity to resist reform that the creditors think will get the country into a position that it can exist in the Euro alongside Germany. Economists should be able to recognise the rational incentive for every grouping to resist reform so that others take the hit. If on the average, there is enough reform, those who resisted successfully will be quids in in the post reform society.

    In Ireland we know the protected professions and public sector are in the strongest positions to resist using the political system. This they are doing.
    This is entirely predictable but where it gets more interesting is if the creditors don’t fold after the private sector and welfare recipients have been squeezed. At that point - just as the Greeks have had enough of paying up as the tax collection efforts on the wealthy flounder and the protected remain protected - is there scope within Irish society for a similar reaction from the downtrodden private sector?

    Am I wrong about this idea of rational incentives? I would be interested to hear arguments as to why. If correct, then it does seem disappointing that, given Ireland’s current situation, there seems to be little attempt by its resident economists to project it into the wider public debate. Is there an obligation on society to protect those outside the powerful groupings or are we red in tooth and claw socialists?

    “Yet there hasn’t been a single strike of notice because these workers and their union leaders understand the gravity of the fiscal situation” – there were fairly vindictive strikes and work “to rules” prior to the Croke Park Agreement. The country is essentially insolvent and its public sector are highly paid – higher than hose in the emergency creditor nations and yet there are to be no compulsory redundancies, further significant pay cuts etc. Even the dumbest trade unionist has copped on by now that this is an unimaginably generous deal in the circumstances – particularly so since the automatic self-destruct clause is very generously being ignored by the political class.

    “And rail against welfare benefits being too high if you want. But these are the least well off in our society and they have put up with consecutive cuts in their modest incomes without serious protests. “

    – No thanks. Apart from the classic example of assistance from lots of different benefits allowing some people to draw down amounts many people find irritating, most welfare benefits are paid to people who need them and experience extreme insecurity. There is no reason to think that for example, the ceiling on public sector pay under Labour Party policy of, what, a cool 250K in the face of the national squeeze required, does these vulnerable people any favours. The Labour Party seem a bit confused about who needs protecting from social injustice.. Ireland has such a perverse economy that what would normally be the “left” actually ends up sticking up for overpaid, inefficient, entrenched, stifling semi-elites that are actually some of the most privileged in the country. Sinn Fein seem to have a clearer view on this, but they continue with the fantasy that default has no consequences

    This last paragraph:
    “Requesting a small amount of assistance from our European partners (particularly in relation to the repayment of loans made to insolvent banks by the ECB and European bondholders) to help Ireland avoid a sovereign default—this shouldn’t be too much to ask for if European solidarity is to be more than just a cheap slogan.”

    I just can’t tell you how outsiders who are currently focusing on Ireland scratching their heads and trying to work out what to make of the place are likely to react to this. A cheap slogan. After putting up with years of lecturing from McCreevy and Harney; watching companies re-locate HQs for tax reasons which apparently they were mistaken about all along (no advantage to be gained or so they say – how does this look?); Lisbon etc.
    If you can’t see it, its not worth me wasting the pixels on.

    Hugh Sheehy might be vulnerable to the perhaps cheap shot, that he’s “probably never heard of macroeconomics”, but there are plenty of your German and Chicago School counterparts that are not. Then there’s Morgn Stanley…..

    Just for reference Hugh, that’s usually a jibe that you are confusing a company’s finances with that of a large collective like a country – which actually has a self interest in running deficits during recessions. Its not the principle, its more the scope of Ireland’s problem combined with the lack of a free printing reserve central bank. Everybody knew the score that ECB = Bundesbank-Nua when the country went into the Euro. It’s a question of engaging on a practical and realistic level given the views and comparative power of the other parties.

    @Kevin O’Rourke
    “But expect lots of comments from our more economically illiterate commentors to the effect that there obviously hasn’t been an adjustment since we still have a large deficit…”
    That really is quite low.

  102. hugh sheehy Says:

    @grumpy
    Thanks, but I understood the (cheap) shot about macroeconomics. I understand the relevant theory too.

  103. hoganmahew Says:

    @Kevin Walsh
    “Increments never went away. What was cut was the rate of pay at each point on the pay scale. And it’s a genuine cut because it applies during (a) the pay period in which it’s imposed - you get less money than in the previous pay period and (b) in all subsequent pay periods, you get paid less money than you would otherwise have been paid.”
    Unemployment must be making me stupid as I don’t get (a) at all. Do you mean that there was a paycut? and (b) means it was permanent? But you still get an annual payrise?

  104. Kevin O’Rourke Says:

    @yoga: I think it is possible to simultaneously believe that (a) there were real paycuts, and (b) maintaining the increments in current circumstances was nuts. That’s my view, anyhow.

  105. hoganmahew Says:

    @Kevin O’Rourke
    Oh, I believe there were real paycuts, or maybe I should say I believed it. It is the wording of the response that made me wonder - if @Kevin Walsh had said “there were paycuts, but no changes to increments” I’d have wandered by more informed than I was. Now I wonder if it just means that people reach the top of scale more quickly so no increments are due them…

    PS some economic illiteracy for you. If the adjustment is so large and painful, why has spending gone up since 2007?

  106. Kevin O’Rourke Says:

    It’s late…

    but this tells a story

    http://www.finance.gov.ie/documents/exchequerstatements/2010/Enddecstatement.pdf

    and so does p. 56 here

    http://www.budget.gov.ie/The%20National%20Recovery%20Plan%202011-2014.pdf

  107. Kevin Walsh Says:

    No, people aren’t getting granted increments more quickly. Why would they be?

  108. Michael Hennigan - Finfacts Says:

    The bravery of so many after the horse had bolted the stable, is wonderful to behold!

    I have often made the point that evidince of reform would be some help in winning suppport from European partners.

    The FT again yesterday focused on the struggles of the two young leaders of the governing parties in Finland, in trying to head off the challenge of a new anti-bailout right wing party.

    People can complain that they’ve taken too many cuts already and in Oct 2008, Pres. McAleese aggreed to cut her salary by 10% from €350K pa. In 2009, her countrpart in Finland was on a salary of €126k and so it goes on for different positions across the well-run countries in the region.

    The difference in pension entitlements is staggering.

    Are their taxes lower than Ireland’s? Individual tax returns are online.

    While pointing out issues like this maybe tiresome, the facts of course feed extremism elsewhere.

    Who expects ‘transformational’ change in the public sector when even the unions will not concede on the ‘bank hour’?

    It will be interesting to see how Howlin handles the rich of the Bar Library.

    As to public pay cuts which began in 2009, it should be noted that there were special increases for high earners in late 2007. The head of NUIG got a 31% pay hike.

    The pension levy is often termed a pay cut but even for a new entrant in 2009, the net pension actuarial funding cost was 19% of salary pa.

    I would guess that it is in the range 30 to 40% for established academics and for existing staff, the salary link continues.

    The Economic and Social Research Institute published a study in December 2008, which concluded that “the public sector pay premium increased….to almost 24% in 2006, controlling for human capital and other relevant pay determining characteristics.”

    Yours,

    Economic illiterate who didn’t go with the bubble flow!

    @ Ernie Ball

    What would be possible if the considerable energy that the Sindo expends lying about the public sector were instead devoted to applying pressure to the grocery cartel?

    It would be a good thing to tackle all cartels.

  109. Michael Hennigan - Finfacts Says:

    It’s also relevant to add that the the lack of institutional refom through the decades, the ‘buck stops nowhere’ culture; the economic crash; the Moriarty Tribunal findings; the way the State banking guarantee was issued and the subsequent slow motion response to the banking crisis, are all part of the same tableau.

  110. BeeCeeTee Says:

    Having looked a little more closely at the IMF study referenced, I notice that the countries covered do not include Latvia, Lithuania and Estonia, all of whioh have gone through serious fiscal adjustments recently too.

    According to another IMF paper, gross adjustments in 2009 as % of GDP were:
    Latvia 13.9%
    Estonia 8.8%
    Lithuania 8.0%

    http://www.imf.org/external/pubs/ft/wp/2010/wp10213.pdf

    I think that puts a different complexion on the idea that Ireland’s fiscal adjustment in 2009 was an outlier. It also puts a different complexion on the idea that the Irish were uniquely stoical about substantial cuts.

  111. Kevin Walsh Says:

    @Michael Hennigan

    You’re out of date. Bank time is already gone, by agreement with the unions.

  112. Vincent Byrne Says:

    I have just read this now. Thank you Karl.

  113. Kevin Walsh Says:

    Regarding the payment of increments in general, a stop on increments would disproportionately affect people in lower grades and people who have fewer years of service, as compared to people in such grades as Secretary General which don’t have an incremental pay scale, people in posts with allowances, and people who have received an unsatisfactory performance review (who aren’t entitled to increments under PMDS).

    It would also lead to bizarre anomalies like someone hired on 31st December getting a permanent pay benefit compared to someone hired on 2nd January.

    Basically, if you want to cut pay costs in the civil service, cutting pay levels is far more transparent and equitable than stopping increments.

  114. hoganmahew Says:

    @Kevin O’Rourke
    Thanks fro that. From p.56:
    “- €1 billion in July 2008, arising from re-scheduling of the decentralisation programme, and a range of administrative savings on foot of the Efficiency Review that had been announced in Budget 2008 (December 2007);
    - €3 billion in February 2009, arising from a range of efficiency and policy adjustments, including the introduction of a public service pension levy, and the postponement of pay increases that had been scheduled under the Towards 2016 partnership agreement;
    - €1.8 billion in April 2009, on foot of a major round of programme savings and capital reductions announced in the Supplementary Budget; and
    - €4 billion in December 2009, with a significant range of cuts in Public Service Pay, Social Welfare payments, as well as other programme areas and capital savings.

    Taken together with other programme savings and containment measures in this period, including in Budget 2009, the overall expenditure consolidation exercise amounts to more than €10 billion, or 8% of this year’s GNP.”
    So, some tax raises, the PS actions, some welfare cuts. The rest is either not relevant (e.g. capital spending or not spending new money) or only postponement.

    And the other 4.6 bn?

    It is simply not credible to count some of these items as adjustments.

  115. paul quigley Says:

    @ grumpy

    Fair play to you for getting stuck in so firmly, but, like your good self, Karl has put in a lot of hard yards on this site and elsewhere. If every economist was as public spirited, and as willing to take positions on contentious issues, we would be in a much better place.
    Just a couple of comments.

    ‘Irish society could be sleepwalking into notable social change’.

    Hard to disagree with that diagnosis. Too many people are just waiting and hoping for the best.

    ‘outsiders … currently focusing on Ireland… scratching their heads. After putting up with years of lecturing from McCreevy and Harney; watching companies re-locate HQs for tax reasons’

    Those were the activities of the ‘dynamic’ private sector, and the ‘business focussed’ politicians who were well rewarded for ‘delivering’ the Irish state. Moriarty is a just tiny window into a broad landscape of pecuniary influence. Much of want was done was good, but too much of it was rotten.

    ‘The creditors want to see Ireland make the kind of effort that can be banked and presented to their electorate
    …Personally I’m with the Keynesians on this. There is a classic debt spiral and it is not sustainable’

    If you believe that closing the primary deficit will simply exacerbate debt deflation, why recommend such a step ?

    ‘Ireland has such a perverse economy that what would normally be the “left” actually ends up sticking up for overpaid, inefficient, entrenched, stifling semi-elites that are actually some of the most privileged in the country.’

    Social democratic parties have been enmeshed in scandals all over the world. To the extent that Labour has long been part of the mainstream, it has enjoyed the spoils. Not all state functionaries are Labour folk, however. It is our ‘private sector’ oriented parties which have mostly built the wobbly castle.

    ‘….is there scope within Irish society for a ……reaction from the downtrodden private sector ?’

    Undoubtedly, but it will have to face down the public sector elite which you mention, as well as their associates, the big private sector players. These groups are apparently opposed to each other, but, in practice, operate hand in glove. With notable exceptions, the so-called independent media are as tightly controlled as the state broadcaster. Hence the vital necessity for this and other blogs.
    Thrashing out a consistent platform for reform requires us to go beyond the public/private sector divide. Many homes have good folk working in both sides of the house, but thankfully divorce is unusual.

  116. Gavin Kostick Says:

    @ Grumpy

    Just some observations.

    From reading the blog I get the impression there are 2 kinds of ‘austerity now - budget surplus’ merchants at work.

    One kind, like yourself (please correct) are pragmatists who want a good flourishing society which has respect for all citizens, but argue that to get there Ireland needs to make the adjustment now.

    The other kind are more ideological and see a small state as the answer regardless of any situation. The answer is always slash the budget. Osborne in the UK is of this kind, I think, posing as pragmatic but actually doing it for ideological reasons. I look forward to seeing the consequence of this year’s UK budget on the economy there.

    A little disagreement here. you say:

    “As maybe one of the founder members of the dare-to-mention-the-primary-deficit club I put it to you that the deafening silence there was about this a few months ago and during the election campaign…”

    It surprising how many people like to see themselves as heroic outsider truth-tellers. That is not my memory of it. The primary deficit was much discussed. Endlessly in fact. I agree (apart from Shane Ross?), no one got elected on that platform, but there was plenty of debate on the issue of the best rate for the country to close the gap - covering political, economic and social outcomes.

  117. The Alchemist Says:

    @Hugh Sheehy

    That OECD tool you refer to for wage/welfare calculations - could you post a link to it please? Apologies if a link has already been posted and I missed it. Thanks

  118. ALTO Says:

    @ Dave W

    “I don’t know, I’ve never actually looked into it in real detail. Have you?

    Have you looked at the international comparisons, to see if we are over represented or under represented? I would be keen to know the actual facts of this rather than just a bland unjustified statement?”

    This is not looking in detail, and no exact numbers here, but considering England has a population of approx 51m, and 532 MP’s, and Ireland has a population of 4.4m, and 166 TD’s, if our population was the same size as England, and had our proportion of TD’s per capita, we would have 1925 TD’s / MP’s!!

  119. Hugh Sheehy Says:

    @The Alchemist

    http://stats.oecd.org/Index.aspx?DataSetCode=FIXINCLSA

  120. Michael Hennigan - Finfacts Says:

    @ Kevin Walsh

    It’s your information is out of date on bank time.

    Check the Irish Times today for an update.

    The CPSU has issued a letter seeking information on the privilege days issue because the union says its concession on bank time was on the understanding the senior staff would forfeit the British empire days.

    Slow-motion v ‘transformational’?

  121. Thomas Paine Says:

    Fascinating stuff and a phenomenal response to Karl Whelan’s initial contribution.
    After working my way through most of it with all the arguments for/against spending cuts v tax increases as % of GDP etc my conclusion is that unless we get the benefit of very high (and unlikely) growth rates or a substantial write-off of debt Ireland cannot survive as a member of the Euro. For political reasons it will be impossible to continue indefinitely with spending cuts and tax increases and keep our relatively free democratic system.
    We must at some time look at the alternative of leaving the Euro and allowing macroeconomics to help us make all the adjustments necessary. We will then have a de facto devaluation, massive debt default and essentially start all over again. I realise this means massive cuts in public spending and tax increases but at least we get control over our own destiny and can begin to make rational political decisions. I also realise there will be massive short-term disruption to banking systems,savings,pensions etc. but we cannot continue to “kick the can down the road” much longer building up more debt as we go. Its time someone shouted stop.

  122. The Alchemist Says:

    @Hugh Sheehy

    Thanks. Very revealing (the last reference year is 2009 I take it). Pity it is limited to two child families.

  123. Eamonn Moran Says:

    @ Gavin kostick

    “The other kind are more ideological and see a small state as the answer regardless of any situation. The answer is always slash the budget.”
    But they are quite easy to spot. They are the ones who do not argue for tax increases as part of the solution.

  124. Brian O' Hanlon Says:

    @ Karl Whelan & Irish Economy Blog,

    As a challenge, I would ask you to contradict a view, which has been my own pet theory for a long time now. Karl Whelan writes above,

    And you can compare Irish income tax rates for low and middle-earners with other EU countries and reckon there’s room to raise more income there. However, the vast majority of these people have entered into commitments (mortgages, car loans, childcare payments) that cannot simply be reversed at the drop of a hat and many are already under enormous pressure. This is why fiscal adjustments are so small and gradual elsewhere.

    You may not understand this aspect about the Irish culture Karl, well enough. But Irish people have a terrible tendency to go ahead and do something, and afterwards to ask authorities to defy them. You can see it in the planning system big time in Ireland. Where one of the wealthiest builders in the country decides to erect a structure, many stories in height beside the River Liffey, without any planning permission. It took the action of another rival builder to highlight the contradiction, and ask for the same structure to be demolished.

    Which leads me to my point. Why were Irish people in such a rush during the Celtic Tiger to pay so much money for homes? The point is simple, if you really understand the Irish culture. I like to think of the analogy of the rubber device that one may purchase at a hardware store to keep a door open. A door stop. The pay agreements during the Celtic Tiger were generous across the board. Every Irish person knew, they would be subjected to review very quickly. They knew instinctively that the government was out of control, drunk on power and spending like the same.

    The fact is, the Irish citizens did not trust a government that was paying with money it couldn’t sustain. What is the instinctive thing to do in that case? To employ a door stop, to force the door to remain open, even though it will want to close. The closest thing to a door stop, to downward salary and wage reviews, the Irish people could reach for at the time, was an overpriced house. Because the overpriced house, and houses in general, in Irish culture had been a scarce commodity, Irish citizens believed that the value could be locked into the bricks and mortar, or the land it sat on. The national conversation during the Celtic Tiger in Ireland did not have one sentence which did not contain the word property. The property was the door stop. If the mortgage for the property at ‘X’ price had been locked in, by the wage or salary earner, then their wage or salary could not go down, because the Irish as a herd had set the cost of living, to co-relate to the inflated price of houses. That is the inflated wage or salary had to remain so, to match with the house price. It was the Irish way of saying, defy me. I have just bought this house, so now you have to pay me ‘Y’ to make ‘X’ attainable.

    If you read Morgan Kelly’s last Irish Times newspaper article, he presents a version of this, but gets it wrong. The Irish will not do the herd-like thing, of defaulting en masse. The Irish are much too forward for that. What the Irish have done, is the herd-like thing, of all simultaneously putting their foot behind the door, and saying to the government, the establishment and all and sundry, defy me, to remove my foot. What I don’t understand, is why folk such as Karl Whelan, Morgan Kelly etc, still haven’t figured this out! BOH.

  125. Brian O' Hanlon Says:

    @ All,

    When the international authorities issue warnings, not to fly to a war inflicted area such as Libya, Egypt or Tunisia, I often imagine the numerous Irish folk who are compelled to buy airplane tickets to those very destinations. To do so in defiance of what they are being told. The Irish do not protest en masse through the streets as other cultures do. But that is not to say, the Irish do not protest. BOH.

    http://designcomment.blogspot.com/2011/03/defiance.html

  126. Mickey Hickey Says:

    I am Irish enough that if I was in your shoes I would write something similar. Our problems are deeply embedded in our culture which has not evolved in a measurable way over the past century. In the seventies four out of five people working in Ireland had worked overseas. One would be inclined to think that a number as high as 80% having been exposed to normally functioning economies would have had an effect at the ballot box. The changes resulting were imperceptible. I have relatives in Buffalo NY, while on a business trip a few years ago I met a Ukrainian American lady from Buffalo who was familiar with the Buffalo Irish community. Her take on it was that the Irish culture is exceptionally strong and the common denominator is they all know precisely when and where they came from. It could be that a lot of Irish who leave Ireland enter into a Celtic cocoon in their new land. The famous Irish long memory makes us impervious to changing circumstances it is as if 1922 happened yesterday, Dev still lives, the ECB owes us (yes owes not owns), sure all we need is a cost of borrowing below the rate of inflation and all will be well. Our LCTR is the new Rosary beads which we can finger whenever we feel anxious. Our rents, wages, regulations, tax rates, social supports cannot be changed because we like to dig the hole deeper. Cuchulainn will show up any day now and cast our debt into deep Atlantic after which we will return to our reverie. There is a Wagnerian epic opera embedded in our present plight that would rival Tristan and Isolde. I am from Kerry this is translated from tales my grandparents used to tell me. I forgot to include St, Brendan so let me say if he could row to Labrador in a cow hide boat we should have no problem with the 747 to Massachusetts. Things are improving.

  127. Brian O' Hanlon Says:

    @ Mickey Hickey,

    Thanks for the comment, I enjoyed reading that. BOH.

  128. Kevin Walsh Says:

    @Michael Hennigan

    You are simply incorrect on this point. Bank time is already gone as of the beginning of this year, and nowhere in Blair Horan’s letter is there a suggestion of any CPSU action to attempt to get it back. Nor is there any prospect of such action.

  129. Michael Hennigan - Finfacts Says:

    @ Kevin Walsh

    The main point here is the tortuous process of reform rather than the particular issue.

    Unless the sick pay system is reformed, then people will compensate by taking sick leave.

    A report by the Comptroller and Auditor General  published in 2009 said sick leave had jumped since the 1980’s in the Irish civil service  with the absence rate rising from 3.3% to almost 5% of available working time, which was lost to sickness absence in 2007. On average, 59% of all staff employed availed of sick leave in that year.

    The average employee was absent for just over 11 days.

    Maybe the IT spoke to the wrong Eoin Ronayne.

    CPSU seeks clarity on privilege days for senior staff

    http://www.irishtimes.com/newspaper/ireland/2011/0323/1224292846993.html

    IT: Yesterday, CPSU deputy general secretary Eoin Ronayne said while its members retained the two privilege days “we agreed not to contest the loss of our bank days on the understanding that higher grades wouldn’t keep their two privilege days”.

  130. Kevin Walsh Says:

    @Michael Hennigan

    There’s nothing in the interview Eoin Ronayne gave that contradicts my understanding of the CPSU position. Moreover, and I hate to beat a dead horse here, Bank Time is already abolished. I don’t believe CPSU has any basis to refer it to the Arbitration Board, the Arbitration Board in making its decision to retain privilege days for senior staff has clearly already rejected the linkage between the two items made in the Croke Park framework, and there’s no prospect of industrial action on an issue that never affected many (perhaps the majority) of CPSU’s members in the first place.

    On the sick day front, civil servants can take, IIRC, a maximum of 5 days uncertified leave with pay, and no more than two consecutive days. It follows that if they take more sick leave, they either shelled out the €50 for a doctor’s certificate, or they didn’t get paid for their absence. In either case, I think it’s worth considering the possibility that today’s civil servants are less healthy than the civil servants of the 1980s.

  131. Ger Says:

    The difference in sick time is almost entirely down to the long-term ill. These are given the boot from private companies in a way that does not happen in the public service.

    But for me, that is more of a reason to reform the private sector than the public service. It is unacceptable that sick people get the sack prematurely, ill health could visit anyone and should be treated with a little patience.

  132. Yields or Bust Says:

    @ BOH

    I have to say its been a long time since I read such a load of old tripe.

    People by houses primarily for one reason and one only reason and that’s because banks allow them to. End of.

    The fact that the banks mis priced them for the best part of a decade was based on greed and stupidity - not traits the Irish have historically be aligned to - the very recent past aside.

  133. Brian O' Hanlon Says:

    @ Yields or Bust,

    No. Wrong, wrong, wrong. In Ireland, it wasn’t until we had gotten well used to over inflated wages/salaries, and too much employment opportunity following too little labour resources, that we got bored with that - and the only other thing we could go onto next, as a nation, to stem the boredom of having too little to do, and getting paid far too much to do it - was to try to compete with each other, to see who could pay more for a 2 up, 2 down. We allowed the sense of our own invincibility, get the better of us. We thought we were indespensible and were poised to rule the world. Pride as they say, always comes before a fall. And what a fall it was. BOH.

  134. Kevin Walsh Says:

    There was a good deal of fear involved for first-time buyers - the fear that if you didn’t get on the property ladder at the first available opportunity, you would never be able to afford a house.

    On the sick day front, I should correct myself. It’s possible to take 7 uncertified sick days, but the decision as to whether to pay you is up to the Department.

  135. Yields or Bust Says:

    @BOH

    This type of ‘analysis’ is as meaningless as it gets, in trying to explain why the property boom eventually ‘got going’ in the way it did. Property booms in virtually every jurisdiction where they have been studied generally stem from one place and one place only and that is the banks in question lose the plot and forget the underlying drivers of property price dynamics which is pricing the asset class on a long run stable yield basis. All other metrics are proven losers.

    In the case of our own bubble when in 2006 Irish banks were lending money at less than 1% net yields which was c80% less than average European risk free rate at the time represented in pretty stark terms an example of banks losing the plot.

    This is nothing to do boredom or invincibility. All to do with stupidity and greed.

    Property markets live and breathe with the availablilty of credit - without it property transactions (in 98% of cases) simply don’t happen. So anyone who believes in tooth fairy stories such as ‘ruling the world’ and the like would want to wise up and face the facts regarding leverage driven asset markets i.e. those who provide the leverage hold ALL the aces.

    The banks in lending the way the did for the best part of a decade at less than risk free rates at the time was a plain old fairly predicable banking pricing error. Nothing more nothing less.

  136. Hugh Sheehy Says:

    @Kevin Walsh
    http://www.rte.ie/news/2011/0325/bank.html

    “Bank time” continues in some sectors of the public sector.

  137. Brian O' Hanlon Says:

    Yields or Bust says:

    Property booms in virtually every jurisdiction where they have been studied generally stem from one place and one place only and that is the banks in question lose the plot and forget the underlying drivers of property price dynamics which is pricing the asset class on a long run stable yield basis. All other metrics are proven losers.

    That is only because of the ineffective way they are studied. By that I mean, there are no labour economists talking to property economists and comparing notes, to establish the actual sequence of what does happen in a property boom. As opposed to the reflection that goes on afterwards, when members of the economics academic establishment decide to troll through the data - like, years after the event - and establish conclusions, which we are all supposed to abide by.

    Take an example, George Lee’s RTE episode in which he analysed the Irish saga of the Celtic Tiger, called How we blew the boom, which is a very good piece of documentary television, produced by someone who knows a little thing or two. However, when I reflect on the case that Mr. Lee presented in that documentary, and how it has been picked up by others since, such as Pat Kenny etc, and re-hashed a few times or more, I consider their entire theory to be flawed. Because it makes a lot of the right points, but gets the sequence out of order.

    Like I said, the lack of cohernent analysis of property cycles within the economics establishment, has more to do with a communication failure between different branches of the same. Namely, that the labour economists move in different social circles, and are on a different peer review/publication program, to that of the property economists. And never the twain shall meet. There is an impressive dissertation topic right there if someone cares to run with it, maybe Phd level, I dunno. If we are prepared to live as per tradition, by this fatal project management to align the two together, to output a real and coherent analysis of what did happen, then I suggest, we deserve the sort of half-baked, simplistic academic results that we are all familiar with, as far as property goes.

    The trouble with property, and it does remind me of Michael Lewis’s book, Liar’s Poker, about the mortgage bonds department at Salomon Brothers, it is the poor relation. No talented academic economist in their right mind, is going to be caught within a country mile of that subject, and hope to achieve tenure before they reach middle age. The sexy areas to study in are labour, markets, international, contractual, blah, blah etc. No sane economist, Irish or otherwise will want to claim to understand property economics in depth, or run the risk of being labelled as a hack. Including contentions to that effect regarding Peter Bacon etc, etc, Cutzpah, etc, etc.

    Anyhow, Yields or Bust, thanks for analysis, and in fairness, Karl Whelan’s original contribution in this blog entry, does contain an awful lot of insight. I only hope to counter balance that, with some of my own pet theories. BOH.

  138. Yields or Bust Says:

    @BOH

    I’ll bow to your better knowledge about the goings on of the alternative classes of economists in the world and indeed there is absolutely no doubt that the sequence of events in determining the starting drivers and ending crashes and worthy of study however I’m pretty confidient that a common factor in any property bubble story will have at its heart crazy lending practices adopted by the local banks involved.

    The argument is always ‘this time its different’ spare me please because our friends in Finland were telling us back as far as the year 2000 the wheels were already coming off but course the mantra was ‘this….’ etc.

    By the way (and much more imprortant, and to my mind worthy of a longer debate) is whether in fact given the scale of the mis pricing error by the lending banks (on my estimates min PTT falls of 74%) what scope if any is there for negligence claims by defaulting mortgage home owners?

  139. Brian O' Hanlon Says:

    @ Yields or Bust,

    Thanks for your reply, and your points are well taken btw, and well made. However, I have enough experience in management of groups and projects through the years, to know, the first place you start with any analysis or form of information, is to look for flaws in the logic and the sequence in which the info was assembled. It is one of the basic principles, that we know from lateral thinking etc. The jigsaw tends to get put together according to the order in which folk find and put together the pieces of the puzzle. In the case of economics, there are various ‘markets’ for the information, various funding streams to be cogniscent of. For instance, one group of economists will be under fierce pressure from the media, government etc to compile analysis of consumer price index, rates of employment, rates of tax take, population trends and so on. That tends to happen fast as the information is available. Then you have other groups of economists who are under different kinds of pressures, and may walk onto the scene much, much later and at a different pace, using different sets of tools.

    All I am saying is be cogniscent of how the ‘picture’ was put together, who was doing it and in what order. If someone could look at that properly someday, and pay attention to it, it would be a great thing indeed. It might provide us with some fresh perspective. BOH.

  140. james Says:

    The Irish public service is still - after all the cuts - very overpaid, and is one of the highest in the world.

Leave a Reply