Broad tax bases are desirable

A criticism often levelled at Keynesian economists is that they are great at calling for stimulus but rarely tell us when it’s time to tighten policy. So kudos to Kevin O’Rourke for this post.

Agreed, except for (d).

My reasoning in the matter is linked to a point that arises from your post that has drawn no comment hitherto viz. the almost daily erosion of the reputation of one MOF in the circle that might be said to matter, the Eurogroup.

The “constraints” aka the “dangers” of euro membership should ensure that most of the irresponsible promises that have been made will not be fulfilled.

Methinks (a) needs some qualification:

Michael Taft http://www.irishleftreview.org/2016/02/12/investment-deficit/

Interesting NTMA paper on export risk

http://www.ntma.ie/download/publications/IrishExportsFactsFictionAndRisks.pdf

Apologies. Page 53.

And the text of the offending circular.

http://circulars.gov.ie/pdf/circular/per/2013/15.pdf

Its porous nature is not the fault of the public servants that drafted it but of the politicians, of all parties, and their electorate, who persist in county/constituency pork barrel politics and cannot imagine, any more than most of the media commenting on their activities, any other approach.

Up Mayo! Or Wexford! Or Limerick! [Insert county of your choice]. Or, as one politician (from Roscommon) put it on the radio some days ago, “four counties and not a mile of motorway in any of them”.

seafóid: Really? Do I have Earth 2 on my internets again?

http://www.independent.ie/irish-news/election-2016/we-wont-let-national-debt-overwhelm-us-again-joan-burton-34428406.html

To say that “arguing for the abolition of the USC or water charges is grossly irresponsible, and should suffice to disqualify a party from being taken seriously” is a statement that itself should not be taken seriously.

The reality is that it all depends on the circumstances.

If the economy is struggling to grow at 1% or so, and only slow progress is being seen in reducing government borrowing and debt, then clearly it would be irresponsible to reduce the tax base.

However, if the economy is growing at 5-6%, tax revenues are pouring in, and government borrowing and debt are falling sharply, then it makes perfect sense to return some of the fruits of economic growth to the taxpayer.

So, which of these scenarios is Ireland currently in?

Clearly, its the latter. Therefore, in present circumstances, tax cuts are perfectly justified and economically sensible. If repeated for the rest of 2016, the January tax returns indicate that Ireland will run a budget surplus this year. Of course, things could change. If the U. States looks like electing a socialist President (Sanders) and its economy slows down as a result, this could adversely affect Ireland. In which case, the assessment given above would need to be revised. But, as of now, tax cuts are totally justifiable.

Once elected a government would say that x or y promise can be deferred in response to a downturn, in the hope that prospects would be brighter later in the cycle — besides most of the current leaderships will be in superannuated bliss from 2021.

No party would want to recognise risks as that could put a doubt on delivering their promises.

Colm McCarthy deals with the Dublin housing crisis today and the fact that there is no credible response to increasing supply, is an example of why politicians have reverted to arguing about tax levels and bribes for voters.

http://www.independent.ie/opinion/columnists/colm-mccarthy/shiver-of-fear-that-could-save-the-property-sector-34451410.html

Maybe the broadcast media is different but reading the print media about what is being termed a “boring” election campaign, the media appears to be in a traditional role of a facilitator rather than catalyst.

Education was once seen as a key factor in modernising the economy but the OECD now points to the low skills of much of the workforce. FG/Labour says 50,000 apprenticeships will be added but the business sector will not pay to rescue the worst apprenticeship system in Western Europe. Burton promises €5 per week on the State pension but there is nothing said about one of the lowest private sector pension coverage (40)%) in the developed world and so on…

http://www.finfacts.ie/Irish_finance_news/articleDetail.php?Irish-General-Election-Media-needs-to-challenge-status-quo-516

@ JTO

The other point is, of course, the hopelessly skewed nature of the Irish tax take, and the actions of the outgoing government to skew it even further.

http://www.irishtimes.com/opinion/chris-johns-usc-is-actually-quite-a-sensible-tax-1.2529863

The thing about media and middle class politicians is that they don’t do context. FG is proceeding on the assumption of BAU. The working classes know it isn’t. FF lost them to SF. Ireland is ill equipped for crisis 2.0 given debt loads and the EZ’s missing crisis equipment. Over to Con for the sports news.

From recent polls, it appears that a Fianna Fail / Sinn Fein coalition might be stable. This would combine the wisdom of those who brought us the credit bubble and those who brought us the Troubles.

According to the Sindo the sale of AIB ain’T going to happen this year. Too much volatility. They should bring AIB to the vet to put it down.

On taxes!

http://www.tasc.ie/download/pdf/tasc_how_much_tax_do_people_pay_on_their_incomes.pdf

“This is a stark reminder that in Ireland the number of adults in employment is nearly matched by those who are not. Therefore any changes to the income system, such as income tax cuts, will have no direct benefit to half of the adult population”.(Page 3).

“Despite repeated expressions to the contrary, Ireland is a low tax country with low levels of public services. Low personal taxation and social
insurance are contributing to this.” (Page 4).

That’s about it!.

There is a popular expectation that (i) a high level of public services is a right that nobody – apparently – need pay for by way of tax on income (assuming that they do not belong to sectors that assume that there is no need to work at all) and (ii) an equally popular view that paying any income taxes is the equivalent of being caught – unjustly – in the “tax net”.

How this delusional state of affairs has arisen is a long story but the PR system, and the auction politics that flow from it, has clearly played the major role.

The average voter’s suggested election promises shopping list.

http://www.independent.ie/irish-news/election-2016/rightcol/seven-questions-for-your-candidates-that-could-mean-more-money-for-you-34449912.html

Just to add that the slice of GDP that cannot yield much tax more than pays its own way in terms of the costs it imposes it imposes on the economy. The output bu multinationals in excess of what can be accounted for by employment is hard to tax but it also makes very little imposition on public spending.

@DOCM

“There might be some merit in what you say if the tax take was adequate, for example, to provide universal health care.”

The Republic of Ireland has a very high level of expenditure on health. In fact, it could be argued ‘too high’, given its population age structure. So what, if part of it is funded by private insurance rather than entirely by general taxation? That might well be a good thing. I find many Southerners view ‘universal health care’ through rose-tinted spectacles. Its not the panacea they think it is. N. Ireland has ‘universal health care’. Its life expectancy is lower than in the Republic of Ireland. Its overall mortality rate, its infant mortality rate and its suicide rate are all higher than in the Republic of Ireland. Scotland also has ‘universal health care’ and it has the worst health stats in Western Europe, with life expectancy 2 years lower than in the Republic of Ireland., even though their culture, climate and lifestyle are very similar. The SLAN surveys of a few years ago showed health levels in the Republic of Ireland to be generally higher than in N. Ireland. There have been numerous cases in recent years of terrible treatment of patients by the NHS (e.g. Staffordshire). An element of choice on users’ part improves most services (transport, education etc). So, why should it be different for health? One of the problems of ‘universal health care’ is that doctors surgeries are full of people with minor illnesses that cure themselves in a few days without medical intervention.

But, the general point is that it is economically sensible and socially just to give taxpayers some of the benefits of economic growth in the form of reducing their tax burden. There is room for legitimate argument, of course, as to which taxes should be reduced. When the economy goes into recession taxpayers are burdened with increased taxes to fund the increased demands on the social welfare system of the large numbers of people who lose their jobs. This is painful, but socially just. So, when the reverse happens and those unemployed start going back into jobs, why shouldn’t taxpayers have their burden reduced, given that demand on the social welfare system will be falling?

@Gregory Connor

“From recent polls, it appears that a Fianna Fail / Sinn Fein coalition might be stable. This would combine the wisdom of those who brought us the credit bubble and those who brought us the Troubles.”

Very unlikely.

(1) They don’t have the numbers.

(2) FF loathe SF (and vice-versa). FF have stated emphatically that they won’t go into coalition with SF (and vice-versa). If FF reneged and went into coalition with SF, the party would split. But, as I say, its academic, as they won’t get close to having the numbers.

Most likely election outcome is FG/FF, or FG/Lab + independents, or FG alone with FF doing a ‘Tallaght’. I’d prefer the first of these.

Regarding your other points:

(1) The credit crisis was a global phenomenon. How exactly did FF cause it? Banks failed in the U. States, U. Kingdom, Spain, Denmark, Germany, France, and umpteen other countries. The idea that Ireland was uniquely badly hit by the credit crisis and the economic recession, that its economy was totally destroyed rather than just being in recession, that it would take decades to recover, and that FF were somehow responsible for this sorry state of affairs, although a fashionable view among the Dublin 4 cognoscenti several years ago, has been blown apart by the growth surge of the past few years.

(2) I have never voted SF (either north or south) and have no time for them at all. I was always totally opposed to their use of violence. But, its inaccurate to say they brought us The Troubles. It was actually the RUC in Derry on 5th October 1968 who brought us The Troubles. I know because I was there.

@ JTO

I advocate the introduction of a system of universal health care, not the equivalent of the NHS, a partial version of which is what we already have, combined with a system of health insurance for those that can afford it, the result being one of the costliest but most dysfunctional health systems, dysfunctional mainly because it is run on the basis of trade union fiefdoms removing the capacity of the management to do their job.

The argument for the introduction of a universal system is one of social justice and equitable treatment. When it comes to choosing the one that provides the best health outcomes, I would probably opt for the French/Belgian model. The outgoing government chose the costliest – the Dutch – and the mainstream political parties collectively, sniffing what they thought was the political wind, including Labour to its shame (and probable electoral detriment), threw their hands in the air and gave up.

On the face of it all the (main) parties have taken Finance’s medium term forecast as their base, including the Fiscal Space (FS) assumptions. This is predicated on a steady decline in the structural deficit, and as such fiscal policy is contractionary and real spending falls relative to GDP. One could argue that policy is not contractionary enough, of course, but its is not expansionary unless one argues the potential growth assumptions are all nonsense.

Fianna Fail have gone with the €8.6bn FS figure derived by Finance, while both Fine Gael and Labour have assumed that Ireland’s Medium Term Objective (MTO), currently to eliminate the deficit. is relaxed to a new 0.5% deficit target, allowing another €1.5bn in spending. Labour, in addition raise taxes by over a billion to give a FS figure of €11.1bn, the highest. Sinn Fein also plan to raise taxes ,by €1.7bn, and all their space goes on spending, with no net tax reductions.

IFAC have pointed out that the FS figures quoted by Finance made no allowance for any increase in public sector pay in line with inflation or any indexation of social transfers. No doubt the economy will not perform as forecast anyway, but the FS numbers depend on potential growth, as defined by the EC, rather than actual growth. The ‘rules’ may also be changed of course and one notes that France has been in breach of the existing fiscal rules for almost a decade now.

@DV

The expenditure rule does not apply to actual expenditure .The benchmark reference spending figure excludes debt interest, a cyclical unemployment component, any co-financed EU spending and capital spending, although the latter is an average over 4 years.

In a downturn cyclical unemployment spending would rise automatically and is not counted in the benchmark. Also it is the potential growth rate figure that matters . Ireland is currently deemed to be operating well above potential ( i.e. booming, which the Government is coy about) so the structural budget is in deficit- hence the need to keep spending below potential growth in order to eliminate it.

@Sarah
Well said. The recovery is not trickling down. SF benefit. Still so much neg equity. And so many risks.

@JohnTheOptimist

Senior rugby!

http://www.independent.ie/sport/rugby/other-rugby/im-not-sure-id-have-wanted-to-be-a-professional-paul-kimmage-meets-rugby-legend-mike-gibson-34430028.html

I met Eamon O Cuiv at a debate as Gaeilge last night. Proper local media. Anyway he reckons it will be FG/Shinner.
The FG rep was flogging the more money line.

Tax should be more attuned to where the money is. Neoliberalism is all about 1% enrichment. They should bear more tax. Capital sitting on balance sheets doung nothing should be subject to a once off use it or lose it levy. Tax is not utilised in the goal of investment and it should be.

The USC is income tax – haven’t we always been overly reliant on income tax in this country. How is this helping to broaden the tax?

Inheritance tax is where I’d start first on broadening the tax base – the desire in this country to penalise those that have done well through hard work and investment in ones own education is depressing….meanwhile everyone seems content that those who have done little to achieve other than to enjoy an accident of birth should be left to enjoy the fruits of that good fortune unscathed.

The Muenchkin

https://next.ft.com/content/0c9acf2e-d189-11e5-92a1-c5e23ef99c77
Looking back, the cardinal error committed by the European authorities was the failure in 2008 to clean up their banking system after the collapse of Lehman Brothers. This was the original sin. Many other mistakes subsequently compounded the problem: pro-cyclical fiscal austerity, the ECB’s multiple policy failures and the failure to create a proper banking union. It is interesting that every single one of these decisions was ultimately the result of pressure brought by German policymakers

So, the housing waiting list figures are fake:

http://www.eveningecho.ie/cork-news/officials-question-housing-crisis-as-48-of-applicants-refuse-offers/1838273/

@ Aedin Doris,

Agree, and housing is just one among several issues that affect people’s day to day lives and act as an impediment to their participation in the workforce, contributing to future economic growth, or realising their own personal potential and ambitions. Add in: inadequate childcare infrastructure, poverty trap social welfare regimes, increasing prevalence of ‘occassional worker/staff’ insecure employment contracts across the economy, unequal access to health services, prohibitive costs of participation in higher education to students and their families. There’s a whole agenda of interconnected issues here that fall under the general rubric of ‘social justice’ and about which there has been little or no debate in this election to date.

I agree with Kevin’s points. We have to get the macro-economics right. But a focus on the micro-economics of people’s lives is just as important to securing sustainable economic conditions and economic growth over the long term. It’s not as if the current housing crisis wasn’t predictable. All the signs were there over the past three to four years, and ignored until what Minister for the Environment, Alan Kelly, now describes as ‘the perfect storm’ manifested itself in a crisis. But it’s the very stuff of politics and policy-making to identify risks and signals and take timely action to avert such crises, not just sit around waiting for a ‘perfect storm’ to emerge.

The current GE debate needs to broaden out to encompass the social within the economic strand. Contrary to the view that voters are bought by cheap promises and get the governments they deserve etc., voters are not stupid. They are not irrational in their choices. Such choices reflect the immediate circumstances of their lives and what the conditions they want to see alleviated in the short-term, as well as a calculation of how things might work out for the best over the longer term, i.e. social justice is inseparable from economic sustainability.

@ JohnTheOptimist

The ESRI did an analysis in 2004 (?) or therabouts where it was estimated that there would be no need to build a single housing unit until 2021 if demand had been spread evenly across the country.

The UK and Ireland have dysfunctional housing systems and in the UK since 1955 land prices have risen 15-fold compared with a 5-fold increase in house prices.

Ireland was the only country in the EU28 in 2003-2013 that saw an increase in the number of farms — CAP welfare has made Irish land turnover very low and Irish agricultural land prices are now among the highest in the world — how crazy is that for a food producer?

At some point Irish politicians will have to take on Nimbies and the land interests as land has already become an investment class.

Who will assert the common interest?

@ zhou_enlai

Do idiot voters have any responsibility? FF and their groupies were elected in 1997, 2002 and 2007 and I bet that most of the supporters never gave a thought to their part in the misery inflicted on tens of thousands of their fellow citizens and others! It’s remote of course for a lot of them.

@ Brian Woods Snr.

Japan appears to be back to 2012 with no real benefit from massive bond-buying and Draghi is preparing another flu injection.

Maybe there are headwinds that they cannot counter?

During the boom years, there was not much attention given to when China’s supercharged growth would begin to slow and Robert Gordon highlights the slowdown in technology-related productivity growth.

http://www.finfacts.ie/Irish_finance_news/articleDetail.php?Sun-sets-on-decades-of-high-growth-in-US-Europe-Asia-529

@ JTO

You are making a good stab at it!

There are plenty of houses; but in the wrong places, courtesy local jobbery and the failure of planning controls. There are today 180,000 houses for sale on Daft.ie. I invite you to check out whatever area you like outside Dublin and its surrounding districts and the larger cities and towns, effectively four or five in number, and compare their number with the level sales achieved, and their prices, on the Sales Register which is now also available on that site.

The figures do not, of course, include half-finished estates and the many houses left vacant by their – emigrated – owners in the hope of a return to better times, not to mention the empty commercial premises in every town and village.

@ JTO

The way the polls are going SF plus Fg would mean no second election

Bad month for OWC with massive job losses in Ballymena and Belfast

Want to broaden the tax base? Legalise marijuana. The side benefit is the transformation of our city and town centres on weekend nights: people who are stoned generally don’t fight, puke, or make atrocious spectacles of themselves.

Colorado, which taxes it relatively lightly compared to what Ireland might, takes in more from marijuana than it does from alcohol. If Ireland were the first country in Europe to proceed with full, Colorado-style legalisation, we’d also reap a temporary bonus in tourism revenue.

Chances that any Irish gov’t enacts this no-brainer: zero. Especially after the drinks pushers weigh in.

The big story of this election so far is that Labour’s collapse is such that a vote for Labour is not now a vote for stable Government. FG and Labour won’t come close to a majority. This has to help the Social Democrats and other middle ground independents who have grouped themselves to do business or have previously proven themselves capable of doing business (Healy Raes, Lowry, F. McGrath, Maureen O’Sullivan).

I agree with all of Kevin’s points bar the first. Though I wouldn’t use the term stimulus – which is a surge in public spending with the aim of encouraging growth – I would argue that we need to address public transport and housing and other deficits, including say policing, that have accrued over the course of the crisis in public finance. Here, I agree with Veronica and others. Our growth figures are probably a little flattering given the GDP/GNP anomaly and, given the risks Kevin mentions, unlikely to last anyway. Perhaps Kevin’s stimulus refers to the extra consumer spending which will no doubt flow from the substantial tax cuts promised all round but especially by FG. That kind of ‘stimulus’ is clearly not what we need.

Since this is an election thread, perhaps I’ll be escused for straying more into the political of political economy. Looked at in the round this election is in many ways far more disheartening than that of 2011. Back then the issue was crisis managment. But right now it’s more about what kind of politics and society will hope to look forward to over the next say decade or so. The rapid turn towards aution politics is particularly lamentable. So too is the absence of political reform from the debate. It seems that reform died as the votes were counted last time round. We’ve had token shrinkage in numbers in local and national TDs but little meaningful reform. The senate wasn’t repurposed, the parliament not made more robust, public appointments not tightened sufficiently, and local government, such as it is, not reworked. Our political landscape is still the sad place it always has been. (Another noticable failure was the way the legal profession rebuffed reform).

But if the Irish politician cannot resist the temptation to promise x and y for all an sundry, maybe it’s because this is all we want to hear. Perhaps the Irish electorate, on the whole, is predisposed to this kind of empty rhetoric; compared with some other countries we Irish are not all that civic minded; instead we suffer from a fair degree of self-indugence and are far too wedded to the parish pump.

“(a) the Irish economy is now recovering, and doesn’t need further stimulus right now;”

Just because some folks say something does not make it so. The Irish economy has recessed near enough two decades – its just not particularly obvious. But look carefully …

“(b) that the Irish economy has proved itself over previous decades to be unusually volatile;”

Correct. Again, its not obvious why, especially if you keep chanting the salient reasons and fail to ask some searching questions about the not so obvious causes…

“(c) that the international outlook right now suggests that there are risks on the horizon;”

Actually they are just off-shore …

“(d) that the Eurozone is a very dangerous place to be anyway, if you are a small country;”

Its never a good political idea for governing politicians to cede any part of their country’s sovereignty, most especially for a monetary bribe. But it happens. So what’s new then? Its like losing your virginity. Once its gone: its gone!

“e) that broad tax bases are preferable to narrow tax bases;”

Yes indeed. But do we actually have any (meaningful) non waged-labour income taxes in Ireland? On land? On financial transactions?

“(f) that given all of the above, arguing for the abolition of the USC or water charges (water charges, as opposed to Irish Water) is grossly irresponsible, and should suffice to disqualify a party from being taken seriously as a “safe pair of hands”?”

There are no ‘safe pairs of hands’ in politics. Just some less mendacious ones. Your political popularity is directly proportional to the amount of other peoples’ monies you can spend. If this is not blindingly obvious ….

Our developed economies are like a massive global bubble – inflated by our ability to extract and put to use, with fantastic technologies, two incredible sources of carbonaceous energy. You can only inflate that bubble so much. Its now a question whether we keep attempting to inflate that bubble until it bursts, or we allow it to deflate in a slow and controlled manner. Past experience of human behaviours would suggest the former is probable. And no, our fantastical technologies cannot ‘save’ us: they are voracious consumers of energy ….

@ JTO

Have your figures been “endorsed by the Department of Finance”, presumably by those civil servants who proffer advice but it remains, of course, the job of politicians “to take decisions”.

We have these politicians throwing mythical figures at one another about “fiscal space”, two words that threaten to mark indelibly the career of our MOF i.e. extra money that might or might not become available. This in circumstances where it is quite clear that there is no adequate analysis, still less control, of the levels of recurring current expenditure!

The Irish electorate deserves the politicians it elects in these circumstances, especially those offering a department for this or a department for that. Were it not for the limitation in the Constitution on cabinet numbers, there would be a government post for everyone. This may well come to pass.

@ Tomaltach

You say: “..this election is in many ways far more disheartening than that of 2011. Back then the issue was crisis managment. But right now it’s more about what kind of politics and society will hope to look forward to over the next say decade or so.”

I agree, as do, I reckon, many other citizens, with the latter opinion , but not that the quest is disheartening. Fair enough, FG made the egregious mistake of assuming that an electoral strategy that might effectively apply in a far larger polity (UK) could be replicated within a small country with a deeply embedded PRSTV system (Ireland).

“Keep the recovery going” might sit well within certain sections of our business community, but is realistically meaningless beyond that cohort. It is also frankly insulting to the vast majority of Irish citizens who know that the real ‘recovery’ has had precious little to do with the direct actions of government in any case, and has happened in spite of their policies rather than because of them. Plus, the inherent fragility of our current economic recovery, subject to externalities, is apparent to all.

The endless repetition of a vacuous slogan, designed for electoral gain, has only served to bring popular ridicule down on the heads of the majority party in government, and rightly so. I never thought I would sit in front of the TV, a bag of bounty bars on my lap, waiting to whoop at the next hapless government spokesman’s enunciation to “keep the recovery going”. Sadly, I was never disappointed over the first ten days of this GE campaign. Whoops, aplenty!

As you suggest in your post, if we’re looking to the future, then immediate micro-problems that affect people’s day to day living conditions need to be acknowledged, and granfted onto overall macroeconomic objectives.

That said, I’m not pessimistic about the GE outcome. As citizens we will choose among the candidates to find representatives that fit best with our own personal judgement on individual candidate capacity for problem-solving, contributing alternate views, and leading the country forward. Thereafter it’s up to the TDs of all parties, and none, to cobble together a workable executive. And may God help them if they fail in that primary duty!

Cliff Taylor on the likelihood of the “permanent government” being required to hold the fort for a a time.

http://www.irishtimes.com/opinion/cliff-taylor-we-can-t-assume-the-recovery-will-continue-but-lets-leave-pudsy-out-of-it-1.2541565

It is to be hoped that it will not waste the next five years in the same way as the last five have been and throw everything at coming up with an immediate replacement for the “tennis club” accounts on the basis of which the country is continuing to operate. The next overrun of health spending will be the canary in the mine.

In addition to talking about a broad tax base, it’d be nice to have a broader political base.

The established parties (FG, FF, Lab, SF) get millions in subsidies. New entrants are fighting against their own money to try to get their ideas across. It’s no wonder we’re not seeing enough in the way of bright ideas.

If anything’s disappointing in the election it’s the lack of ideas and the lack of discussion of them. Our political discourse is stuck at the level of Fintan O’Toole and Vincent Browne (i.e. not very high). Break the political party lock on funding and perhaps we’d get somewhere. Maybe, maybe not.

@ PH

cf. the written PQ link above.

The voters are totally in the dark because the politicians see it as in their interest to keep it that way. The mutual game of blind-man’s buff will continue until the budgetary facts are pinned down and in a comprehensible manner. The establishment of an Independent Budgetary Office (IBO) would not help as the upstairs/downstairs division of the single most important department of state responsible over the past five years makes it incapable of providing the necessary financial data.

However, I agree with you that the kicking about to be handed out by the voters, it would seem, to the parties principally responsible for this deplorable situation is a hopeful sign. Maybe the public servants concerned will finally grasp that inter-departmental rivalries must take second place to the creation of a comprehensive rolling system of national accounts and take the opportunity to impress this need upon whatever incoming government is cobbled together.

DOCM: I know not whether I should laugh or cry at some of your comments – “The voters are totally in the dark …” This is simply not correct. ” …because the politicians see it as in their interest to keep it that way.” Really? The primary interest of a parliamentary politician is to get their bum back onto that brown leather seating. Period.

You must fully incorporate into your mindset that any Irish government is actually an elected dictatorship – and you know about dictators? – carrot in one hand; stick in other. They hand out goodies in a disproportionate manner to garner and to sustain support and will ruthlessly and vengefully penalize those who actively oppose and criticize them. So which group of groupies do you think attracts the most followers? Yeah, I thought so.

“Maybe the public servants concerned will finally grasp that inter-departmental rivalries must take second place …”

This is even more wistful – if not downright delusional. The PS – above certain ranks is hierarchical, pyramidal and rule and regulation bound. The upper-level of the PS working world is a Bitch creation environment. One eventually either reverts to type (or metamorphoses) and becomes professionally devious, mendacious and self-seeking or slips sideways and becomes an administrative automaton You would never believe this to be so. But just try working with them. Concepts such as loyalty, co-operation, accountability or God forbid, openness and transparency are only required from those of lower rank. What’s it all in aid of? Dunno. But the stakes are awfully small. Maybe that’s it.

Do not look to our senior PS for meaningful restructurings. You will be very disagreeably surprised. Albert Reynolds was correct – he wanted things on a single page. The PS will provide a booklet – and several committees and sub-committees to render that. Its the Mushroom Policy, or the Bullshit Brigade, whichever you prefer.

@DOCM,

I don’t think a majority of voters are in the dark. There will always be a certain percentage of voters who believe it is possible to impose levies on others so as to provide largesse for them without having any detrimental impact on the body politic or economic. But I sense that a majority of voters are much more sensible and are very well aware they are being gouged by various special interest groups in the sheltered private, public and semi-state sectors – and all that politicians are offering (and all they are able to offer) are very limited tweaks in the “great re-distribution” designed to compensate for this gouging. This is fuelling considerable disgust and anger.

Where they may be in the dark is on the minutiae of the complex edifice of legislation and regulation that facilitates this gouging. Despite being “hidden in broad daylight”, it would take an army of forensic accountants, lawyers and regulatory economists to provide a full revelation of the mechanism of this gouging. But it didn’t prove necessary to conduct such an exercise to arouse very focused and effective public disgust and anger.

The water charges débacle provided the perfect lightening rod. It had a selection of the full cast of characters from all of the special interest groups – from the high-powered legal, accounting, consulting, IT and PR professional service providers (with their snouts in this huge new trough of fees) through the tame academics (who know on which side their bread is buttered) and the suborned (or lazy) media types to the central govt. departments dealing with environment and energy (hoping to come up with a politically cunning scam) and finance (hoping to fiddle Eurostats’s accounting rules and DG Ecfin’s fiscal rules), to the management, staff and unions of the 34 local authorities and their water divisions (aiming to maximise the preservation of their existing privileges) and finally to the management, staff and unions of a prominent semi-state – BGÉ – (who were to be compensated for the sale of its non-network activities by setting Irish Water up as a subsidiary within it with a free transfer of the sector’s assets.)

The outgoing government may think that it has neutralised water charging as an issue on the doorsteps, and to a considerable extent it has done so. But the damage was done between April and November 2014. While a majority of voters may still be in the dark about precisely how they are being gouged and by whom they are being gouged, this episode provided a glimpse of the collusion that is involved and opened many people’s eyes to similar collusion in other sectors. There will be many voters expressing their disgust and anger at how the mainstream parties (and that’s all of them) have facilitated the continuous gouging they suffer next Friday. And it’s not before time.

On (c) Cartoon of the Day

http://www.theguardian.com/commentisfree/picture/2016/feb/22/martin-rowson-on-the-reaction-to-boris-johnsons-eu-stance-cartoon

@ PH

When I spoke of voters being the dark, I meant that they had no objective overall picture of the budgetary situation confronting the country in terms of total resources, with reference to the best means of increasing them. They have, of course, a grasp of the areas of it that impact directly on them and that is what they are concentrating on in their dealings with the politicians vying for office. They see the latter, literally, as messengers to some higher instance that, as Marian Finucane memorably described it on one occasion, “will look after them”; the government, in other words. This, it seems to me, is an inheritance from our colonial past compounded by the electoral system which will see repeat counting of paper ballots well into next week.

Labour’s problem is that it looked after the wrong constituency over the past five years i.e. those in permanent, pensionable employment, mainly the public sector, and (i) did not even look after the lower paid therein and (ii) alienated totally the sector of the workforce without either employment or pension. I need hardly add that the failure to stick, as a matter of principle, to the creation of a universal health system, and not be guided by the vested interests in the existing health structure, has also come back to haunt them.

We need a line by line presentation of budgetary spending. This is well within the capacity of modern accounting systems, including the identification of “cost centres”. We should not need the OECD to tell us that we are spending more than any other developed country, bar the US, on health, for example, and getting an inequitable, two-tier mediocre health service, at best, in return. A matter, literally, of life and death as the repeat scandals emerging in the health sector attest.

The major parties are selling quack remedies, including more disruptive re-jigging of the structure of government departments, when this serves absolutely no purpose other than to reduce efficiency even further.

We need a period of squabbling no government. Such have done us some good in the past.

@That’s Legal

Good points. I wonder which party you as best at offering them.

I see loopy Vincent Browne is back writing in the Irish Times today:

This is what he says:

“All income and wealth is the property of society, not the property of those who claim to have “earned” it.

Sums up socialism in a nutshell.

@DOCM,

I think it’s asking a bit much to expect voters to form a view on the overall budgetary picture. Some, no doubt, will; but most will focus on their perception of the impact on their own specific circumstances. The amount and allocation of public expenditure and the funding of this expenditure are interwoven with the “great redistribution” via the welfare and taxation systems required to reduce the excessive inequality of the distribution of market incomes. Among the similar redistributions in other OECD members, this redistribution is proportionately greatest in Ireland.

So there should be little surprise that many voters choose the TDs and factions who they perceive will maximise their share of this redistribution – and will punish those who previously promised to look after their interests but failed.

So, next Friday, some punishment will be meted out to FG and Labour – and others factions and individuals, almost by default, will enjoy increased support in an almost random manner, since there is no credible or effective government-in-waiting.

It will take a long time before the rent-seeking that generates the excessive inequality of the distribution of market incomes will be curtailed – and the resulting gross inefficiencies of the “great redistribution” will be addressed. But it will happen eventually as more and more voters are beginning to see the excessive and unnecessary burden this rent-seeking is imposing on them.

@That’s Legal

I must be one of the losers because I definitely pay more than 30% in tax.

@ PH

I do not agree. Rather, I agree with the opinion of Johnny Foreigner.

Anyone who takes the time to read the Commission report will find in it both the broad budgetary data and a list of the assorted failures of the outgoing government to implement specific undertakings, notably in relation to the control of expenditure.

The idea that the troika “has been sent packing” is, of course, complete nonsense. It is still very much on our case and will remain so until every cent advanced by “official lenders” has been repaid.

The one thing that the election is confirming is that we have the most mediocre political class in Europe, with the possible exception of our nearest neighbour.

@ BW snr + PH posts re Mandarin shenanigans and Rent Seeking etc –

absolutely spot on – sadly for the general citizenry….

@PH

The election debate was marked by what was left unsaid. The PS remains a shambles. Cost benefit analysis would be a novelty. Documentation is a joke.
Health is worse.
The macro outlook is dreadful.

@ PH

No doubt you are right in domestic terms. But I return to the point that I have made repeatedly i.e. that Hibernia may be out of the operating theatre but is still in intensive care because of the enormous debt run up for the medical treatment. Neither politicians nor electorate are prepared to accept the truth of this contention. Only events will push them in that direction.

The big event at the moment is that the only conceivable stable government is a FF/FG one. If they need the most easily adopted government programme, they have Annex A – pages 76 to 80 – of the Commission’s most recent report on Ireland, which I will post also on this thread (with a word of thanks to the thread moderator).

It is, after all, largely that put in place by the previous FF government.

http://ec.europa.eu/europe2020/pdf/csr2016/cr2016_ireland_en.pdf

The two parties can take as much time as they like. The less interference from them, the more likely the patient is to recover given that an economy is made up of much more than the national political process, especially if a major percentage of it is owned and run by mainly US companies and has an inbuilt impetus as a result.

Apart from the general state of denial, media included, on the state of health of the patient, the most striking feature of the ongoing electoral postmortem is the failure to recognise that the near demise of the Labour Party is attributable to the fact that the bulk of the unionised workforce (presently working and pensioned) is employed by the state, not by MNC’s and Irish SME’s. Those working for the latter, and especially those who lost their jobs and/or coping with the various debt arrears identified in the Commission’s report, can hardly have been impressed by the manner in which they were, and continue, to be treated relative to those in “permanent, pensionable employment”. Exactly the same dichotomy as that plaguing Spain, Portugal and Greece.

It would have been much better had Labour stuck to the bailout script; and to have blamed the troika! To coin a phrase, it hasn’t gone away.

@Paul Hunt

“Sean Lemass driving the policy changes from 1958/59 that started to lift the economy out of three decades of Dev’s debilitating autarky”.

While some of your points about the current political situation are valid, I would challenge what you say about Dev.

“three decades of Dev’s debilitating autarky”

Really?

Poor old Dev is scapegoated in the Dublin 4 media for the fact that the Celtic Tiger didn’t take off until 1958/59 rather than in 1922/23. Thanks to historical revisionists, most people are now under the impression that Dev was unchallenged dictator of ireland (a la Franco or Salazar) for the first few decades after independence, ruling continuously from 1922 to 1958/59 and presiding over an economic and social backwater.

Actually, between 1922 and 1958/59 FF and FG (or CnaG as I think they were called then) were in power for almost equal periods of time (about 18/19 years each). Dev was Taoiseach twice, 1932-48 and 1954-57. Of the 16 years in Dev’s first period as Taoiseach, 4 or 5 were during the Great Depression when every country stagnated, and 6 were during World War 2. I’m not actually sure how Dev was supposed to create a Celtic Tiger in those conditions. There wasn’t that much scope for increasing exports to France or tourism from Germany in the early 1940s While the only multi-nationals that would have been interested in coming to Ireland in those years were the British and German armies, which most people thought at the time Dev did brilliantly to prevent. Taken as a whole, Dev’s first period in office (1932-1948) was extremely successful by the standard’s that Ireland had experienced for the previous century. Between 1841 and 1932 the population had fallen by 70 per cent. But, between 1932 and 1948 it actually rose for the first time since the Famine. The fact that the period 1932-1948 was a lot better than what Ireland had experienced for the previous century might explain why Dev won 5 elections in a row in that time, a feat that Enda Kenny looks unlikely to achieve.

It is true that it would have been better if he’d retired and handed over to Lemass after FF lost the 1948 election. However, it is unfair to blame Dev entirely for the economic stagnation of the early and mid 1950s. If we agree that 1948-1958 was the worst decade for economic growth in Ireland since independence, it is reasonable to point out Dev was in power for only 4 of those years. There was actually an FG-led government in 1948-51 and 1954-57.

It is also wrong to suggest that Irish economic growth only took off after Dev retired. The First Program For Economic Expansion, seen by most economists as the take-off point for Ireland’s economic growth, was launched in autumn 1958. Dev didn’t retire until June 1959. The high rates of economic growth Ireland has achieved almost continuously ever since (except for 1983-86 and 2008-11) were already in full swing (although in their early stages) by the time he left office.

It is true that Ireland was socially extremely backward while Dev was in power. Some examples of this backwardness will give you a flavour of how bad things were then. In 1958 there were only 300 prisoners in Ireland (4,000 today). You could walk the length of O’Connell Street on a Saturday night without being mugged. And, horror of horrors, in some years while Dev was in power there wasn’t a single murder in Ireland. The shame of it! None of these would be acceptable in a modern progressive socially liberal society.

I should declare an interest here in coming to Dev’s defence. I actually met Dev in 1954. Well, that’s putting it a bit strongly. As a 5-year-old, I got presented to him by my parents at some function or other in Bundoran in that year. I had no idea who he was at the time.

Regarding the current political situation, as I said, you make some valid points. The fragmentation you refer to is common throughout the Western World. In the UK the Conservatives and Labour used to get 95 per cent of the vote, but its now down to about 65 per cent. This fragmentation is somewhat more pronounced in Ireland than in the UK, probably because of the PR system. In Ireland any crank party can get 1 or 2 TDs elected, while its much more difficult in the UK. UKIP got 15 per cent in last year’s UK election, but only 1 MP. In Ireland they’d have got 25 TDs with that vote. Other countries with PR are experiencing similar fragmentation to Ireland.

Even so, in this election the sensible center-right has won a clear majority. FG and FF combined look like getting 95/96 seats (out of 158). The total left-wing vote is down compared to the last election. SF have bombed (excuse pun). It looks like 14 per cent is their limit and they’ll never go above it. Labour have imploded. The Social Democrats have the grand total of 3. While the remaining nutty left-wing parties have just a handful of TDs. It is now up to FG and FF to act on what the electorate have voted for and provide (in one way or another) stable center-right economically-sound government for the next 5 years. In some ways the result of the election is ideal, with FG and FF having enough seats to form a stable government, but not enough seats to be tempted to go into coalition with one of the left-wing parties (no combination other than FG/FF has the numbers). If either FG or FF attempt to go down that route and try to form a rackety coalition with any of the left-wing parties supplemented by independents (unlikely but not impossible), they’ll have to pay the price in the election that follows the inevitable collapse of that coalition, probably within a few months. In contrast, an FG/FF coalition can easily last 5 years.

Another aspect of this election is the falsity of the opinion polls. A Red C poll last Sunday put FG 10 per cent ahead of FF. The margin in the actual election was 1 per cent. Another poll put FF and SF level. In the actual election FF were 10 per cent of SF. Exactly the same thing happened regarding the FF and SF votes in the 2014 local elections. There needs to be an enquiry, just as there was in the UK after the polls got the result wrong last May (although by nowhere near as large a margin as the polls here have). All the more so as polls by the same companies are being used by the media to generate the belief that there is massive popular backing for various pieces of (always liberal) social legislation.

@DOCM

I paid some attention to these DG Ecfin documents while Ireland was in the support programme – and even then the Commission officials generated considerable amounts of garbage and refused to tackle key issues. You should probably pay more heed to the disclaimer used: “This document is a European Commission staff working document. It does not constitute the official position of the Commission, nor does it prejudge any such position.”

As for governance options, The Guardian’s Henry McDonald may indeed be revealing a very plausible scenario. It ties in with my contention that when it comes to instituting important and badly required changes – in this instance changes in Dáil procedures and in the relationship between government and parliament – FF often proves to be far more capable and effective. It would be wonderful to see a government in fear of the Dáil – and not dominating and abusing it as has been the wont of successive governments in living memory.

Micheál Martin knows that FF needs another stint in opposition to boost its heft and credibility as the ‘government-in-waiting’ (or at least the core of this of a government-in-waiting). Providing “confidence and supply” to a limping FG-dominated caretaker government is the best option for FF at the moment.

@JtO,

I agree by being so cryptic I was being a tad harsh on Dev. But I also agree with you that he should have passed the baton on when he lost in ’48. Uisce faoi thalamh. We are where we are now. And I’m a bit surprised and bemused that you’re channelling the establishment (if not entirely the Dublin 4) commentariat’s drum-beat in favour of an FG/FF coalition.

As I indicate above, FF providing “confidence and supply” to this well electorally slapped rump of FG and Labour would prove a living political hell for the latter – and could provide remarkably good goverance for the majority of citizens.

Most commentators seem dumbfounded at FF’s comeback. Conor Cruise O’Brien must be rotating in his grave at a very high speed. Morgan Kelly must be totally flabbergasted. Certainly, given the strength of the economy in recent years, it seems to go against the normal rules. But, anyone reading my posts here over the years would not be at all surprised. I’d say there are several reasons:

(a) FG’s surrender to the Labour Party over its secular anti-Catholic liberal agenda antagonised socially conservative FG supporters in rural Ireland. That’s not to say there are not lots of liberals, especially in Dublin and other large cities, who support this agenda – just that few of them would ever dream of voting FG). How many of those cheering Enda Kenny at Dublin Castle on 23 May last year actually voted FG? I’d say very few.

(b) The growth of the economy since 2013 scuppered the narrative that FF had totally destroyed the economy. In 2011 we were being told (falsely) that all the Celtic Tiger growth was fake, that FF had left the economy in a totally ruined state, destined to not be able to grow again for a generation. Yet, by 2013 it was the fastest-growing economy in Europe and has remained so ever since. Obviously, FG deserve their share of credit for that, but it also undermined the theory that the economy had been totally destroyed. People saw that the severe downturn 2008-2011 was actually a global phenomenon and that the underlying Irish economy was extremely healthy, to the extent that, as soon as the global economy picked up, growth in Ireland came bounding back.

(3) The housing shortage. Recall that we were being told (falsely) in 2011 that Ireland had 350k empty houses, all the product of FF and builders’s corruption. Yet, by 2014 there was a housing shortage. How can this possibly be? It undermined the Morgan Kelly theory that builders (mostly FF supporters) were some sort of evil species who had ‘destroyed Ireland’. The idea that building houses should be prioritised again began to be looked on more favourably, and, as the builders’ party (supposedly), this was bound to benefit FF.

(4) Regional disparity. During 1986-2011, FF’s regional and decentralisation policies were hugely successful. The 2011 census showed this. Between 1996 and 2011 Ireland had an unprecedented population boom. Moreover, for the first time, this boom was spread evenly across the regions. The census showed population growth 1996-2011 just as high in Donegal, Cavan, Monaghan, Galway, Clare, Sligo, and even little Leitrim, as in Dublin and the east coast. In contrast, the perception in 2016 was that the growth was concentrated in Dublin and the east coast. In fairness to FG, I’m not sure how that perception corresponds to reality. It may have been exaggerated. We won’t know until the census. But, the perception was certainly there and that’s what matters in the election. The perception itself may have been partially enhanced by the Dublin 4 cultural war on rural traditional Ireland I referred to in (1).

Even so, FF are not the biggest party. There is no way they can form a government. So, they have 3 options:

(1) Fail to elect a government when the Dail resumes and have another election immediately.

(2) Support a minority FG government for a limited period of time.

(3) Go into full-blown coalition with FG for a full 5-year term, during which, while FG would have the right to the Taoiseachship, FF could reasonably expect 50 per cent of the government posts.

I strongly favour (3), but (2) is not too bad either.

I’d just say that it should be recognised when making their decision that not going into government is as risky as going into government. There seems to be a perception that the electorate always votes out the government and that, under scenario (2), FF can pull the plug at budget time and romp to victory in the election. This is possible, but not at all guaranteed. It all depends on the economy. If the global economy turns down, unemployment rises again and tax increases are needed, then option (2) is realistic. And, some of the greatest economists in the world, Stiglitz, Roubini, Seafoid are predicting just that. However, if that doesn’t happen and the Irish economy continues to grow strongly, with unemployment continuing to fall, the boom spreading out across the country, and a tax-cutting budget in October, then it would FG that would be in the driving-seat at budget time, both with regard to the timing of the election and its likely result. I’d be concerned that FF would have missed the boat.

Finally, FF have now overtaken SF in Donegal, Cavan and Monaghan. They have SF on the run in Ulster. Its time they organised across the artificial border and repeated their success in Tyrone, Fermanagh, Armagh and Derry.

@DOCM

I agree that public spending increases 2001-2007 were much too high. While Charlie McCreevy was Minister of Finance 1997-2001, a tight rein was kept on public spending and growth averaged 9% a year. For this he and the FF government were vilified and demonised by the media and the left-wing commentators who dominate it. Read what Fintan O’Toole and Vincent Brown were writing about the FF government in 2001, Charlie in particular. This demonisation prompted Bertie Ahern to foolishly change tack around 2001 and replace Charlie McCreevy with Brian Cowen. He let public spending rip. And while FF must bear primary responsibility for this change of tack, it should be pointed out that, throughout the post-2001 period when they were increasing spending massively across the board, the media and even the opposition parties were criticising them for not spending enough.

Meantime in the real world, stats out this week:

new cars sales UP 37% in Feb over Fen 2015

retail sales UP 10.4% in Jan over Jan 2015

number of overseas tourist arrivals UP 18% in Jan over Jan 2015

milk production UP 19% in Jan over Jan 2015

unemployment DOWN again in Feb

So, a good week so far. Lets see what tomorrow’s exchequer figures reveal and whether or not they confirm my prediction of a few months ago that Ireland is heading for a budget surplus this year.

Icing on the cake: Aodhan O’Riordan (the Irish Times made flesh) booted out.

@ JTO

Only 9%!

That is the problem with FF. It mistook Ireland for China.