In this article in today’s Irish Times, I explain why EMU is neither a primary source of our current woes nor an obstacle to recovery.
Author: Philip Lane
Danny McCoy of IBEC is today’s contributor to the Irish Times series: you can read his contribution here.
Rossa White is today’s contributor to the Irish Times series: “The Time to Take Hard Decisions on Public Pay is Now“.
He concludes by advocating a new system that will avoid fiscal procyclicality in the future, through a ‘golden rule’ policy, plus the establishment of a rainy-day fund.
Institutional reform along these lines is highly important. Indeed, I post a link below to a 1998 article I presented at Kenmare and published in the now-defunct Irish Banking Review, in which I advocate a similar approach. However, I wonder about the political incentives to establish such institutional restraints on the conduct of fiscal policy. Again, the current crisis may provide the right environment for undertaking such reforms.
Philip R. Lane, “Irish Fiscal Policy under EMU,” Irish Banking Review, 1998.
VOX has launched a new initiative that is intended to act as a central forum for an open-format discussion of the global crisis. This promises to be quite interesting (I am acting as moderator for the macroeconomics theme; Luigi Zingales on regulation; Francesco Giavazzi on institutional reform; Dani Rodrik on development; and Richard Baldwin on open markets). You can read more about it here.
The media reports suggest that ICTU has proposed a new top income tax rate of 48 percent. If various levies are added to that, the effective marginal income tax rate for high-ish earners could exceed 50 percent.
I am interested in the views of this blog’s readership on the extent to which a top tax rate in this range might adversely affect economic performance, in the specific context of the Irish economy and the Irish labour market. For myself, I think it is important that the top tax rate in Ireland does not deviate too much from the UK top rate, which is due to be raised to 45 percent after the next election, in view of the high labour mobility between Ireland and the UK.