Death by a Thousand Cuts

Pat Kennys Frontline made for depressing watching last night.   The first segment focused on the level and composition of the fiscal adjustment for the next four years with an emphasis on next year.   Credit to Dan OBrien and the others on the panel for being brave enough to be specific about where they would cut. 

But given the size of the needed adjustment, I worry that this formula of focusing on specific adjustments one-by-one is just not going to work.   For each proposed adjustment means testing child benefit, cutting publicservice pensions, introducing a property tax the affected group will focus on the negative effect on them and will inevitably try to shift the burden. 

Recognising the size of the overall adjustment, I think it is better to start with a plan for the overall distribution of the burden across the income/wealth distribution.   The pain will need to be spread broadly but progressively.   After recent budgets, the ESRI has provided an excellent analysis of the distributional implications of tax and benefit adjustments using its SWITCH model.   This tool could be available prior to the budget to evaluate alternative four-year plans.   The key is to make people think about the overall effect on them in the context of how the overall burden is being shared.   My sense is that there is recognition a large adjustment must take place and most are willing to play their part but only if assured that others are bearing their fair share.   The alternative of arguing about specific cuts in isolation of the overall distribution of the pain is probably doomed to failure.