Budget debate begins: I'm happy to do the state some service by working with NED

I live a charmed life in many ways. I belong to a generation that was well educated, essentially for free. I made it all the way to a PhD with no debt. The taxpayer paid for that.

The state delivered a very good education and I reap the rewards of it every day. The state gave me the means to make my living and even gave me a job afterwards.

So when the Department of Finance asked me to be a rapporteur for the new National Economic Dialogue (NED) process, I said yes without hesitation.

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Greek euro exit would scar a generation

Last week, Greece became the first developed country to default on the IMF.

Greece’s debt is 180 per cent of its GDP. Most of this debt, it will never pay back. To give you a sense of scale, Greece owes more than €90 billion to Germany alone. It owes around €70 billion to France, slightly over €61 billion to Italy. The key reason Greece owes so much to its official creditors is because nine of every ten euro lent to Greece in 2010 went to pay back debt that should have been restructured then.

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Absolute power, absolute accountability

Ministers for finance often have no idea just how powerful they are until they leave office. When they get the gig they are too busy being slapped on the back to think about it, and all too often the distractions of the job and their focus on getting the next job prevent them from actually exercising the power our constitution gives them.

And there are so many distractions, not the least of which is the traditional Irish political compulsion to be at the opening of things – preferably wearing a hard hat – or dealing with some crisis or other, or having the ears bent off them by special interest lobby groups.

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Currency is not destiny

Iceland and Ireland were both rocked by the fallout of the Global Crisis. This column argues that differences in currency arrangements affected the mechanisms of the boom and the collapse. Iceland’s banks collapsed because they did not have a lender of last resort in euros. Ireland did. But Iceland’s collapse and ensuing capital controls shifted the burden of debt restructuring onto foreign creditors to a much greater extent than in Ireland.

Read the rest of our piece on VoxEU

Greece runs out of cash as debt crisis enters final act

Greece will have a referendum seven days from now. Its people will decide, via vote, whether or not to accept the terms of an agreement that the institutions of the European Union haven’t actually agreed on. The absurdity of the situation is compounded as, all the while, euro-denominated deposits are flying out of the country. Greece might well default on a major payment to the IMF on Tuesday. The ECB can decide to let the Greek banks collapse, or impose capital controls, stop the outflow of money and cut the country off from the rest of the world financially.

The situation for the Greek people, to put it mildly, is pretty bleak. Ineptitude on both sides has brought us to this point. The troika have not recognised the fundamental failure of their 2012 bailout programme, which doubled Greek national debt levels, broke the economy in half, doubled unemployment, and bailed out European banks. The troika’s failure to acknowledge the reality that Greece can never, ever repay its loans lies at the heart of the current impasse.

 

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The State’s Scarce Resources Should Not Be Used Like This.

Would you give a lot of food to someone really hungry, or give everyone with a stomach a morsel? Will you use the state’s resources to give a little to all, or a lot to some? These are the big questions of public policy. Given scarce resources, we elect politicians to make these choices, and we elect them based on their pre-election promises. You’ll be hearing a lot more of them fairly soon.

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If employment is the top priority, why are SMEs getting squeezed?

Governments aren't the most logical of organisations at the best of times. When election season rolls around, any pretense at rationality gets firmly shoved down the list of important things.

One logical element that deserves a place in the government's calculus is the number of people in full time employment. Jobs, we are constantly told, are the central focus of the government.

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We tried rent controls before and they didn't work

Take one hundred economists. Punch each of them. Now that you’re feeling better, stick your hand in some ice and ask them each a question: do they think rent controls, or price ceilings of any kind, are a good idea? They will already be a bit annoyed at you, but suggesting rent control will probably offend them more than a knuckle sandwich.

You’d be more likely to successfully herd cats into a bath than get economists to agree on something, but when it comes to rent controls, the evidence is in: they just. don’t. work. We’re talking more than a thousand papers written on the subject.

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Pay deal spells less cash for services

The big questions never change in economics. That’s why it is so interesting to study. The context shifts constantly, which means the answers to the big questions might change over time, but ultimately the big questions endure. Questions like: Why are we so rich and why are they so poor? Questions like: Given the choice, would you opt for lower taxes or higher public services, paid for from increased taxes? Your answer depends on where you come from, on your personal context, but the big question remains the same.

On the Claire Byrne show last week, government minister Aodhán Ó’Ríordáin was asked by a citizen with a life-limiting illness what he would do to help her, and the thousands like her. The lady’s dignity, quiet composure, and poise showed through, even as her illness made it harder for her to talk, and she needed notes to make sure she got her point across. The minister’s answer might have struck some as cold, even harsh.

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IIEA Talk

Today I spoke at the IIEA on the theme of Consolidating Ireland's Recovery – What Next?, with EU Commissioner Pierre Moscovici, Minister Dara Murphy and Bank of Ireland's Loretta O'Sullivan. The event was chaired by Dan O'Brien and was really informative. Slides and video will be up here in due course.

Employment data: Careful now.

Sometimes failure really is success in progress. The headline unemployment is now 9.8%, more than 212 thousand people. On the face of it, a total policy failure, and nothing to be happy about, apart from the fact that that number is dropping from a high of over 15%, and has been dropping since mid 2011. Over 1.9 people are employed in Ireland today, getting us back to 2009 levels. There are large increases in full time employment and decreases in part-time employment. Of all the new jobs, 19,000 of them are in construction. Long-term unemployment is falling like a stone.

Is it fair to call the current unemployment rate a failure of policy? Any unemployment rate above three or four per cent is probably too high, but policies focused around building stronger labour market activation programmes, a more connected welfare system and an increase in investment by small and medium enterprises is very important. Well-designed strategy documents to the contrary, not many of these policies are in place, and there are few evaluations showing us just how good the programmes are.

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