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Get a more considered and data-heavy presentation of the key issues surrounding today’s crucial budget at Ronan Lyons’ blog and of course Irish Economy. Here’s a list of ten things Minister Lenihan has to get right.
Oddly, for me, I’d like to rein in the rant on this budget. It’s crucial we do so, because the long term consequences of a temporary but intense public hysteria that generates little light but much heat could be severe. If we lose the constructive aspects while wallowing in the destructive aspects of the budget, we might do ourselves more harm than good.
Here are five talking points over which we should stop, breath in, count to ten, and exhale through the nose before condemning all and sundry reflexively–no need to begin ranting immediately about bankers, politicians, rich people, developers, undertakers, the French, etc., etc..
If, after a few minutes, you still feel like ranting, go’head. Be my guest.
1. This budget is too hard, too divisive, too much too soon. This is the second of four or five hard budgets. The emergency budget this year raised taxes and put the brakes on the capital programmes in Ireland was the first of these. Today’s budget will cull the expenditure side of things. So we have to understand this budget in its medium-term context.
2. Public sector pay has already been hit, it’s not ‘fair’ to reduce pay further. Employers, the government, and even the country’s unions have signed up to the narrative of a fiscal contraction to bring about balanced growth. Unions did so in January. ICTU in particular lost the political-economic battle back in January when they openly accepted the logic of fiscal contraction. Once you accept that spending is too high, with taxes too low, then logically one can only argue over proportions of what gets cut, and when, as the main political parties have done since September. The public sector bill is 1/3 of expenditure, so it had to be cut. I’m a public sector worker. I don’t want to have my wages cut, but fairness has nothing to do with it, unfortunately.
3. I need my child benefit, they shouldn’t cut it. No, you don’t. If child benefit is taxed as Profs Nolan and Callan argue, then if you need child benefit, you’ll still get it. Using child benefit as an income supplement for the middle classes makes no sense. Removing it all together, and increasing the benefit paid to lower income households would be cheaper and reduce inequality, and cut the budget deficit faster, meaning fewer punitive budgets. Again, I’m saying this as the father of two kids. I don’t want to lose that money either. But the numbers just don’t stack up.
4. The impoverished worker will suffer if tax bands get broadened. The argument goes that, because they are worse off than the unemployed, thanks to our overly generous social welfare system, those earning 30,000 Euros or so are acutely sensitive to changes in the tax net. This argument plays fast and loose with the facts, as Michael Taft has shown.
5. Lenihan didn’t hit ‘fat cats’ first. I’m all for clamping down on tax shelters, but, unfortunately, a soak the rich policy just won’t work because of the size of the hole in our public finances. Everyone’s going to have to bite the bullet on this one.
Where the principle of everyone shouldering some of the ‘pain’ is misapplied, or misdirected due to the influence of a lobby group, then I’d get the rant juices flowing again.
