So, the election, or perhaps we should just call it the auction, is in full swing.
We see Renua promising, or perhaps threatening, to eviscerate the tax base under the guise of a flat tax. At least they are honest. Counterpart that to the FG wish, as we can assume it to be being uttered by the party leader, to have a “US Style” tax system. Presumably the US tax system for corporates, with a headline rate of 35% is not what Enda means but rather the personal tax base. Corporates don’t, yet, vote, but people do. We see Fianna Fail with a host of targeted tax reductions, ranging from the USC to property tax, Sinn Fein doing similar especially on water charges, Labour now discovering it also is against the USC (which brings in billions by the way). The Social Democrats alone amongst the parties with clear policies seem to be committed to a more or less unchanged (but tweaked) tax system and to use the monies that will be generated for public spending but their plans remain mostly uncosted.
All of this, combined with the re-emergence of Irish leaders on the world stage telling the nations of the earth how to manage their economies (like ours…) suggests that we have as a polity learned absolutely nothing from the crash, its causes, its progress, its outcomes or its effects. Nothing. We will, as a polity, vote in hundreds of thousands for parties committed to giving us more matches, more lighter fuel, more economic kindling, and then to blame the match manufacturers and hydrocarbon industries when we burn the place down.
We are, more or less, at full tilt now in economic growth terms. Unemployment is falling, GDP, that great fictive shibboleth of Irish wellbeing, is rising, even mortgage arrears are topping out. Now is not the time to pour fuel on the economy. Now indeed is the time to start to rebuild things like the national pension reserve fund, to invest in making a seamless health service, an inclusive education system, a decent public transport system for the whole country , things that are generally seen as public goods. That isn’t ideological – its pragmatic. Given our head of money we as a nation will spend it on real property, imported luxury and consumer goods.
In an economy with private sector debt to GDP well in excess of the EU average, at 263%, even with a large chunk attributable to MNC headquarters engaging in Father Ted-ing of accounts we need to tread very carefully. Interest rates are very very low. QE, directed as it is through the financial sector, has failed to move the economic dial. It has resulted in a very large increase in financial sector wealth for the 1%, but man is that trickle down slow. More QE will result in more wealth for the 1%, but little else. What QE has done is to reduce the bond and interest yields. We are the beneficiaries of that. At some stage QE will end. At some stage bond yields and interest rates will rise again. If we havent reduced our debt burden we run a real risk of being hammered again.
The best way to reduce the debt burden in real terms is to grow. And we as a economy have been growing. Most of this has been export orientated. That is great, so long as it lasts. The real issue in this election shouldn’t be about who can cut the personal tax rates and burden the fastest but how to make resilient an economy more than ever dependent on external factors. Brexit looms more and more likely – the reaction of most Irish businesses seems to be “yerra, shure, twill be grand, like” . The USA is stuttering, its (pallid) recovery running into the twilight and a recession beginning to be signalled by many indicators. A recession in an election year is bad news for the incumbent party. A republican president, of whatever manic hue of nativist sentiment they might be would be bad news for Ireland and its Father Ted MNC Sector. In the global economy we see a flagging china, which adds further complexity to the outlook.
Auction politics are great fun, but they don’t help in uncertain outlooks. We should expect more from ourselves