Notes on the Front

Dare to spend. That is my advice to Brian Cowen in advance of tomorrow’s budget. Dare to borrow, to invest, to lend: now is not the time for timid measures, trimming here, paring there in the vain hope it will rescue an economy veering dangerously out of control. Reject the deflationists – many of whom cheer-leaded the low-tax, low-spend, low-regulated model, a failed model; many of whom ignored the billions that fled out of the country into property portfolios abroad while our infrastructure and enterprises were starved of investment. Dare to challenge the orthodoxy – you owe it nothing, Brian.

Take the bold action you know is necessary and inevitable. By tomorrow evening, bring all the Irish banks into public ownership. Does anyone really think these walking dead will ever be reanimated to normal? (Since the day of the bank guarantee, Bank of Ireland shares have fallen by 80 percent; AIB by even more). Under public ownership, all the competing strategies to flush out toxic assets and recapitalise clean balance sheets will be under direct and accountable control. This, alone, will instil confidence and shorten the reconstruction period.

Focus on unemployment. Already, commentators are speculating on a 20 percent unemployment rate by the end of next year. With the economy collapsing at the speed it is, this speculation is not without some foundation. Set-up every possible programme to maintain employment – subsidise jobs, subsidise part-time work, subsidise career breaks, subsidise the Sterling exchange rate. Spend whatever it takes to stop the job haemorrhage. This employment is the bedrock upon which recovery will happen.

And go further. Fianna Fail has a history of creating public enterprises where markets were broken and private capital reluctant or incompetent. Look to that history for inspiration. If key enterprises are falling down – enterprises with world wide-brands, key skill-sets, pivotal to our national and regional economies – don’t hesitate. Supply the necessary public equity, negotiate the public-private partnerships and, if needs be, take the companies and turn them into public enterprises. Without those brands, those skill-sets, those companies pivotal to our national and regional interests, our recovery will be that much harder, that much more incomplete.

Be creative. Invest billions into our infrastructure – physical and social – but keep it off the books. Plunder, raid, induce, incentivise investment pools and redirect them through non-Exchequer mechanisms (but still under the public control). This investment will create jobs, incomes and economic activity, which will reduce the fiscal deficit while the costs won’t show up on the deficit. Even employ sleight-of-hands – like the New Dealers: set up shadow budgets, twin-tracked budgets, side-by-side budgets where temporary stimulus borrowing is separated out from the regular budget. One side gives, the other side receives. A ruse? A ploy? A wile? Yeah, sure, why not, who cares? Keep it all above board, let the numbers speak for themselves – just do it. We’ll be all the better for it.

Don't tax income that might be spent in the economy – this is a lose-lose game:  less spending, less business revenue, falling economic activity, more short-timing, part-timing, unemployment.  Tax unproductive capital, unearned income, the high-earning groups.  Most of all, go after capital assets.  The top 100,000 households each have millions in wealth.  They accumulated this during the boom years.  Take it back, now that we are busting.  Don' t prune, chop the tax expenditures that benefit high-income groups with no economic benefit.  There are literally billions to be had.  This is not a 'soak-the-rich' suggestion; just a proposal to give them a good splash.  They'll still have their houses and their cars and their accouterments and their life-styles; what will the rest of us have?

Reject the cutters but drive the efficiencies. Is there a programme not working? Cut it, reform it, transform it. We have one of the highest levels of child-income support and, yet, one of the highest levels of child poverty in the EU; something is not working. We have a ‘childcare supplement’ that doesn’t supplement childcare, which, in itself, is the most expensive in Europe. We spend billions on a health care system that segregates our citizens into those that can and can’t pay. We spend billions subsidising private pensions while those same private pension funds are falling all about the place. There has got to be a better way. Can you find it?

Drive the efficiencies – open up the capital budget to the light of day. Do we know how much is spent to this or that effect? Do we have a cost-evaluation system? Do we a benefit-evaluation system where we can see whether this road-build will have a better or worse return than that road-build? Do we have a system of analysis that can weigh and distinguish the import-content as opposed to the domestic output multipliers so that, in the recessionary years, we can focus on capital projects that accentuate the latter and (temporarily) postpone the former – to maximise direct and indirect job creation and economic activity? Maybe we do. But if so, we are hiding these analytical lights under a bureaucratic bushel. Open it up, let’s have a debate – you will get better ideas, better analysis, better results.

Reform the public sector – but make sure you know what you’re reforming. Is it what public sector workers do themselves? Or is it what they do as dictated by government and ministerial policy? Remember: the EU KLEMS database shows that the Irish public sector produces more value added per employee than the EU-15 average. The National Competitiveness Council has produced tables showing that Irish public sector productivity is one of the highest in the EU, only coming in behind the super-efficient Nords. Is the public sector under-performing? No doubt, of course, is anyone surprised that any in large organisation – whether in the public or private sector – there are inefficiencies? But if Irish public servants are so productive, where does the problem lie? Maybe, policy; maybe ministerial inertia.

Above all – take on the begrudgers. We have self-appointed spokespersons on behalf of the ‘international markets’ predicting that any day now investors will refuse to buy Government debt. On television and radio programmes, in our newspapers they aid and abet speculators in the bond and credit default swap markets. They are either ill-informed or so ideologically-driven they don’t care about the reputational damage they are doing. There’s a name for this: economic sabotage. Denounce the saboteurs, expose them (they're being found out already - long-term bond yields have fallen by over 80 base points in just the last two weeks).  Tell them to f*** off (no better man than you, Brian, to unleash this earthy censure).

We need a FDR moment – that juncture in time that defines whether we take control of our destiny or passively endure it. I am not a Fianna Fail supporter, never will be. But at this moment such partisan differences are a luxury. We all sink or swim in the same economy. We need leadership and vision to navigate the rising tides.

You have that opportunity tomorrow.

Please don’t blow it.