November 23rd 09
A New Way of Dealing with the Economy
Two weeks ago this Blog visited Dolphins Barn, a working class district of Dublin and met with some residents, including members of the residents committee. The local Sinn Fein Councillor Criona Ní Dhallaigh accompanied me.
Dolphin’s Barn is the second largest public housing flats complex in the city. It has almost 400 flats, including 44 senior citizens units, and has an overall population of close to 1,000.
The residents briefed us on the many problems confronting them. These include serious issues with the design and maintenance of the accommodation, the lack of play facilities for children, the poor state of the units housing the elderly, debt and rent arrears, as well as community safety concerns, including drug- related issues.
This Blog was deeply impressed by their calm dedication and determination to improve the quality of life for residents and especially the young and the elderly. Many of those this Blog spoke to give hours of voluntary service each week. The local community depends very much on the voluntary and low paid work of a core of community activists.
Inevitably many of the problems confronting residents exist because of a lack of adequate funding and resources. The harsh decisions of the government during the current economic crisis and the official spin emerging around the upcoming budget, have also led many of them to expect that worse is to come.
They believe that the Fianna Fáil/Green Party budget on December 9th is likely to rip the heart out of this small disadvantaged working class community.
The Celtic Tiger didn’t visit this area. It didn’t benefit from the boom years. And now it faces its greatest threat because of the mismanagement of the economy by the government.
Instead of dealing with this crisis properly the government has spent the last year rushing through cutbacks, attacking facilities school children, the elderly and working families.
The Government has chosen to bail out corrupt bankers, their shareholders and dodgy developers. They have opted to protect the Golden Circle rather than fund the building of hospitals, schools and other vital public services, and create jobs.
Its decision last April to end the Christmas Social Welfare payment (better known as the Christmas Bonus) was a mean spirited scrooge-like decision. The impact of this will be very hard on those families and senior citizens who live in areas like Dolphins Barn.
But as well as the hardship it will mean for those directly affected, the axing of the Christmas Bonus makes no economic sense. It will result in millions of euros being taken out of local economies and this will put more jobs at further risk.
The Government’s approach is to argue that restoring economic competitiveness can only be achieved by slashing wages and public spending. Regrettably the main opposition parties have bought into this. They have allowed the Fianna Fáil/Green Party coalition to fix the agenda and the perimeters within which any alternative proposals by the main opposition parties are set. So instead of thinking outside the box and looking for innovative answers Fine Gael and Labour are locked into an approach dictated by the government. This is bad economics, and bad politics.
There is an alternative. Last week the Shinners published ‘The Road to Recovery’ which was described by Michael Taft (UNITE's economist) on his blog spot 'notes on the front' as a “clear and coherent alternative to the deflationary orthodoxy, a more sophisticated fiscal platform from which to launch recovery. They have demonstrated a new way of how we can talk about our economy.”
You don’t need to be an expert to know that to meet the current economic crisis is to invest in the future, protect public services and social welfare, create jobs by building schools, hospitals, houses, and by investing in the renewable energy sector, and business infrastructure.
Such a long term approach will take the pressure off now while helping to solve longer term problems.
Of course, the government says that this cannot be done; it will cost too much and the money isn’t there!
They’re wrong. The fact is that with political will the funding can be found and the crisis dealt with effectively and in a way that doesn’t force hundreds of thousands more into poverty.
So, for example, it is possible to raise €7.623 billion to use as both a stimulus and a deficit reducing measure to keep international lenders happy.
This can be done by:
* Standardizing discretionary tax reliefs, raising €1.1 billion;
* Introducing a 3rd tax rate of 48% on income over €100,000, raising €355m;
* Placing a 1% wealth tax on assets over €1 million excluding farmland, raising €1.6 billion;
* And capping all public service salaries at €100,000, raising €450 million.
There is also the space to establish a stimulus package worth €600 million for a jobs retention fund, cut excise duty over the Christmas period and provide a cost of living reduction package for households.
It is also possible to reintroduce the Christmas social welfare Bonus.
None of this means creating a high tax economy. But it does mean creating a fair tax economy. That means dealing with the shortfall in revenue by increasing taxes for those who can afford it and reducing wages of higher grade public sector workers.
The December 9th Budget provides an opportunity to set a new course in tackling the economic crisis. It requires brave decisions, including tackling the corruption and abuses within the current system. It means producing a fair and equitable budget. Don’t expect it from this failed Fianna Fáil/Green Party government.