Michael Taft can see a dim light from the end of the tunnel. Well not from the government, but he applauds Eamon Gilmore for setting a few things straight on the relationship between the economic reality and public expenditure:
The problem we have in the public finances is as a result of the fact that the economy is in a recession . . . we have a problem in the economy which has created difficulties in the public finances. Its not the other way around.
Hmmmm… do you think he’s maybe been reading you somewhere Michael, or what…? Labour’s denouncement of Pat Rabbitte’s promised 2% cut in the standard tax band is welcome he says, but not enough:
The fiscal issue goes beyond capital borrowing or using Pension fund for capital projects it is about borrowing over the length of the downside business cycle for both current and capital expenditure; a necessary breathing space while other policies are put in place to get us on the right path.
Sound familiar? This precisely what’s happening across the developed world. As I note in my Brassneck piece this morning all normal rules no longer apply. Anatole Kaletski in the London Times yesterday, likened it to a patient who’d been suffering cancer suddenly taking a heart attack:
Credit will have to be controlled in the long run through better regulation and tougher capital requirements; saving will have to be encouraged, especially in America and Britain, by higher interest rates; and consumption will have to be restrained with higher taxes. These higher taxes, in turn, will eventually narrow the government deficits that must be temporarily swollen to offset the post-Lehman slump.