“Good old days indeed.”

RTÉ does a good job of collating the speeches at the Fianna Fáil Ard Fheis today [Check against delivery – Ed] with Taoiseach Brian Cowen promising a new financial watchdog, warning that in this fight for Ireland’s economic life taxes would rise and services would suffer in the short term, and that recovery will be tough but as a small nation Ireland can adapt radically – “we have submitted our targets and proposals for this to the European Commission. And they have accepted them.” Hmm.. With reservations. From Brian Cowen’s speech.

During the good times, we developed a fairer and more progressive tax system that allowed people to keep more of their own money. Everyone had a better standard of living. That tax model was based on continuing growth. It works best when we have high employment and a thriving economy. Unfortunately, we are not a thriving economy for now, and we need to adapt our tax system to fit our new circumstances. Everyone will need to pay more.

Timely then for the Irish Times’ Colm Keena’s article on the “good old days”

A key point about this is that a large percentage of the Government’s tax take was from property or construction-related taxes and the people who were paying these taxes were borrowing the money from the banks, who were in turn borrowing the money abroad. The Ahern era pro-cyclical credo, “if you have it, spend it”, is considered a very unwise economic strategy by many economists, but there must be few if any on the globe who advocate a policy of borrowing abroad to pay taxes during a boom era, so you can pay off the borrowings later when you’re in a bust.

The result has been a type of perfect storm with a collapsed property market bringing with it a sharp contraction in the economy and public finances that are badly in the red. Meanwhile the people who took out mortgages and other property-related loans during the boom years are left with their long-terms debts, while also being faced with the likelihood of increased income tax rates.

As well as claiming credit for running a “can do” low-tax entrepreneurial economy, the Government also has a tendency to point out that we have a debt to gross domestic product (GDP) ratio that is low compared to other European economies, putting us in a strong position for weathering the storm in which we now find ourselves.

But this, too, is a bogus claim to some extent. Much of the more wild borrowing by builders, property developers and property speculators that occurred during the boom will most likely never be paid back. Many ordinary mortgage holders will also not be able to pay their debts. The resultant hole in the finances of our banks is a problem that the taxpayer, via the exchequer, looks likely to have to fix. No one has as yet put a figure on this black hole but it will no doubt be huge.

Has anyone told Bertie?