Budgetting for a generation of fear and loathing

Brian Lenihan has committed the political equivalent of armed robbery. Now that the sham of the celtic tiger economy has been exposed. While the budget is to “target all sectors of society” according to today’s Irish Times article, it’s difficult to see what good that will do.
“Radical direct and indirect taxes” mostly affect the middle and upper middle classes. Think of families with 2 working parents earning between 70 and 110k in total. That seems like a lot of money until you realised they’re saddled (or perhaps shafted) with massive debts to buy mediocre accomodation and are possibly in negative equity. The bigger their salaries the greater the debt on their massively overpriced accomodation that this same government encouraged them to buy. Their fuel bills, travel costs and medical bills will now rise.
Their children’s allowance will be cut. Their mortgage relief has been cut. Any to cap it all.. a move of utter stupidity a half percent rise in the high rate of VAT.
I suppose we can console ourselves that by using less fuel and catching pneumonia we’ll be delivering a double benefit to the environment. I miss the principled outspoken PD’s when all I see are these ingratiating tax apologists hanging onto the monster’s coat tails. I’m talking about the greens of course 🙂
As a retailer I can tell you I’m feeling the pinch together with everyone in “trade”. Consumer spending has been moving steadily down the past 2 christmas as rising interest rates and massive house prices reduced the disposable income and hence spending. The sheer pointlessness of raising the high rate of VAT to 21.5 percent. Retailers around the country will have an extra bit of their margins eroded and will have to adjust prices. Has Minister Lenihan noticed the whole country is on sale?
Throw in overpriced childcare and this budget has pulled the trigger of the long gun barrel the middle classes have been looking down since our economy went into free fall. This group are the engine of most retail in Ireland and on their spending many businesses will fall, creating more unemployment, poverty, emigration and all the negative aspects of Irish life for decades. It was well known economist Morgan Kelly who suggested that the boom was so great because successive generations of governments had managed to insulate the Irish people from the effects of a boom for years. Cometh they hour, cometh Lenihan!
The government are suggesting the poor have been protected. What about the friggin middle classes or the “new poor” as I like to call them? I know a few families of modest incomes that are already struggling. Finances are tight and jobs are uncertain. This budget won’t help them or ease their concerns one bit. Instead, it slaps them across the face for bothering to work as opposed to living on benefits.
It seems the super rich (the oligarch class as David McWilliams describes them) will escape relatively unscathed with tax incentives in place and a relatively modest hike in income tax. It would be such a shame to hurt the stud farm industry. I wonder do they escape the 1% levy?
We already some of the world’s highest levels of indirect taxation masking a low-ish direct tax regime. Far from reform we’ve moved farther away with, in reality, nordic levels of personal taxation for inadequate service provision.
Raising taxes across all sectors has been proven time and time again to exacerbate the effects of a recession. While the reckless trading of credit derivatives in the US might have created this crisis, there’s a cogent argument to suggest that raising taxes brought about the recession that together with US bankruptcy laws led to the meltdown in the sub prime market.
The following piece from the Cato Institute makes some valid points about the effect of increasing tax burden during a downturn. By reducing growth and actually causing bankruptcies such measures increase the burden on the exchequer. Raising taxes only bails out the state for poor economic planning. It HAS NEVER and NEVER WILL ameliorate a recession as it reduces the available income for industry, spending etc.
Richard Bruton also made some neat points about this “take away” budget.

“This is a Budget that is all about extra taxes for ordinary families, about extra charges for people, and about cutting capital spending,’’ said Mr Bruton.
“You are looking to make it tougher for people who are struggling to get by,’’ he added.
“There is no sign that you are aware of the pressure on people from fuel bills, the pressure on people who have lost their jobs.”

There are signs he may actually know what he’s doing and it’s a shame that Enda’s shiny suit distracted from what could have been a very capable minister for finance. There’s still time!
It’s difficult to be shocked that a Belvedere-educated, former Trinner-lecturing, barrister (Lenihan) is a bit out of touch with the general electorate. Oh, of course we needed to do this to remain within our EMU parameters. That’s some incentive to the overstretched single parent who’s had their child support for college-going kids slashed. How will they pay the registration fees which just doubled. Equal opportunities indeed.
If the management of a public company had performed so badly they’d be ousted at an A/EGM. Yet the cabinent are congratulating themselves on their principled 10% wage cut. They got reelected by telling the people of the country an economic fairytale that several economists rubbished and which precipitated a crisis in almost the exact way they predicted. There’s a clear attempt at political misdirection where they try to confuse the issue in the public’s mind. The credit crunch hasn’t lowered consumer spending NOR did it lower a few weeks ago. This is a fallacy and any attempt to suggest this budget is entirely the effect of “worldwide economic conditions” is horseshit. George Hook dealt with this very nicely when Miniature Cullen tried this tack on his radio show yesterday evening.
What can we really expect when we don’t have a cabinet member who has any experience of running an SME? If we keep electing these monkeys we SHOULD EXPECT to live on peanuts.