Should There Be A Giveaway Budget

It seems fortunate that in the run up to the last budget before the election, one which has been flagged since early 2005 as the ‘big-one’ for winning over a sceptical electorate, events seem to be mitigating against a huge giveaway. Of course I mean fortuante for the opposition.

Irish inflation is running close to 4.2%, a figure which is primarily boosted by external factors. Oil and ECB interest rates are primarily responsible for the bulk of the increases in inflation (through Housing, Water, Electricity, Gas & Other Fuels (+16.5) and Transport (+4.7%)). With an increasing class of commuter workers around the ever-expanding Dublin suburbs, it seems clear that these costs are not only ones which affect industry but also ones which have a huge knock on effect on standards of living.

The majority of workers in this country (of which most are in Dublin) drive to work. For many this drive is not the most enjoyable experience in life, filled with morning radio, agressive drivers and an M50 which hinders more than it helps. Transport costs, mortgage and heating costs are on the up and the indication from Europe is that interest rates are on an upward trend, like most other parts of the world.

This is music to the ears of opposition parties, many of whom are taking the opportunity to hammer home the message that increased spending in December is bad news and a sign of government incompetence. The ESRI and IMF have had recent reports suggesting that the Irish Economy is overheating and reliant on a number of sectors (construction, debt and housing) to sustain itself. Under such circumstances both have argues for ‘prudence’ in next Decembers budget.

Strategically this is all great, the Greens have noted;

Today’s figures give further weight to warnings in recent months from the IMF and ESRI for budgetary restraint from Government. Any attempts to buy votes in next year’s General Election through a giveaway budget in December would further increase inflationary pressure.

It seems that a fortunate run of events for opposition parties have at least made possible the presentation of a huge spend at the next budget as electoral recklessness which is destined to undo the good work of the Tiger years. If successgful they might once again chalk up a victory for managerial politics. That all depends on how clever the government is at spending.

Personally I cant see Cowen et al giving the IMF and ESRI (and most certainly not the opposition) the last say on the budget before an election. It is the incumbents greatest trump card and one that Fianna Fail can ill-afford to squander right now.

Government recklessness in December could well be counter productive, few people have forgotten the two years following the last election where inflation and slowdown were big issues and government popularity slumped. How then should government play it?

If the media consensus turns, as it seems to be doing thanks to weighty input from IMF and ESRI, against big budgets then FF may well be lost as an incumbent stripped of some of incumbency advantages. However with SSIA money coming on stream perhaps Budgetary spending need not be so extremely inflationary, SSIA holders could well do enough of that themselves.

Economically, the distinction is becoming clear, a consensus is emerging surrounding the next budget. If the government spend they are reckless and power-seeking at the exense of the common good, if they dont they have taken the ‘sensible option’ but squandered the advantage of the incumbent in purchasing popularity.

Of course this may all be moot in the end as the rebelling backbenchers (feeling the dustbin of history tugging at their trouser legs) seek to gain some influence over the political activity of the next few months. I wonder however, outside of the economic institutions and the opposition parties; if it is correct to accept the dichotomy thus presented between spending/recklesness and prudence/failure. While we have some cash left in the coffers, the government has at least the option of spending wisely.

It so often happens that wise spending fails to coincide with popular spending, but I think this case may make an exception. We are apparantly coming to an end of the second incarnation of the Tiger. What lies beyond is currenty a murky haze. The coffers are bulging but due to external factors we may see that largesse shrink.

I propose then that perhaps there is a median path which ought be explored (and why not do so here in the comments) where spending is notionally sanctioned in cases where it lays the foundation for further growth and also safeguards those most exposed from economic downturn. Nine years in, we have proposals for a transport network worth the name, need for capital investement in health, dearth of affordable housing, issues regarding the quality of science teaching and numbers of graduates, issues regarding quality of life and childcare (with all its knock on effects on the attitudes of the work force/productivity).

We ought surely suggest with all due respect that a giveaway budget aimed at floating voters in the emerging suburbs is at best irresponsible and at worst immoral. But advocating across the board tightening when perhaps there are final chances for future proofing both society (preventing those on the bottom of the ladder from falling off it entirely in a downturn) and the economy(laying foundation for wealth creation through indigenous business and SME while looking after workers) is not, to my mind, any more responsible politics. Am I the only one?