I couldn't but help wonder at what type of voter Paul Murphy was trying to appeal to tonight when spoke about having a wide anti-austerity movement in place for the next general election given what appears to be a Labour Party meltdown in the polls.
Now assuming Paul Murphy is appealing to the left I really can’t see why anyone who does the math could be unhappy with the current situation if they are a left wing voter.
Firstly we are borrowing large amounts of money to fund a very high rate of social welfare, costly public services and even for those on the dole massive mortgage protection payments (one of the reasons incidentally the cost of taking up a job is so high). Now to me (and as any regular readers know I am no Labour Party fan boy) the Labour Party is actually doing a good job of protecting their traditional supporters, I think their problem is that at election time they didn’t explain to them what protecting them entailed. The reason Labour are in trouble is they weren’t up front and were populist on this “Labours way not Frankfurt’s way” comes to mind.
So what I would love to know is how we are going to avoid austerity in some form or other. I have heard several proposals mooted from numerous quarters (note while Paul Murphy is mentioned above the below are general proposals from end-austerity supporters I hear regularly and not proposals that I am attributing to Paul Murphy) :
Proposal 1. A Wealth Tax
Large wealth taxes don’t work, with the exception of land and property all other real wealth is easily moved to another jurisdiction. Where a high percentage tax is applied to assets such as land or property is taxed it leads to a vicious spiral in their values as owners are forced to sell to pay the wealth tax buy actual wealthy buyers are reluctant to keep their cash wealth in the jurisdiction to purchase these assets. So in my opinion this can’t work.
Proposal 2. The French Style 75% Tax On Profits / high earners
This will just see an exit of privately owned businesses exiting the country, along with high flying professionals and of course high earning sports starts, celebrities, artists etc. such as Gerard Depardu.
Proposal 3. Default On Our Bank Debt
Firstly I will say I was vehemently opposed to the bank guarantee and still am, but the banks don’t owe the money now, the Irish Government does, it borrowed the money, paid off the banks bondholders and now the banks don’t have any obligations on this. So defaulting on debt is all fine except we could face the situation where Irish assets are sized abroad – see the Argentina battleship. Of course the other fly in the ointment is that we as a nation need to borrow a five figure sum every year for our current spending budget deficit, how that proposing default plan to plug this is beyond comprehension as no one in their right mind will loan us money if we default unilaterally. I will say personally that if they want the short sharp shock that not being able to borrow money will bring that we will by default have to introduce the type of austerity that I would advocate. I still think that what is really necessary is to sit back and wait on the bank debt, the ECB will eventually be forced into quantitative easing, it is simple math, and incidentally not something I like, so inflation proofing is still the order of the day.
So all in all austerity is necessary, I might often criticise the government here on this site, but that is not because of austerity, it is because I believe the mix should be more cuts and less taxes. That said though I still support their efforts to reduce our deficit, and I would prefer to pay higher taxes than to see a mish mash of those who would go off on what on unworkable tangents.
What these people need to learn is that no one likes austerity, personally I hate it, and most other people do as well, but I see the need for it because it is necessary to sort out our finances. It is to me like someone having to have open heart surgery, they most likely hate having to have it but know it is necessary if they want to live.
I still think that come the next election a lot of people will still vote for austerity. Certainly in Fine Gale’s case, they never said they wouldn’t follow an austerity programme when running for office the only place they could fall down is on the mix of cuts ‘v’ taxes, and they will get away with blaming Labour for the taxes.
So at the end of this long rant what do I want? Well I would love to see some theories put forward by those who “want to end austerity” put forward that make sound financial sense and not just the usual cries of “tax the rich” or “default on bank debt”.