During the first US election held after World War I in 1920, the Republican candidate Warren Gamaliel Harding - a man whose tenuous relationship with spelling and grammar led HL Mencken to quip that the language he spoke was not English but "Gamalielese" - faced off against Ohio Governor James M. Cox, who was plagued by the dubious legacy of a world war and the economic crash of 1920 inherited from the incumbent Woodrow Wilson. In seeking to woo a war and recession-weary public to support him, Harding wrote a speech in which he talked of a return to "normalcy" - a made up word which he claimed sounded better than "normality". The "return to normalcy" became his winning theme as he romped home against the hapless Cox. After seven years of crisis and borderline crisis, Michael Noonan seems to have assumed the role of Mr. Harding - announcing that the next election will be preceded by €1.5 billion in tax cuts and spending increases. Normalcy with an Irish accent, so to speak.
After the appetiser that was last year's budget, it would appear that the main course coming up later this year will involve an indulgent loosening of the belt, with Mr. Noonan promising cuts in income tax and USC until 2020 and the reversal of public sector pay cuts. While he was at pains to emphasise that there would be "no return to boom and bust" and pledged that the budget would be balanced by 2018, there was a haunting echo of Bertie Ahern and Charlie McCreevy resonating through the halls of his Department, and with it the emergence of a disturbing - if hardly, at this stage, surprising - sense that in Ireland there is no such thing as a lesson learned, only a lesson observed. However, Noonan has found receptive listeners in recounting his tale of redemption. In the officially minted economic history of Ireland since 2008, we have worked long and hard to purge ourselves of Celtic Tiger excess and are now receiving our just and long-awaited reward. The question that arises is whether this narrative bears any relation to reality. A cursory glance at the figures leaves me sceptical.
Even if our budget were to balance today (which it won't), we are still faced with a national debt which is projected at the end of this year to weigh in at €203 billion - compared to €43.7 billion in 2006. In other words, our public debt burden is almost five times larger than it was when our budget last balanced. However, remember that according to Mr. Noonan's (I fear rosy) budgetary forecasts, the budget will not balance until 2018 - leaving us with three more years of deficits and debt accumulation over and above the €203 billion sum - less reductions that can be extracted from sources like asset sales. This is hardly evidence that throwing off the chastity belt is a wise move. Unfortunately, the numbers only get worse from hereon in.
The Department of Finance estimates that by the end of this year, its annual tax revenue will have reached just over €42 billion - up from just €34 billion in 2011 but still well down on the figure of €48 billion in 2007. On spending, the numbers are even more sobering. The Department of Finance estimates spending for the fiscal year of 2015 to come in at just over €50 billion. The €42 billion of revenue that the government receives from tax receipts does not include revenues received from sources other than taxes. However, the gap between tax receipts and spending is nonetheless alarming in the context of a budget deficit which still stood at €6 billion in 2014. Of course, that €50 billion in spending is down from a peak of €63 billion, indicating that we have succeeded in impressively reducing our spending outlays. However, this figure looks a whole lot less impressive when one remembers that this elephantine figure was reached in 2009 - a full two years after the last Celtic Tiger budget of 2007, when spending reached a (then lusty) figure of €56 billion. In other words, more than half of the peak to present spending cut has consisted of cutting back on increases in spending that occurred after the circus left town in 2007. These numbers make one thing clear - Ireland has a long way to go before belts can realistically be loosened.
However, not for the first time in Irish history, our economic policies are being determined by political cycles. During the period of 1997 to 2008, the Fianna Fail government enjoyed an unprecedented bounty of budget surpluses to give away and found that the most politically profitable manner in which to distribute them was by spreading the spending gravy far and wide and cutting taxes at the same time. Politically, it worked but economically, it left Mr. Lenihan with the mother of all fiscal hangovers to manage in 2008. Sadly for the two Brians, they attempted to spread the fiscal burden far and wide - just as Bertie Ahern had done with the fiscal windfalls. Of course, spreading pain so broadly and without distinction between the public and private sector was never going to satisfy the desires of the "fairness" lobby - which always craved government spending - or the private economy - which had to finance it. Thus, instead of accepting the 2008 crash as what it was - a timely message that our government needed to either radically slim down or radically increase its revenue base - the forlorn Cowen government sought to impose a mixture of cuts and hikes on the same model of government and economy that had grown up during the years of excess.
The failure of Fine Gael to win an overall majority in 2011 and its reliance on Labour (aka. the Public Sector Party) to form a government has resulted in an onslaught of "taxsterity" (i.e. significant spending cuts which have angered the recipient base combined with tax increases which have damaged the economy and punished the productive). This has, in turn, led to the onset of "austerity fatigue", with the FG-Labour government resorting to crude (and unaffordable) bribery in order to prevent even more irresponsible people from coming to power. Perhaps Mr. Kenny and Mr. Noonan should heed the advice of their own government's road safety campaigns: "Wise up. Slow down."