Hi °C | Lo °C Before the 2002 election, I observed that one reason for wanting Fianna Fail re-elected would be the exquisite pleasure of watching them clean up the mess they had created in their bid to get re-elected.
And so it proved — for a time. Remember Charlie McCreevy's ‘Dirty Dozen’, attempted changes in social welfare payments?
As I recall, some of them seemed quite sensible ideas but, then as now, the good gets blown away with the bad when the storm of outrage is blowing.
The same could have been said about re-electing a Fianna Fail coalition in 2007. For some reason, though, I don't seem able to enjoy the same degree of Schadenfreude.
It is partly the departure of Bertie Ahern —whose legacy this mess largely is — because we cannot see him squirm. His remarkable luck held to the end, even if he may not see his untimely end in that light.
It is partly, perhaps, that one is five years older, and a bit more serious minded. But it is mainly, of course, that the situation is much worse than it was in 2002. Worry has overtaken the pleasures of being the hurler on the ditch.
The fact that the Government got off to such a bad start in its attempts to correct matters only adds to the worry, and to the feeling that we are all in this together: Government, opposition, interest groups, even commentators.
To get some sense of the seriousness of the fiscal situation, it is necessary to go to the stuff at the back of the Budget book which is published after the Finance Minister finishes his speech.
Not many people do that, but they would hardly have comprehended the depth of the problems if they read only Mr Lenihan's speech.
The "historical task facing us," he said, is to "build on the country's economic success". Well, there may be a couple of other things we have to do before we get back to that. True, he pointed to the severity and speed of the downturn.
But he gave no evidence to back his assertion that we are in a better position to deal with these difficulties than in the 1980s. The national debt is smaller, and that helps, but pretty well everything else is conspiring against us.
There is the fact that, after an apparent bit of slippage, gross current spending will increase 10.4% this year. That means the public finances are just as unsustainable in 2008 as they have been for the past five or more years.
Every representative from the health and education sectors who is out complaining about how the system will collapse in 2009, should be asked what they have done with all this money.
Actual services have not increased at anything like this rate. Nor is the amount of money being cut — it will go up 3.6% next year.
By any international measure, the totals being spent should be enough to, at least, maintain the cheapskate, rickety services we actually have.
Clearly, it is spent in the wrong ways. Now we learn that more of it is to be spent in the wrong way. The increase in public sector wages so supinely agreed by Mr Cowen will not be raised from taxation, but from existing budgets.
Since quick redundancies (maybe any redundancies) are impossible, that means more cuts to the rickety services
So we do not start from a good position. And the task is immense. The key sentence in Mr Lenihan's speech was: "It is my intention to secure a progressive reduction in the (general government) deficit as a percentage of GDP in 2010 and 2011."
That also does not sound too alarming, until one goes to the back of that book and sees what it means in practice. Mr Lenihan's "progressive reduction" involves an even smaller increase in spending in 2010 — probably less than
3% — and something similar in 2011. The tax burden continues to rise, although, since national income barely grows, the actual increase in tax revenue is modest. Interestingly, to put it mildly, the public sector pay burden is supposed to fall, from over 16% of GDP to 15% by 2011.
Despite rising unemployment, underlying social payments do not increase. The planned result is that the deficit falls by a further 1.2% of GDP in 2010 and by 0.4% the following year. Those figures are based on the previous year's out-turn. It is worth noting, therefore, that this controversial Budget increased the 2008 deficit by 1% of GDP. If the plan works, the deficit just slips under the 3% of the GDP ceiling in 2011 — which is still more than stable public finances would allow.
All this happens while GDP grows only 5.5% over the three years, so that the national debt is almost 50% of GDP by 2011, which is back where it was in 1999.
But will GDP grow even by that average 1.5% a year? Almost certainly not. The growth forecasts in the Budget are the most optimistic you will find anywhere these days. They say that, after contracting by almost 1% next year, the economy will rebound to 2.7% growth in 2010 and to something like trend growth of 3.7% in 2011.
The most optimistic of recent outside forecasts was that from PricewaterhouseCoopers, which agreed with the Government on 2009, but saw just 0.5% growth in 2010.
One sympathises with Mr Lenihan taking a rosy view. Put in anything like Goodbody Stockbrokers' horrendous forecast, and it becomes impossible to frame a fiscal strategy which gets the deficit below 3% in any reasonable timeframe. One has to have something for Brussels, even if they don't believe it either.
We must realise that the deterioration in the public finances is very likely to be worse than the Budget anticipates.
In that case, even if the Budget targets are achieved, by 2011, the national debt will be up around the 60% of the GDP limit set out in the original Maastricht Treaty.
That is largely a symbolic figure, but one needs some kind of compass in this kind of storm. If public pressure and public sector inertia combine to defeat the Budget targets, and the economy does suffer a three-year slump, we will find ourselves back once more among the heavily indebted nations.
One awaits constructive suggestions from the baying herd as to how this fate might best be avoided.
