Ireland Urgently Needs Fiscal Stimulus Package to Kick-start Economy

Addressing Labour’s national conference in Kilkenny on Saturday, Deputy Leader Joan Burton called for a ‘new deal for new jobs’. To get Ireland through the recession, Ireland needs three things, she said: 1) to get credit flowing again, 2) to stimulate spending, 3) to make Ireland competitive again.

You know the famous Chinese curse :

May you live in interesting times.

Well, 2008 has certainly lived up to that billing, and November is no exception.

As the year ends Ireland is in dire need of CPR.

The economy and the Government that manages it are both in a state of paralysis.

Instead of containing the slump our two Brians are contributing to it.

The economic news worsens by the day:

• Banks on life support.
• Job losses on a scale not seen for decades.
• Tax revenues collapsing as economic activity slows down
• A Government out of touch, out of ideas, with out of date policies
• Ministers who have lost the energy for reform

The Irish economy faces clear and present danger. To contain that danger we need to do three things:

• Get credit flowing again
• Stimulate spending
• Make Ireland competitive.

We need a sound and stable banking system, one of the sinews of any modern economy.

Governments everywhere are injecting equity into their banks. Brian Lenihan’s Farmleigh Formula is to invite private equity funds such as the Carlyle Group and JC Flowers to rescue the Irish banks.

This is like being rescued from a whale by a shark.

Both the National Treasury Management Agency and the Pension Reserve Fund could be the vehicle for state equity investment in Irish banks.

[A public bond offering could allow citizens to invest in Irish banks.]

When bank shares recover, there will be a significant upside for the taxpayer. Unlike with the guarantee, where the taxpayer takes all the risk but will reap none of the rewards.

Beware of vulture capitalists posing as good Samaritans.

The winner of this year’s Nobel Prize for Economics, Paul Krugman, told President-elect Barack Obama:

• Figure out how much help the economy needs, then add 50 percent.

To get a depressed economy moving, you must have a stimulus, a new deal for new jobs.

A stimulus package is necessary for one simple reason. When demand slumps, when deflation is a greater menace than inflation, when consumer and corporate confidence has collapsed, fiscal conservatism makes little sense.

Instead it makes sense to reflate through a carefully managed programme of public investment. It’s smart economics to invest in education and infrastructure like public transport.

I want to add an extra principle:
• Now is the time to lay the foundations for a low-carbon economy.

• For years we had IT, information technology, as the engine of growth.
• Now is the turn of ET, energy technology.
[It can be an outstanding source of speedy labour intensive investment and innovation, for energy efficiency in homes, offices and industry.]
Germany, for instance, created 25,000 jobs by retrofitting some 200,000 apartments in a 2 year period. Britain is now creating 10,000 jobs on a similar programme. Ireland can do the same.
Why abandon construction workers when the opportunity is there to use their skills to deliver environmental benefits at quite a modest cost.
Directed wisely, this economic stimulus could be the basis for a ”green new deal” for Ireland, creating jobs, leading to long-term prosperity, while helping us play our part in solving the climate crisis.

We need both public and private sectors to champion the new green deal.

Better regulation to reduce car emissions and improve building standards can be the driving force for research and new technology; however anathema regulation is to Charlie McCreevy and his Acolytes.
[The private sector that will make most of the investments, but the Government has to shape the incentives and encourage the investment climate that allows the switch to take place.]
Every class in every business school, in every engineering school should come up with at least three products and services that need to be replaced by greener alternatives.
That is the source of new jobs.
Growing the green economy now is not just smart for the environment, it’s smart for the economy. Government action now can put us on a path to smart, green growth.

We can beat this recession in a way that reduces risks for our planet and sparks off a wave of investment which will create a more secure, cleaner and more attractive economy for all of us.

This would be the biggest industrial project Ireland has ever undertaken and timid gestures about light bulbs are only a distraction.

In Ireland we need to change our leaders not just our light bulbs.

The gloves are off, and an epic battle of political ideas has begun.
Conservative intellectuals are struggling to come to terms with the failure of unregulated capitalism, a collapse as dramatic as the collapse of the Berlin Wall was two decades ago for Soviet Communism.
The doctrine of market fundamentalism has been so dominant, so pervasive over the past three decades that it has seemed like a law of nature.
People are reaching out for a new politics.

This new politics will encourages all citizens to play their part and harness the best of private business with a dynamic public service.
Today a massive public stimulus is all that stands between the nation and economic calamity. Brian Cowen still doesn’t get it. He holds steadfastly to the failed dogma of the invisible hand: that markets can do no wrong.

Every day you hear people say there is no difference between parties.
Well they can’t say that now.
This party disagrees sharply with FF on the government’s role in bolstering the economy.
[We favour investment in public transport, in alternative energy, in home insulation and in education, which would not only create jobs but also make us more competitive globally.]
Brian Cowen wants a governmental spending freeze, though he has in budget after budget facilitated multi billion tax cuts for the rich — who are more likely to stuff their loot in offshore havens than invest it productively.
Having spent his career as the champion of policies that resulted in the meltdown, Brian Cowen now promotes policies that will turn recession to depression.
He’s entitled to his beliefs, but Ireland can’t afford to worship at the altar of these failed gods.

For years the Labour Party has campaigned on a platform of tax justice. I welcome the recent abolition of the ‘so-called’ Cinderella rule for tax exiles.
But I ask this.
Why have we tax exiles at all? If you work here, own a home here, earn profits here and benefit from the services the State supplies and raises taxes to fund, why should you be free of tax.
It is always wrong and it is doubly wrong when the country faces such severe economic challenges.

Remember Thatcher’s famous chilling phrase.
‘there is no such thing as society’.
The present crisis tells us the exact opposite.
Labour says loud and clear.
• There is a thing called society.
• There is a common good.

• There is a national interest.

The common good is superior to vested interests.
It is superior to sectional interests.
And if there are sacrifices to be made then the burden has to be shared in a fair transparent way.
Burden sharing may take many forms through extra taxes, wage restraint or the deferral of worthy policies.
Fairness has to be transparent. No one group either in the public or private sectors can carry all the sacrifices and each will rightly want to see how those who have done so well in the past decade are willing to take their share in the pain of recovery.
This is very much a values debate:
We offer today pragmatic ideas to progress our country in the present dangerous times but we offer, too, a long term commitment to an economic policy that values trust and traditional ethical standards as essential elements of the financial system and balances the profit motive with responsibility to the community as a whole.