Life will come at most of us fast over the next six or seven months until the weather warms up and people can switch off their costly heating. But by then, mortgage rates also will have risen by perhaps a couple of percentage points, adding hundreds of euro to monthly repayments. Ordinary people appear to be waking up to what lies ahead, as the current trough of consumer sentiment data indicates.
But how long will it take for the chorus of increasingly shrill voices in Irish politics, business and society who only ever want more expansive public expenditure to realise that the near-€250 billion gross national debt cannot be perpetually inflated like a Baby Trump blimp without harming future generations?
The tectonic impacts of Covid and the cost-of-living crisis justify the huge countercyclical interventions of the State. It was sensible to borrow €30 billion to ease the pain of the pandemic. Next Tuesday on budget day, further billions will be spent on taking some of the heat out of galloping energy bills.
Government and opposition politicians, advisory boards, civil society groups, business lobbyists; all hum for a bigger State paid for by the Magic Porridge Pot
But crises aside, it is clear that a normalisation of the spend-spend-spend mentality is in the ascendancy in the ethereal exchange we call “the national debate”. Fiscal rectitude as a rule seems to be going out of fashion in this State. Government and opposition politicians, advisory boards, civil society groups, business lobbyists; all hum for a bigger State paid for by the Magic Porridge Pot.
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The shift in thinking is most obvious in the lofty current spending promises of Sinn Féin, the Government-in-waiting, and in the yelping of Government backbenchers who want their ministers to chase that party down the road of inflated public spending. Where it leads, we cannot be certain. But there is financial trouble ahead and we all know it. Inevitably, that will affect borrowing. The argument that says permanent spending growth can always be paid for with more taxes is not an honest one.
People can argue the toss over the State’s debt profile and the trajectory of its bond maturations, and how sustainable it might be to have close to €50,000 in gross public debt for each person among us. Yet the detail of the numerical arguments is less fascinating then the blinkered mentality that would have us believe permanent public spending growth won’t come with consequences for our children.
Contrast this with the climate change debate. The message is now landing with many of us that if it is true that how we live our lives is severely damaging the planet, if “the science” is spot on, then morally there is no option but to decarbonise as quickly as possible, even if it damages living standards now. The only real quibble that can be had with it is people should be told plainly what the transition will entail, and not be codded into thinking it will be painless. Look them in the eye and be honest.
People also instinctively understand it would be a gross moral failure to live as we like now, in the knowledge that future generations will bear the brunt of the consequences. The selfishness of that mindset is obvious. The left wing of politics has done most to highlight this responsibility we now share.
Bewildering
That’s why it is so bewildering to hear some of the same people who want to to reduce the climate burden on future generations take such a different tack on public spending. The classic call is for more permanent spending on health, despite the annual over-runs that show our health system’s spending framework is broken. It doesn’t matter that the bucket has a hole in it. They want it filled anyway.
The same mentality swirls around discussion of almost every issue on the national agenda. Throw money at it. Little is said about the fact that soon, money will not be cheap any more, with interest rates shooting upwards. We want to save the planet so our children are not swamped by rising seas. But there is less compunction about leaving them drowning in public debt to pay for our public services now.
Future generations will need that borrowing capacity to solve the problems of tomorrow and their ability to do so will be hampered if we max out the national credit card in the few years ahead
Just as it is wrong to leave the next generation to roll back the effects of climate change, it is also wrong for us to spend their inheritance before they get it. Just because the State is still quite capable of borrowing more cash on international markets to solve problems now, that doesn’t mean that it should. Future generations will need that borrowing capacity to solve the problems of tomorrow and their ability to do so will be hampered if we max out the national credit card in the few years ahead.
Last week’s report from the Commission on Taxation and Welfare proposed a raft of measures to pay for rising public spending commitments, while its authors later said “the money has to come from somewhere”. How about from spending reforms in other areas?
One letter writer to The Irish Times, Dublin man Gerard Reynolds, subsequently suggested a parallel commission on spending reform should be set up and its findings implemented before any further demands are placed on taxpayers. It was one of the brightest ideas I heard all week, and it applies just as much to extra demands put on taxpayers in the form of more debt repayments as it does to more taxes.
The Department of Finance’s “where your money goes” website states that gross public expenditure this year will be €97.2 billion. That is 30 per cent higher than it was just five years ago. Since then, an extra €7.4 billion annually goes on health alone, with a further €3.7 billion on debt repayments and European Union contributions. Really, where does the money go?
Paschal Donohoe, the Minister for Finance, tried to keep a lid on demands for public spending growth in the years before the 2020 general election. Yet all it earned him was unpopularity within his own party, even though his reticence to blow up the public finances left us the fiscal space to fight Covid in the years that followed. He rarely gets credit for that.
As rectitude goes further out of fashion, it ought to be remembered that there is nothing noble about eating tomorrow’s jam today.
