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Pat Leahy: Spending is the key to re-election. Expect more Government giveaways

It has signalled moves to avoid a ‘cliff edge’ at end of February when energy supports are due to lapse

Taoiseach Leo Varadkar is said to be among the most enthusiastic backers of a new wave of Government supports. Photograph: Brian Lawless/PA
Taoiseach Leo Varadkar is said to be among the most enthusiastic backers of a new wave of Government supports. Photograph: Brian Lawless/PA

The consensus among commentators, for what it’s worth, was that Joe Biden used his State of the Union address on Tuesday evening to signal that he will seek to run for re-election next year. Already the oldest person to hold the office at 80 years of age, that would make him 86 at the end of his second term. It’s too old, but we live in an imperfect world full of unsatisfactory choices. It’s not as if the Democrats are exactly tripping over alternative candidates, is it? And Biden has already demonstrated one quality that might be required for the 2024 contest: he can beat Donald Trump.

The analysis that Biden is signalling a bid for a second term rests on two things. Firstly, his delivery was energised and combative. “His performance,” noted the New York Times, “could help address doubts about his vigour as a 2024 campaigner”. The second was the heavy emphasis in his speech on what Americans often describe as “pocketbook issues” – the state of the national economy and the impact that has on ordinary people in their daily lives.

With inflation falling and unemployment at its lowest rate in more than 50 years, Biden is constructing an appeal that is squarely economic in its design.

“We’re building an economy where no one’s left behind,” Biden told a raucous Congress of cheering Democrats and jeering Republicans. “Jobs are coming back, pride is coming back, because of choices we made in the last several years. You know, this is, in my view, a blue-collar blueprint to rebuild America and make a real difference in your lives at home.

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“Here’s my message to all of you out there,” he said. “I have your back.”

The maxim of the Bill Clinton campaign in 1992 – “It’s the economy, stupid” – is as overused as it is misunderstood. It doesn’t mean the economy is the only issue. But it does mean that a governing party can’t win without a decently performing economy. Or, perhaps more accurately, without a perception that a healthy economy is making a difference in people’s daily lives, a government is very, very unlikely to be re-elected. That’s why Leo Varadkar’s Government is likely to continue spending to help people with cost-of-living pressures. Discussions on this are taking place behind closed doors at Government Buildings with announcements due before the end of the month. Senior Ministers will consider the issue next week.

The extent of the forthcoming giveaway will also tell us about the balance of power in the Government on such matters

The Government has already signalled that it will move to avoid a “cliff edge” at the end of February when existing energy supports are due to lapse. My guess is that it will become a political impossibility not to extend the supports.

The real impact of increases in the cost of living is becoming increasingly apparent. This week, people queued early in the morning, as they often do, to receive food parcels at the Capuchin centre in Dublin. Children’s charity Barnardos reported a survey that found that 10 per cent of parents had used food banks at some point in the last year; nearly a third reported going without meals or cutting down portion sizes to ensure their children had enough to eat. The Society of St Vincent de Paul reports record demand for its services.

But it’s not just the hardest-pressed sections of society, whose concerns often don’t command the sort of political clout that others do. Mortgage rate hikes resulting from the European Central Bank’s steady increases in interest rates – and more to come, folks – are now biting hard into the disposable incomes of middle-class homeowners. They are people who have survived the financial crash, endured Covid and have benefited from the extraordinary economic recovery in the country. They are the economically motivated voters that Varadkar has always eyed as his natural constituency. They have good jobs and mortgages and families and if Fine Gael and Fianna Fail can’t appeal to them with the promise of political stability and continued economic growth, then they can’t appeal to anyone.

Sharp as a tack, Pearse Doherty can see the play a mile off. This week, he tabled a Dáil private members’ motion urging the Government to reintroduce tax relief on mortgage interest. This would be a laser-guided missile to the source of middle-class difficulties. It has previously been discussed around Government – and some Ministers love the idea – but it didn’t make it into the budget. If it’s on the way, Pearse wants to plaster Sinn Féin stickers all over it.

Michael McGrath politely declined the suggestion, glossing over the fact he had proposed it in opposition, but the preparation of a new package of cost-of-living measures is the subject of much discussion around Government. Among the most enthusiastic backers of a new wave of supports, it is said, is the Taoiseach. And usually the Taoiseach gets what he wants.

The rationale is the same as Biden’s. One of the lessons that has been internalised around Government Buildings is how the use of the big bazooka in the September budget – with its combination of regular spending increases and once-off measures totalling an €11 billion giveaway – helped insulate the Government parties from the political fallout from inflation and the cost-of-living crisis. But that’s a wasting asset: it will have to be replenished. And with the economy growing and the public finances in robust health, it’s not hard to see how the political pressure to act will build until it is unbearable.

The extent of the forthcoming giveaway will also tell us about the balance of power in the Government on such matters. McGrath and Paschal Donohoe will urge caution; that is their job. This week, they shunted another €4 billion into the rainy day fund. But the clamour for politics is louder than it is for prudence, and the appetite for spending is ravenous. We can expect more giveaways.