Gulp.

This morning.

Leinster House, Kildare Street, Dublin 2

Fur farm-hating grim reapers greet returning TDs afte the Dáil Summer recess.

Rollingnews

Meanwhile…

Social Democrats TD Róisín Shortall and the party’s political director Anne Marie McNally on the plinth at Leinster House

This morning.

Outside Leinster House.

Social Democrats TD Roisin Shortall has called for an immediate rent freeze nationwide.

In a statement, Ms Shortall said:

“One of the worst effects of the housing crisis is that more and more people are relying on private rental accommodation. Rents are at record levels. According to DAFT, rents nationwide have risen by 75% since 2011 and are now 27% higher than their 2008 peak.”

The party’s political director Anne Marie McNally said:

“The Government needs to intervene now to stop rents sky-rocketing any further. We have to end this exploitation of renters and those priced out of the housing market. That objective should start with an inescapable nationwide rent freeze now.”

FIGHT!

Meanwhile…

The Dáil resumes this afternoon, following the summer recess, with Leaders’ Questions starting at 2pm.

Proceedings can be watched live here.

Pic: Social Democrats

‘Puck’

Smell him coming a mile off.

Derry Nane writes:

Just sending this on in case it might interest some of your readers who are interested in GAA and/or perfume…

From top: Fine Gael Minister for Finance and Public Expenditure and Reform, Paschal Donohoe on his way into talks with Fianna Fáil over the 2019 budget at the Department of Finance last week; Michael Taft

The orthodoxy is running loose, we are being frog-marched into another round of depressed spending and progressives are nowhere to be seen.

Fiscal policy can put a lot of people to sleep, especially as it is presented in numbers, ratios and sometime dubious historical parallels. But it is one of the key foundation stones in the area of public expenditure, investment, taxation and, most of all, macro-economic stability.

Lately we have been treated to a barrage of calls to ‘run a budgetary surplus’, ‘rein in our high debt levels’, ‘prepare for Brexit’ and ‘avoiding over-heating’. Each of these is contestable and has profound implications for social and investment policy. For the most part, the Left is silent and the debate has the sound of one-hand clapping.

We are in danger of a repeating the experience during the austerity period when the orthodoxy set the (narrow) parameters of the debate and the Left failed to develop a common programmatic response. Let’s go through some of these issues (in the next post we’ll discuss the overall debt).

Tainting the Golden Rule

Ministers, the Department of Finance, the Central Bank, the ESRI and the Irish Fiscal Advisory Council are all calling on the government tighten up on spending so as to create a surplus – that is, to ensure that government revenue exceeds government expenditure.

The bases on which they are making these calls, however, are flawed.

Traditionally, the benchmark for fiscal policy is the Golden Rule. This states that over the medium-term, the Government should borrow only to invest and not to fund current – or day-to-day – spending. The rationale behind this is that current spending benefits today’s taxpayers; investment benefits tomorrow’s taxpayers.

Of course, there are ups and downs. During a recession current spending will go up with increased unemployment benefits while tax revenue will fall as business activity declines. When the economy recovers, a prudent Government will run a surplus on current spending to make up for the deficits in the recession; hence, over the medium-term deficits and surpluses balance out.

This was the rationale behind the original Maastricht guidelines – which permitted a three percent deficit. This allowed for borrowing for investment purposes while requiring that current spending was in balance or even in slight surplus.

The Golden Rule was undermined by the Fiscal Rule which stated there must only be a 0.5 percent deficit (one percent for those countries with an overall debt level below 60 percent of GDP).

This means that Governments are not allowed to borrow to invest. They must fund most of investment out of current income.

This is irrational for two reasons:

What would happen if households had to fund major investments out of current income – house purchase, retro-fitting, new car, etc?

Central Bank rules require households to pay 10 percent of the house price (investment) up front. Imagine if those rules required households to pay 70 or 80 percent of the house price: house purchases would collapse along with the building sector.

Why would you not borrow for investment when interest rates are on the floor?

But now it is getting worse. By demanding that the entire budget be in surplus many commentators are going beyond even the restrictive fiscal rules, tuning the Golden Rule into rust.

They are demanding that not only should all investment be paid out of current revenue but that there be an additional large surplus. This is despite our many infrastructural deficits.

How Do We Compare?

In an attempt to frog-march us into this depressed future all manner of numbers and ratios are used, most of which miss the Golden Rule mark. How does our current budget balance compare to the rest of the Eurozone?

Not only does Ireland have a very high surplus on current, or day-to-day, spending compared to the Eurozone; it is rising much faster. The Government intends to drive this up even higher in 2020 and 2021.

This is not only unnecessary in terms of the fiscal rules; it deprives the productive economy of badly needed resources.

If we enter the next downturn, slump or recession with a housing crisis, an unaffordable and poorly paid childcare system, low levels of R&D and per student expenditure we will find an economy struggling to return to growth.

On the other side of the downturn it will cost even more to repair the economic and social damage, repeating the same mistakes we made coming out of the last recession.

A Progressive Starting Point

What should progressives be proposing? First, we should argue adherence to the Fiscal Rules, that is, a 0.5 percent deficit. This would facilitate economic and social investment.

The Government’s Summer Economic Statement gave us a table showing what additional expenditure – above Government projections – would be allowable under the Fiscal Rules.

Over the next three years we would be allowed to spend over €4.1 billion above what the Government intends. This is a sizeable amount available for investment.

Of course, this doesn’t tell us where to spend the money – that is another debate to be had (for my money it would be housing, childcare, education, R&D and primary healthcare).

Second, progressives should use the European elections to argue, on the basis of a common platform, to exclude investment from the fiscal rules. This would return fiscal policy back to the Golden Rule. The EU Commission has already taken small steps in this direction.

Third, progressives should challenge orthodox assertions regarding debt, deficits, growth, investment and over-heating. Evidence-based arguments should be put forward along with common-sense explanations.

In short, progressives should get back into the debate over fiscal policy – by proposing an alternative medium-term framework.

In doing this, though, progressives should also confront the real dangers that lie ahead – and do so in open and honest manner: Inflated revenue levels due to multi-national accounting practices; rising interest rates – probably starting in 2019; Brexit; a global slowdown due to the next downturn, fueled by tariffs and trade wars, etc.

This is no easy task. The orthodoxy can put forward its arguments based on simplistic and static budgetary arithmetic that overlooks the negative economic and social impacts which ultimately undermines a prudent fiscal policy.

We must argue an alternative framework that promotes investment in the productive economy. For it is the strength of the productive economy that will see us through the troubles ahead – and provide a pathway to sustainable growth and increasing prosperity on the other side.

Michael Taft is a researcher for SIPTU and author of the political economy blog, Notes on the Front.

Leah Farrell/Rollingnews

This morning.

Scenes from the National Ploughing Championships in Screggan, Tullamore, Co Offaly.

Visitors include Ava Murphy, ten, and Lucy Murphy, 11, from Athy Co Galway (fourth pic) and Eugene Barrett, above.

WATCH: Conditions ‘slightly slushy’ as National Ploughing 2018 gets underway (Offaly Express)

Sam Boal/Rollingnews

You report that the United Nations has found that Ireland is one of the best places to live. According to the UN’s Human Development Programme Index, we sit behind only Norway, Switzerland and Australia.

This is very strange because, based on a lifetime of reading The Irish Times and listening to RTÉ, I had assumed I lived in a backward, misogynistic, capitalist hellhole.

Karl Martin,
Bayside,
Dublin 13.

Ireland and living conditions (Irish Times letters page)

This morning.

Gemma O’Doherty (top right) will be joining us LIVE above at 10.15 to discuss her bid for a nomination to contest the Presidency of Ireland.

PLUS Artist Kevin Sharkey (top left) on why he pulled out.

Minister for Justice and Equality Charlie Flanagan (left) with  Garda Commissioner Drew Harris at the Garda College, Templemore last month

Before long you’d have to be thick
If you’re tempted to take a quick pick
Of a Garda at work
For due to a quirk
Of our laws you’ll end up in the nick

John Moynes

Rollingnews

Former Minister for Justice Frances Fitzgerald; Terry Prone, of the Communications Clinic

Last night.

Journalist, director with Right To Know and Dublin Institute of Technology lecturer Ken Foxe tweeted that he had received word back from the Department of Justice yesterday.

This follows his attempts to obtain records of correspondence between the former Minister for Justice Frances Fitzgerald and PR advisor Terry Prone between May 8, 2014 and March 11, 2017 – a time when Ms Prone was also advising the then Garda Commissioner Nóirín O’Sullivan.

Mr Foxe had initially been told there were no such records.

After appealing the matter to the Office of the Information Commissioner, the OIC discovered 68 such records of correspondence.

Last night, Mr Foxe said the Department of Justice informed him there were more than 190 such records.

He has yet to receive the documents.

But last night, Mr Foxe explained:

Previously: Frances, Nóirín and Tess