How a Responsible Government Responds to Recession

On reading a recent article about how Ireland is dealing with the recession and budget crisis, it struck me how radically different their response is from what we are seeing here in the US. Despite the fact that their economy was in a bigger bubble and suffered a more significant crash than ours, and even with a government more left-leaning than its predecessors which had brought it great prosperity in the new millenium, their plan to resolve problems with unemployment, recession and growing government debt shows a good sense and pragmatism which is in stark contrast to the profiligacy and irresponsibility of the Obama administration.

In Ireland’s recession unemployment has reached 12.5% (high for Ireleand, but low for Europe and their deficit is projected to be $32 billion or a “staggering” 13% of annual GDP, four times the limit which the European Union recommends for member nations. In comparison, the US currently has 10.5% unemployment and an annual deficit projected to be around $2.2 trillion or about 12.3% of our projected $14 trillion GDP. Ireland’s national debt is currently around $110 billion or 45% of their GDP, much less inflated than US national debt which is running at around $11 trillion or close to 85% of GDP. This means that Ireland’s short term-challenges are similar to the US, though on a smaller scale, while their long term indebtedness is considerably less. They are overburdened with debt, but half as much so as the United States. We’re both in bad shape, but they have a little more room to borrow money if they wanted to assume that risk.

In the past year the response of the Obama administration and Congressional Democrats to recession, housing foreclosures, business and banking failures and record unemployment has been to spend money and to spend more money. Not only on bailouts for the banks and the brokerages and the auto companies, but also to benefit their political allies, trade unions and special interest groups. Very little of the money has been directed towards small and medium size businesses who do the most to grow the economy and create new jobs. In addition they have escalated the war in Afghanistan, doubled our commitment to overseas aid, and are preparing to condemn us to trillions more in long-term debt with a poorly conceived and publicly unpopular health care bill which massively expands entitlements and costs for consumers while subsidizing lawyers and indurance companies. To top it off, earlier this month they passed a budget which expanded spending by a record 10% and included substantial pay raises for federal workers and elected officials. All of this will be paid for with massive revenue generating measures hidden in the health care bill and from ending Bush-era tax cuts and in forthcoming Cap and Trade legislation. These revenue raising measures are the equivalent of unprecedented tax increases will place huge burdens on small businesses and will amount to thousands more a year in taxes or additional costs even for the working poor. All together these measures add up to the greatest government financial outlay in history and the largest increase in the size of government the US has ever seen, all at the expense of the economy and the working people of America.

Compare this litany of irresponsibility and political opportunism to how the responsible leadership in Ireland has responded to their similar crisis.

In some ways Ireland is well ahead of the US in socialism. Already 20% of their workforce are government employees, a figure which we may match by 2012. But in their case, rather than raising government salaries as the US Congress has done for almost 2 million federal employees, the Irish government is implementing cuts of between 5% and 15% in the salaries of government workers, and the Prime Minister is taking a 20% pay cut. It’s not a huge savings, only about 5% of their deficit, but it’s a start.

Ireland already has universal healthcare, but rather than expanding their system at massive expense as Congress is attempting to do this year, they are planning $1.1 billion in cuts in social welfare programs plus $588 million in healthcare cuts.

Ireland is also cutting taxes while the US government is massively raising taxes. They are reversing a .5% increase on their national sales tax and cutting taxes on beer and liquor. To raise some revenue they are increasing the tax on various fossil fuels, a nod to the desire to move away from polluting fuels without the dictates of an international treaty.

The main concern of the Irish government is that their economic boom in the 1990s and early 2000s came with substantial inflation, and now they are losing a lot of the business which they attracted with a low corporate tax because of increases in wages and the cost of living. Finance Minister Brian Lenihan observed that they “will not be able to stem the hemorrhage of jobs until our prices and the costs of doing business here move down in line with those of our main trading partners.” The goal is to attract business back to Ireland with lower expenses and lower taxes and use that to spur restored growth.

Not surprisingly, Irish unions are up in arms about the austerity measures and are threatening to strike. But unlike the Obama administration which has pandered to the unions at the expense of businesses and taxpayers, the Irish seem willing to call their bluff and demand that unions behave responsibility and share their part of the burden of rebuilding the economy.

Lenihan seems to be confident that responsible cost-cutting and sensible economic stimulus will put Ireland back on the right track, commenting that “by taking the difficult but necessary measures now, we will rebuild our nation’s self-confidence here at home and our reputation abroad,” Lenihan said. It certainly seems like a better plan than driving down the economy for political advantage and expanding government and the welfare state at the expense of free enterprise and individual prosperity as seems to be the plan in the United States.

We’ll see which approach works better, but I’m betting that Ireland will see an economic turnaround long before we do.

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About Dave 536 Articles
Dave Nalle has worked as a magazine editor, a freelance writer, a capitol hill staffer, a game designer and taught college history for many years. He now designs fonts for a living and lives with his family in a small town just outside Austin where he is ex-president of the local Lions Club. He is on the board of the Republican Liberty Caucus and Politics Editor of Blogcritics Magazine. You can find his writings about fonts, art and graphic design at The Scriptorium. He also runs a conspiracy debunking site at IdiotWars.com.

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