rorkesdriftvc.com Forum Index


rorkesdriftvc.com
Discussions related to the Anglo-Zulu War of 1879
Reply to topic
ZULU AND THE Irish BUDGET!
AMB


Joined: 07 Oct 2005
Posts: 921
Reply with quote
It is interesting when newspapers and websites still use the film Zulu to get their message across. This recent example coming from the website, Independent.i.e., uses Zulu in regard to the Irish Budget announced this week:

FORGET THE MYTHS; CUTBACKS SPARED US A GREEK TRADEGY
Dangerous fictions about last week's Budget could lead us down the path to bankruptcy -- like Greece.

By Marc Coleman
Sunday December 13 2009

'Those bastards, they're taunting us," said Lieutenant Gonville Bromhead. "No, no. You couldn't be more wrong. They're saluting you, they're saluting fellow braves," said Lieutenant Adendorff. If, like me, you're stocking up on classic Sixties movies for Christmas, I can highly recommend the 1963 movie Zulu. Richard Burton's majestic intro and epilogue aside, the two final lines by actors Michael Caine and Gert van den Burgh will bring a lump to your throat.
Based on a true story, it tells how Bromhead (Caine) fights off a relentless attack by thousands of brave Zulu warriors with barely 100 exhausted soldiers of his own. As thousands more Zulus appear on the horizon at the end of the film waving their spears, it looks like curtains for the Brits. But it isn't an attack, but a salute acknowledging their defeat and Bromhead's victory.
There are grounds to taunt the Government over Wednesday's Budget; the incompetent and failed tax hikes of April should have been reversed and stamp duty should have been abolished. Lenihan also missed a trick by not reducing a plethora of exorbitant State fees and charges before cutting the dole and lowering public service pay.
The consequences of those failures in terms of lost tax revenues, negative equity misery and needless job losses will be examined in time. For now, though, we need to look at the big picture -- Lenihan has won a victory that deserves to be saluted. It also needs to be secured against bogus arguments that might yet bring people on to the streets in ways that could destabilise or even bring down the Government. Again, timing is everything. There'll be plenty of time to pass verdict on the Government's handling of the economy, but first -- for our sakes -- let's finish the job of setting things right.
As another small country in the opposite corner of Europe has shown, Lenihan's decisiveness in cutting spending has saved us from disaster. Greece's failure to follow suit prompted bond markets to up the interest rate on Greek debt by 1.3 per cent, the worst increase in recent European bond market history. Greece may soon be unable to pay interest on its government debt and may become the first euro zone nation to go bankrupt. The modest but clear fall last week in Ireland's interest rate premium is a sign that those same bond markets are saluting Lenihan's tough action.
Let's hope it holds up. If it doesn't, a Greek tragedy awaits us. Emerging myths need to be addressed before they destabilise public support for tough action, a support that last week proved vital to facing down opposition. Among these myths is the fiction that public sector pay cuts are self-defeating in revenue terms, that tax increases are a viable alternative to spending cuts, and that the cuts are somehow "deflationary". Let's debunk these myths one by one.
The graphic of two workers, one public sector, one private sector, shows how -- as critics point out -- the net gain to the exchequer from Wednesday's pay cuts is less than the amount of the cut in pay. But this analysis is too narrow. First of all, there remains a net gain to the exchequer. Second, compared to the alternative scenario of not cutting pay, that net gain is larger than it appears.
Competitiveness in the economy needs to be restored by cuts in both public and private sector pay. Given that average public pay was higher (and according to the ESRI figure remains higher, even after Wednesday's cuts) than private sector pay, backing down on public pay cuts would have forced the private sector to bear the brunt of the competitive adjustment by taking even higher cuts.
In the absence of any lowering of income tax thresholds (another error of judgment), this would cost the exchequer dearly. As the graphic shows, the exchequer is therefore -- compared to the alternative -- quids in from Wednesday's cuts.
Trade unions have argued there was an alternative to cuts, namely to increase taxation on the rich. But as Mark Redmond of the Irish Taxation Institute pointed out, "The limit on the taxation threshold has been reached and further increases would be counterproductive." Ever the diplomat, Mark is understating the truth. Not only has that limit been reached, it has been greatly exceeded.
As the chart above shows, the rise in the marginal rate of taxation and the rise in unemployment are moving together like two synchronised swimmers. From 43.5 per cent in 2007 to 52 per cent heading into 2010, the rise in taxation (measured on the left axis) has been followed by a rise in unemployment -- from 4.4 per cent to 12 per cent. Public sector unions may represent those who cannot lose their jobs. But this doesn't exempt them from a moral obligation to avoid advocating policies that inflict the human misery of unemployment. The way back -- the only way back -- to full employment is to begin reducing the marginal rate of taxation and there are no two ways about it.
As recent history shows, the idea that cuts in State spending are deflationary is also nonsense. In 1985, the then government dithered over a fiscal crisis, allowing spending to rise by 7.5 per cent. Alone among EU countries, Ireland went into recession the following year. By contrast, the government took the bull by the horns in 1988 and cut spending by 1.3 per cent. The following year, the economy grew by 4.7 per cent. Why did these outcomes happen? Simply because people are not as stupid as those making the deflation argument think they are. Punters understand that today's borrowing is tomorrow's taxes and, by contrast, that strong action on spending today means lower taxes in the immediate future.
Of course the Budget was unfair. Despite welcome cuts in excise duties and VAT, the State remains responsible for one of the highest costs of living in Europe for those on low incomes. Its �4.60 take from a packet of cigarettes, for example, exceeds the price of a packet of cigarettes in most EU countries. And despite negative inflation, State inefficiency and
monopoly power means goods and services used by the poor (transport, health and education) continue to rise in price. Before a finger was laid on welfare recipients or lower-income public servants, these problems should have been dealt with. In time, these issues will have to be addressed. For now, the decisiveness of Wednesday's Budget means we can relax and enjoy those Christmas movies.

AMB
View user's profileSend private message
ZULU AND THE Irish BUDGET!
You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot vote in polls in this forum
All times are GMT  
Page 1 of 1  

  
  
 Reply to topic