Economic recovery - Like the US, we must face stark reality

PRESIDENT Barack Obama’s announcement on Sunday night that Congressional leaders had reached an agreement that would raise the US government’s borrowing limit and avoid default is good news for us all.

This was reflected in an immediate bounce in stock markets all around the world.

The prospect of an American default is almost too calamitous to imagine. Despite the accelerating ascendancy of other economies — China, India and Brazil for example — America remains the most powerful economy in the world and its wellbeing is of great concern to any country in its shadow.

Imagine, if you dare, how this country would fare without the investment and employment American companies bring, a real possibility in the event of a deepening crisis in America’s domestic economy.

Over the weekend, Republican and Democratic leaders worked on a deal involving $2,800 billion (€1,940bn) in deficit cuts within 10 years. Cuts of that proportion herald a new relationship between state and citizen, especially if that citizen is employed by that state.

The cuts mean America’s annual domestic spending will fall to the lowest level since Dwight Eisenhower was president in the 1950s. Though the €1,940bn seems almost incomprehensible when compared with the €3.8bn Finance Minister Michael Noonan must, under the terms of our IMF/EU rescue deal, cut from our domestic budget in December, the impact of those cuts on individuals here will be at least as profound as anything faced by Americans.

In that context, and in light of the disproportionate anger generated by last week’s announcement of a very minor element of the reshaping of how we fund and manage this society, the Government has a long, long way to go before everyone is convinced of the depth of our crisis, our very limited options and the great urgency needed in bringing our expenditure much, much closer to our income. If a €100-a-year household charge can provoke such an outpouring, imagine the response to a cuts and tax package designed to take even more billions — €3.8bn — out of circulation?

If the past is anything to go by, and we have little else, then we can expect another bout of the tribalism and disingenuous grandstanding that did so much to get us into this mess. Unfortunately, the current Government were as good as anyone at playing a part in this destructive charade, so they can expect little latitude from the opposition benches.

Announcing the default agreement, Mr Obama said that a framework was in place to “end the crisis that Washington imposed on America”, a framework that would “begin to lift the cloud of debt and the cloud of uncertainty that hangs over our economy”.

If Enda Kenny is, to paraphrase, to end the crisis that Dublin imposed on Ireland, he and his Government need to communicate with the people of this country like no Irish government has done before. If December’s slash-and-burn Budget is to be accepted, then the arguments based on wishful thinking, and there are still very many, must be well and truly laid to rest before Budget day.

Over the last few days, American politicians were told to “grow up” and put America’s interests before their own. It is time we did the same.