Get ready for the next soft landing - Promising the impossible

ONE of the phrases Bertie Ahern must regret — and there may be a few — is the one he used to try to calm a self- fulfilling panic around a collapsing property market. 

Almost a decade ago he suggested that any “correction” could be characterised as a “soft landing” and that we’d easily cope with any eventuality. Indeed.

His successor Enda Kenny may have made his “soft landing” blunder in Davros yesterday when he said that he is confident Ireland will be insulated from some of the growing and ever more troubling turbulence in the global economy. Mr Kenny’s optimism, or at least his expression of optimism, is understandable — what else could he say or do on the cusp of an election? Especially on an issue he cannot control? However, his judgement seems questionable and his reassurances misplaced and unwise.

Ours is still a small, open economy more or less dependent on the wellbeing of the Anglo/American economies. The old, sobering truth still stands: If America or Britain sneeze we get a cold. It is impossible to see how Ireland Inc would avoid the grim consequences of world stock markets hitting new lows — as they did this week — and to suggest otherwise pushes electioneering towards conscious deception. It is disheartening that Mr Kenny now seems so very comfortable with the kind of ballyhoo he was elected to eradicate.

If Mr Kenny’s chutzpah was a harmless and isolated moment of cheerleading — or a fatherly instalment in his Paddy-likes-to-know communications policy — it would not be terribly significant but when it is considered along with the pre-election promises on tax cuts it must set alarm bells ringing as loudly as they have rung for a decade.

Already Fine Gael and Labour proposals to abolish or significantly modify the unpopular — as if a tax was ever popular — Universal Social Charge have been criticised by the International Monetary Fund. Warning that such a move would be “regressive” the IMF pointed out that “the risks associated with tax base erosion” and argued against “further reduction of the USC, which has played an essential role in restoring a sustainable revenue base”. In other words cutting this tax makes a reduction in services, new or increased taxes eleswhere or increased national debt almost inevitable.

This simple equation was highlighted by the Fiscal Advisory Council when it pointed out that we are obliged to match tax and expenditure changes. Basically, if we cut taxes we must cut spending and limit already stretched public services further. After eight lean years all of the low hanging fruit has been long harvested and all the while demographic changes sharpen pressures on spending. Hardly the ideal scenario to cut any taxes. It is one of our great tragedies that politicians of all hues have successfully convinced a game-changing proportion of the electorate that we can cut taxes and improve services. The reality is that the vast majority of people understand if you want something you have to pay for it. How much better our country, and our politics, would be if that simple truth became a guiding principle rather than an obvious precursor to our next “soft landing”.