They Cheer, Little Realising they are Cheering Their Own Failure

Why didn’t the Irish media report this comment by the Minister for Public Expenditure and Reform?

‘Today I am announcing further reductions in Public Service numbers.  I expect this reduction to reduce consumer spending by over €1.2 billion, to cut employment by nearly 25,000, and to remove about €2.3 billion out of the domestic economy.  Through all this pain I am hoping to reduce the deficit by 0.3 percent of GDP.  As the Government needs to reduce the deficit by 7 percent, we are hoping that this will make a small contribution.’

Ok, the Minister didn’t say that directly (he did say the first line).  But if he had used the ESRI measurements, he could and should have laid out the terrible economic carnage the plans to cut public sector employment will inflict on us.  If we had vigilant economic journalists they could and should have been queried the Minister about this at the press conference.  What impact will these measures have?  How much does the Government expect to ‘save’ when lost revenue and higher unemployment costs are factored in?   

But he didn’t.  And we don’t have that kind of vigilant economic journalism.  So we have a Government patting itself on the back for cutting jobs out of the economy.  We have a set of proposals that will do considerable damage to the economy and have little benefit in terms of deficit reduction.  You don’t have to go through the tables in the ESRI paper to measure all this; it’s just common sense.

You have anywhere between 20,000 and 30,000 people entering the labour market every year from schools and universities.  Then you have all those people on the dole queues trying to get a job.  The economy has to generate a lot of jobs each year just to stand still.  It has to generate even more jobs to start making a dent in the unemployment figures.

In this mix we have private sector employers struggling to generate jobs.  So what does the Government do?  It goes to the largest employer in the state (itself) and cuts the number of jobs even further.

So, now you have more people chasing fewer jobs in the economy.

When you factor in the lower employment levels - as the largest employer in the state is shedding more jobs – you have lower growth.  And all that money the Government purports to save by reducing the public sector payroll is eaten up by lost tax revenue, higher unemployment costs and a lower consumer economy.  At the end of the day, the reduction in the deficit is minimal. 

It reminds me of the scene where Homer pursues another one of his get-rich-quick schemes by buying bacon rashers, frying them, feeding the rashers to the dog and then selling the left-over grease to grease recyclers.

Grease Purchaser:   Four pounds of grease... that comes to... sixty-three cents.
Homer Simpson:   Woo-hoo!
Bart Simpson:   Dad, all that bacon cost twenty-seven dollars.
Homer Simpson:   Yeah, but your mom paid for that!
Bart Simpson:   But doesn't she get her money from you?
Homer Simpson:   And I get my money from grease! What's the problem?

When the Government finishes carving up of the public sector and finds the deficit hasn’t really fallen much at all, we will know what has happened.

The Government just pulled off another Homer.

Comments

[Dave]

Another much needed dose of reality and common sense although I have to disagree with the last line about the government pulling off a Homer. From my recollection of Simpsons quotes to "pull a Homer" means "To succeed despite idiocy". They have no shortage of idiocy but I don't see much success...

[Michael Taft]

Dave - well spotted. Should have said something like it will succeed as much as Homer's get rich quick schemes but it was a bit long-winded. And people have to be well versed in Homer-nomics.

[Mark Walshe]

Great analysis as usual, but I think it should be acknowledged that ICTU and UNITE have backed the Croke Park 'deal' which is making these job losses possible without any resistance. That's the real story here.

[Michael Taft]

Mark - UNITE public sector members voted against the Croke Park proposals.

[Mark Walshe]

Yes, but UNITE dropped its opposition and decided to go along with ICTU subsequently. The same as my own union, the ASTI. Members voted against but the leadership took a different position which eventually prevailed. This has meant full cooperation with the job losses.

[Kieran Sullivan]

The current Government and the previous one's reaction to the economic crisis reminds me Grandpa's Simpson in this clip: http://www.youtube.com/watch?v=lEi0OyOgZ4s

You try something...

It makes thing worse.

You try the same thing again...

It makes thing worse.

You try it again...

etc.

[jim]

The ERSI presumes 22500 job losses will be just that. Job losses and therefore get the figures cited. They ignore that most cases of the job losses it is retirees or early retirees. The ERSI don't take into account how the impact of these pension's on the economy, which would be reasonably significant.