Let's be practical about mending our economy
Taxpayers will have to pay more -- high earners a lot more -- to solve our debt crisis, writes John Crown
The juxtaposition of television images of French rioters with those of grey-faced opposition TDs issuing Weimar-style economic forecasts outside the Department of Finance during the week, led several commentators to speculate that we might be ripe for insurrection.
Fixing the economy would help of course, and asking for specifics is the order of the day. So here are some.
The central threats we face seem to be public debt/public finance, personal debt, and stagnation/unemployment.
The public debt is simply staggering. The challenges posed by a recessionary collapse in tax take from €60bn to €35bn were bad enough, but were compounded by the rushed, ill-informed, kamikaze decision to bail out all of our banks, with a no-questions- asked, no-fault guarantee of 100 per cent reimbursement to every gomdaw around the world who foolishly invested in our real estate market.
It will be obvious to all but right wing Tea Party wannabes and ultra-leftists that the debt needs to be dealt with by a combination of both tax increases and decreased expenditure.
The appropriate taxes are on income and on wealth. Income tax has to go up. All taxpayers should pay more. High income people like me should pay more -- a lot more. Simple -- no argument.
In the aftermath of the property bubble, people are asking "Where did the money go?" There must be a substantial amount of real estate bubble windfalls sitting in bank accounts. It seems reasonable to me that a small, emergency retrospective once-off tax on these transactions should be considered. It certainly makes more sense than a property tax. Indebted houses are not assets. They don't represent wealth. Property tax right now would in fact be a form of capital loss tax. If things recover and houses sell for a profit, then charge full-rate capital gains tax at the time of sale.
What about expenditure? There are many activities which might represent an appropriate use of public money for a rich country, but which lose priority in a poor one. This includes ALL Government contracts to management consultants, press secretaries and PR companies and most government agencies and authorities.
They may do great work, but if the choice is closed wards in Crumlin Hospital or a grant to the arts, I know which I'd choose. It certainly includes all those public service advertisements asking women if they are making less money than men (honestly, if they are, and they don't already know it, there is probably a very good reason why), or urging citizens not to serve raw hamburgers at barbecues or to be nicer to breast-feeding mothers.
Do we really need a Health Information and Quality Authority to tell us that we have poor standards in the health service? Abolish the Senate, cut the TD numbers down to 100. Limit ministerial numbers to 10.
Another painful reality is that many good, intelligent well-meaning and diligent public servants are doing jobs which are devoid of value to our society. We will need a Public Servants Emergencies Act 2011. Under such legislation non-essential public servants would be directed to choose between early retirement or redeployment.
This could be done in a humane fashion.
Trained administrative and clerical staff would not be asked to dig holes for the Metro, but it would seem reasonable to redeploy them to clerical/administrative activities such as passport control and garda desk work, thus freeing up gardai for front-line duties and simultaneously reducing their overtime bill. Others could become hospital clerks, teaching assistants and school library assistants.
If we had 10 such people redeployed to the Irish Cooperative Oncology Research Group we could open many new studies to the benefit of Irish patients and the Irish economy.
Couldn't some be redeployed to the IDA to be used as a subsidised labour inducement to foreign companies to invest here? I'm sure the Germans and French would object, but we could use our tribunal-trained lawyers, who have shown themselves so skilled in terminally delaying legal procedures to tie them for so long, that by the time the European Court found against us the recession would be over.
For personal debt, and especially mortgage debt, why not allow people with private pension funds to access some of these funds prematurely. The State would benefit by getting the tax revenues now (together with a prematurity premium), when they are critically needed. The banks would get extra liquidity.
A few thoughts soon on wealth creation, and in particular how the biomedical research sector is key.
Professor John Crown is a consultant oncologist