Now we are all Victims of McCreevynomics

DublinWriter

The Celtic Tiger is dead and we are now deep in the era of McCreevynomics.

McCreevynomics is, to paraphrase Charlie McCreevy, the economic approach whereby when we have money we spend it, when we don't we don't.

McCreevynomics is a short-term, reactionary and seriously-flawed approach to managing public finance.

It failed to serve us even in the good times by ramping up public spending to an unsustainable level.

On the one hand he tried to incentivise saving with SSIAs, while with the other hand he tossed vast amount of cash at public spending in an ever-increasing effort to increase political support for his party.

Anyone who runs a household knows that McCreevey's approach to public spending was reckless at best, catastrophic at worst.

Even the most Flahulach of Irish mammies always told their offspring to put a little by for a rainy day.

Back in the day when you went to to apply for a mortgage the bank would stress-test your finances to see if you were able to afford the financial commitment.

When you went to apply for a mortgage back in the day the back applied the the practise of 'stress-testing' your finances to see if you could actually afford the financial commitment. What wasn't this methodology applied at national level?

You could say that McCreevynomics is the reckless application of laissez faire economics for immediate political expediency.

gcgirl

They bought 2 elections, it was give give give away budgets, SSIA and later the Early Childcare allowance instead of investing in a proper state run Childcare, we dropped taxes rates but done nothing to improve Education or health we just reveled in all that stamp duty that came in!

spadder

The only peolple to benefit from McCreevynomics are the horsey set.

His Pony palace in Naas is a monument to his greed, vanity and incompetence.

gcgirl

spadder wrote: »

The only peolple to benefit from McCreevynomics are the horsey set.

His Pony palace in Naas is a monument to his greed, vanity and incompetence.

Didn't Sean Dunne build that!! Ummmm

Eliot Rosewater

DublinWriter wrote: »

You could say that McCreevynomics is the reckless application of laissez faire economics for immediate political expediency.

Your taking the piss, right? What your giving out about are spending increases. A laissez faire approach is one that reduces government expenditure and services and ultimately the size of the government.

Seriously - if your going to use economic terms at least head over to Wikipeida to make sure you actually know what you talking about. In this case you clearly dont:

In economics, Laissez-faire means allowing industry to be free of government restriction, especially restrictions in the form of tariffs and government monopolies. The phrase is French and literally means "let do," though it broadly implies "let it be" or "leave it alone."

Sand

Firstly, I dont think McCreevy would summarise his economic philosophy as being spending driven. More tax cuts to encourage economic activity.

Secondly:

STATEMENT OF EXCHEQUER SURPLUS/(DEFICIT) IN THE PERIOD ENDED 31 DECEMBER 2003

Total Revenue: 33,157,356,000
Total Expenditure: 28,747,083,000

McCreevy departed mid way in 2004.

STATEMENT OF EXCHEQUER SURPLUS/(DEFICIT) IN THE PERIOD ENDED 31 DECEMBER 2009

Total Revenue: 34,868,000,000
Total Expenditure: 60,128,000,000

McCreevy had his flaws, but he wasnt the one who more than doubled spending to a completely unsustainable levels. Funnily enough we need to cut back spending to somewhere in the McCreevy ballpark.

ParkRunner

Sand wrote: »

McCreevy had his flaws, but he wasnt the one who more than doubled spending to a completely unsustainable levels. Funnily enough we need to cut back spending to somewhere in the McCreevy ballpark.

Where would we be without the NRPF too, even if it has been decimated.

murphaph

Sand wrote: »

Firstly, I dont think McCreevy would summarise his economic philosophy as being spending driven. More tax cuts to encourage economic activity.

Secondly:

STATEMENT OF EXCHEQUER SURPLUS/(DEFICIT) IN THE PERIOD ENDED 31 DECEMBER 2003

Total Revenue: 33,157,356,000
Total Expenditure: 28,747,083,000

McCreevy departed mid way in 2004.

STATEMENT OF EXCHEQUER SURPLUS/(DEFICIT) IN THE PERIOD ENDED 31 DECEMBER 2009

Total Revenue: 34,868,000,000
Total Expenditure: 60,128,000,000

McCreevy had his flaws, but he wasnt the one who more than doubled spending to a completely unsustainable levels. Funnily enough we need to cut back spending to somewhere in the McCreevy ballpark.

Yeah, someone said (maybe you Sand) here recntly that McCreevy was sent to Europe cos he wouldn't play ball with Bertie's giveaway 'philosophy'.

In my mind at least, Bertie Ahern is the greatest villain in all of this.

London Irish

http://www.irishtimes.com/focus/budget2006/mccreevyprofile.htm

There is no date associated with this piece, but sounds like it was penned during Sept 2004...

As Charlie McCreevy leaves the Department of Finance, Dan O'Brien suggests that spurious debate about how 'right-wing' he was as Minister has obscured his many real shortcomings.

To quote just some of this:

Among the few big positive changes made during his long tenure was the introduction of tax credits. These reduced inequities and helped integrate the benefits and tax systems making it easier for those on welfare to escape poverty traps. But for the real story of Mr McCreevy's time as finance minister, one has to consider his spending record, because this is where he had genuine influence. And here the picture is dismal. Start with the recklessness with which he used taxpayers' money for electoral purposes.

While governments everywhere tend to loosen the purse strings to win voters' favour, from 2001 Mr McCreevy simply upended the public purse, allowing spending to run out of control.

The splurge mirrored in many respects the fiasco after the 1977 election. The big difference between the two periods was something over which Mr McCreevy had no control - the world economy. Had it taken a serious downturn, as happened in 1979, the Irish economy, and the public finances, would quickly have followed suit.

What made his gamble so reckless was how real the risks of global recession were. For some time serious imbalances have existed internationally. These must inevitably unwind. Had they done so suddenly while spending was so wildly out of control, it could well have been back to a 1980s future of unemployment and stagnation....

DublinWriter

Eliot Rosewater wrote: »

Your taking the piss, right? What your giving out about are spending increases. A laissez faire approach is one that reduces government expenditure and services and ultimately the size of the government.

Seriously - if your going to use economic terms at least head over to Wikipeida to make sure you actually know what you talking about. In this case you clearly dont:

By Laissez-Faire, I mean a hands off approach, which means not only letting external private market forces decide but also internal public ones, i.e. that unregulated, public service bureaucracy will always display a tendency to enlarge and engorge itself.

If you want to engage in an academic p*ssing contest, then I refer you to Plümper and Martin (2003) and Roubini and Sachs (1988) who consistently demonstrate this phenomenon.

worded

gcgirl wrote: »

They bought 2 elections, it was give give give away budgets, SSIA and later the Early Childcare allowance instead of investing in a proper state run Childcare, we dropped taxes rates but done nothing to improve Education or health we just reveled in all that stamp duty that came in!

Its cost 400 euros per year for a state run creche in Czech republic.

Flamed Diving

You can't really compare a household budget stress-test and an aggregate economy stress-test.

dixiefly

McCreevy is on Miriam's programme with his wife at the moment. Wonder what he will say about the current mess that he has contributed to.

zootroid

I'd blame Bertie and Cowen a hell of a lot more than McCreevey

P. Breathnach

Well, now we know that everything Charlie McCreevy did was the right thing, and an unqualified success. He told us so.

Even his decentralisation programme was successful.

Sand

When he was forced out, Ireland was running a significant surplus and spending was under control. Decentralisation was a disastrous policy, but overall McCreevy was perhaps the best Finance Minister this country has had. He certainly kept spending in line with revenue ( and was cautious enough to keep it well below revenue which enraged his cabinet colleagues who couldnt understand why he didnt spend, spend, spend), and diverted surplus to bringing down the national debt and indeed putting it into the NPRF, which everyone ought to be thankful for now given the government has raided it already.

We could do worse than having McCreevy back to sort out the mess Cowen and Bertie made having forced him out - but Id doubt hed want to take on the hassle of fixing their problem. McCreevy became a hate figure for the Irish left, and he revelled in winding them up - maybe a little unbecoming, but he is only human. He also offended sacred cows by describing the health service as " a black hole", where spending was increased again and again with no real improvement in services. It does explain while he is still so hated though. And goes someway to explaining why Bertie the Last Socialist pushed him out.

Eliot Rosewater

DublinWriter wrote: »

If you want to engage in an academic p*ssing contest

This isn't an academic pissing match - this is about you using a word without knowing what it means. Im calling you up on your use of the term laissez-faire to describe a system that proponents of laissez-faire economics are, frankly, disgusted with. Any government that allows the public sector to expand is not adhering to laissez-faire policies as they are interfering with the market. ESB, CIE, RTE are all cases where the government interferes with the market.

The reason I am so passionate on this point is that it is another example of the general trend in Irish political opinion. The woes of the current government are for some reason blamed on right wing economics (and the PD's) whereas the true cause lies with left wing policies - ie spending binges.

hinault

Eliot Rosewater wrote: »

The reason I am so passionate on this point is that it is another example of the general trend in Irish political opinion. The woes of the current government are for some reason blamed on right wing economics (and the PD's) whereas the true cause lies with left wing policies - ie spending binges.

Hmmmmmmmmm.

The public finance deficits is one issue :

I would call the laissez-faire attitude to banking and bankin regulation has landed this country in a far more precarious place.

Both the public finance issues and the state of the banks will cripple the taxpayer because this govt has decided to make the taxpayer bail out both.

Flamed Diving

In fairness Eliot, the Heritage Foundation last year (2008) ranked Ireland the "third freest economy in the world, behind only Hong Kong and Singapore."

More.

And they are as conservative as they come. My view is that there is blame on both sides of this phantom ideological divide.

Eliot Rosewater

hinault wrote: »

The public finance deficits is one issue :

Indeed your right. However the OP was giving out specifically about huge government spending, which is a distinctly left wing policy and hardly laissez-faire. I pointed it out because, as I have said, right wing economics gets the blame for left wing policy far too much, in my experience.

That Heritage Foundation link is interesting and Ireland is a very free economy for sure. Placing the blame for the recension is hard to pin down, and cannot be blamed on one specific thing. Ye are right about the banking issue but it begs the question: if the economy were totally free, would interest rates have been so low so as to cause the recession? Why were the banks so reckless - was it because they knew they were "too big to fail"? I dont know.

Flamed Diving

I would recommend reading Krugmans book 'The Return of Depression Economics". It's a light enough read and sheds a lot of light on why these sort of bubbles occur. He refers to the more recent as the "mother of all financial crises" because it was a combination of all of the last century's, rolled into one. Another place to look is in the field of behavioural economics, here is a link:

http://en.wikipedia.org/wiki/Extraordinary_Popular_Delusions_and_the_Madness_of_Crowds

DublinWriter

Eliot Rosewater wrote: »

This isn't an academic pissing match - this is about you using a word without knowing what it means. Im calling you up on your use of the term laissez-faire to describe a system that proponents of laissez-faire economics are, frankly, disgusted with.

Laissez-faire by its most fundamental definition means to leave alone, ergo to let be.

Agreed so far?

Eliot Rosewater

DublinWriter wrote: »

Laissez-faire by its most fundamental definition means to leave alone, ergo to let be.

To "ride" means to travel a distance on a vehicle or an animal. Within the context of sexual relations to "ride" means something quite different.

Yes, laissez-faire means literally to leave alone, however within the context of economics it is used to describe a governmental policy of non-intervention.

Ive no interest in getting into a semantics debate. I was rash at the start - "your taking the piss" was inappropriate language for this forum and I apologize for it and withdraw it (but Im not going to do a Paul Gogorty on it and get my buddys to set up a Facebook group :pac:). Lets just admit that your choice of words, and my choice of response, were both off the mark.

P. Breathnach

Eliot Rosewater wrote: »

To "ride" means to travel a distance on a vehicle or an animal. Within the context of sexual relations to "ride" means something quite different...

You're tempting me to take this discussion off in an obscene direction.

brianthebard

Eliot Rosewater wrote: »

The reason I am so passionate on this point is that it is another example of the general trend in Irish political opinion. The woes of the current government are for some reason blamed on right wing economics (and the PD's) whereas the true cause lies with left wing policies - ie spending binges.

If you are going to give out about one person's definitions of right wing policies then it would be in your own interest not to create silly strawmen out of left wing policies. 'spending binges' is not a legitimate left wing policy, thank you very much.

View

Flamed Diving wrote: »

In fairness Eliot, the Heritage Foundation last year (2008) ranked Ireland the "third freest economy in the world, behind only Hong Kong and Singapore."

More.

And they are as conservative as they come. My view is that there is blame on both sides of this phantom ideological divide.

One of the columnists last week pointed out that Anglo-Irish was ranked as being one of the three best banks in Europe around 2 or 3 years ago by another "analysis" body. That "analysis" body's latest trick - providing governments with their insights on how to deal with the banking crisis!

View

brianthebard wrote: »

If you are going to give out about one person's definitions of right wing policies then it would be in your own interest not to create silly strawmen out of left wing policies. 'spending binges' is not a legitimate left wing policy, thank you very much.

A fair comment, since "Red Ruairi" (Quinn)'s management of the economy seems increasingly brilliant in comparasion to his successors.

Permabear

This post has been deleted.

Tipp Man

murphaph wrote: »

Yeah, someone said (maybe you Sand) here recntly that McCreevy was sent to Europe cos he wouldn't play ball with Bertie's giveaway 'philosophy'.

In my mind at least, Bertie Ahern is the greatest villain in all of this.

I have said that in the past, it is fairly well known that as soon as McCreevy said to Bertie that enough is enough with regards to the PS he was shipped off to Brussels

Its really only since McCreevy left that the economy really lost the run of itself, Bertie was the root of all our problems, aided and abbeted by Cowan who was only a yes man, no spine to stand up to Bertie

InReality

Good thread. I didn't realise things were more or less in balance when mcCreevy left. I took his "lets spend it when we have it " comment at face value.

would also recomend the krugman book to anyone interested in this area.

irish_bob

murphaph wrote: »

Yeah, someone said (maybe you Sand) here recntly that McCreevy was sent to Europe cos he wouldn't play ball with Bertie's giveaway 'philosophy'.

In my mind at least, Bertie Ahern is the greatest villain in all of this.

the bould bertile gave seamus brennan his marching orders at transport when his attempts to deregulate the dublin system met with fury by the beards