Spending Cuts or Tax Increases – What Would Jesus Support? The Recession Diaries – July 20th


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Dan O’Brien – who is producing work at the Irish Times at a phenomenal rate – quotes approvingly from the Department of Finance:

‘In formulating policy, the Government took on board evidence from international organisations, such as the EU Commission, the OECD and the IMF, as well as the relevant economic literature which indicates that consolidation driven by cuts in expenditure is more successful in reducing deficits than consolidation based on tax increases. Past Irish experience also supports this view and suggests that confidence is more quickly restored when adjustment is achieved by cutting expenditure rather than by tax increases.’

You could write mountains of posts on just this one quote but I’ll just content myself with a small hill. ‘Relevant economic literature‘ is one of those catch-alls – you can find just about any viewpoint, perspective, set of prescriptions from the economic literature you’re looking for.  And if it agrees with your viewpoint its ‘relevant‘ and if it doesn’t its ‘irrelevant‘. Increase spending, cut spending, increase taxes, cut taxes, increase borrowing, cut borrowing – it’s all out there in the ‘economic literature‘. Take your pick. You can even discover that Jesus wasn’t so hot on the minimum wage if you look hard enough.

Fortunately, we have some really relevant literature to our current economic condition.  The ESRI assessed the impact of tax increases (income, property and carbon) and spending cuts (public sector wages, public sector jobs and public investment) on the economy and fiscal deficit. Here’s what they found for ‘consolidation’ packages worth €3 billion each.

Jesus and Spending Cuts

Well, well, well. Spending cuts would cut GNP growth by five times more than tax measures; five times as many jobs would be lost through spending cuts as opposed to tax increases; but – tax measures would yield more savings than spending cuts – 50 percent more savings.

Let’s put some numbers on all this for 2011:

  • Spending cuts will result in a fall of €1.5 billion in the GNP more than tax measures.
  • Spending cuts will result in a fall of approximately of 24,000 more jobs than tax measures

That’s why spending cuts will deliver less net savings (after you factor in higher unemployment costs, less tax revenue and less economic activity) – over €800 million less than tax measures.

In other words, spending cuts will result in moe business failures, more unemployment and less deficit reduction.  Tax increases, on the other hand, have a far less negative impact and greater yield for the Exchequer.  These findings from the ESRI model were published eight months before the Department of Finance made that statement above. So this ‘economic literature‘ was known to them. It’s just that it didn’t fit the viewpoint of the Government. Therefore, it was not considered ‘relevant‘. Isn’t that convenient?

Now, I wonder what Jesus would say about spending cuts.

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7 Responses

  1. William Wall

    July 21, 2010 6:45 am

    Michael, thank you for the link to “Three New testament Roots of Economic Liberty”. This enlightened testament by a free person has been of great spiritual benefit to me. I have long wondered if God approved of free healthcare, justice, saving people from starvation, the free movement of capital and property rights. Now I know. Jesus loves private property. This explains everything.
    Among the parts of the Bible that bothered me hitherto were things like Jesus’ admonition to the rich man to ‘give up all and follow me’. Now I know it was because this particular rich man was arrogant and egotistical and having to give up everything would have been good for him personally. Of course, Jesus didn’t say, Give everything to the state or the poor. The rich man could as easily have renounced his property rights in favour of his wife and family. This would have been a spiritual act. Had he given it all to the poor it would have been a sin since he could have invested it all and the increased capital investment would have been better for the poor because it would have provided more jobs and more jobs is what Jesus was after (meaning, of course, more capital investment), rather than more money for the poor. In fact, Jesus would have approved of the idea of driving wages down because lower wages means companies could employ more people.
    Another troubling thought was the reference in Acts to the fact that the Apostles held everything in common. This made them proto-commies, in my deluded ignorance. But now, equipped with Mr Ahmanson’s logic I can understand it better. They held everything in common, not because they were proto-reds, but because they were a proto-joint stock company and this was a good way of increasing their capital. It has taken until now for the truth to dawn on me.
    So, once again, thank you for that most useful link.

  2. Colin Quirke

    July 21, 2010 9:22 am

    When you apply the shock doctrine, to a politically dead society, is there a possibility that the corpse becomes reanimated?

  3. Hugh Green

    July 21, 2010 12:42 pm

    Jesus freely submitted to crucifixion because he believed only the Roman Empire had the power to enforce a rigorous juridical system of property rights, the only human rights worth talking about. When he said ‘come with me and I will make you fishers of men’ he was merely suggesting that with the Galilee fishing industry on the way out, Peter and Andrew should get jobs as recruitment consultants for temporary work placement agencies.

  4. Brendan Walsh

    July 21, 2010 1:23 pm

    This is the problem here in Ireland right now , we are living in a fantasy land for a start Jesus was as real as Superman or Batman .
    We are been lied to every day and the volume of spin coming from all political parties just confuses the average Joe and Jill to the point where they simply don’t listen any more and just go and turn on their Sky Tv to escape and maybe even have a beer or wine they got from Aldi or Lidl ( what would we do without the German’s?)
    Our National Media of course don’t want to up set the apple cart too much as they are still screwing businesses with their outlandish advertising fees while they still also get the revenue from the ‘Quango’ gang. Until an RTE presenter asks REAL Questions un scripted and our national Newspaper Editors print in bold letters how wrong and flawed the whole system is now,… we will get no where only deeper into debt, loose many more young bright talented people through emigration ( and suicides ) and will see ALL services fall backwards.
    Hopefully this winter will be a wet miserable one with more flooding then perhaps we will finally take to the streets and throw out the crooked political elite we have now living of us !

  5. William Wall

    July 21, 2010 1:35 pm

    Jesus was not very positive towards human rights. He regarded them as a threat to capital accumulation, Caritas, of course, was the answer – the noun rather than the organisation. I think your interpretation of the fishers of men dictum is correct. However, his use of small amounts of food to feed multitudes tells us that most people (the majority) don’t need much really. Another much misunderestimated story is the one where he says ‘the labourer is worthy of his hire’ which basically means no job for life, fixed term contracts etc.