Deficit-friendly economist named to State’s budget watchdog

FINANCE Minister Paschal Donohoe has appointed Oxford University economist Michael McMahon to the board of the Irish Fiscal Advisory Council, an independent body that assesses fiscal budgetary forecasts and proposed policy.

Mr McMahon (pictured) is a Professor of Macroeconomics and previously worked at the Bank of England. For three years he was a euro-area economist there, doing both analytical and forecasting work, serving as one of the UK’s two representatives on the European Commission’s Experts Group on Economic Forecasting.

He was born in Dublin and studied at Trinity before moving to the UK for post-graduate study. “Really looking forward to this — an exciting opportunity to engage and contribute to Irish fiscal policy,” he tweeted after his appointment was announced.

The council he joins was set up in the wake of the financial crisis and has recently been critical of the Government’s budget policy, cautioning that a boom in corporate tax revenues had been swallowed up by repeated overspending in areas like health.

That overspending, the council argued in a recent report, risked eroding the Government’s ability to use its finances in any future crisis. Prof McMahon’s published work would appear to show that he is no deficit hawk. He argued in a paper published this year by the Social Market Foundation that “deficit funding is not, in and of itself, reckless”.

“The focus on debt reduction as the goal of fiscal policy diverts the discussion away from the important debates on tax and spending that should be clear in every political party’s platform,” he wrote in a paper on the choices facing Britain’s political parties on budget policy.