Were inflation to stay put, weary voters would have just one last gamble: Sinn Féin
IWAS sitting beside a Fianna Fáil TD at one of the party’s annual Cairde Fáil dinners in a Dublin 4 hotel, when he leaned over and showed me a text message. The message said that his fellow TD, Willie O’Dea, had just called to a friend’s front door in Limerick city. It was around 9pm on a winter’s Saturday night and Willie was canvassing.
The broader message to voters, colleagues and rivals was clear: ‘While the rest of them are above in Dublin tucking into roast beef, Willie is here working for the people.’
Mr O’Dea is politician, community worker and cult figure, yet let none of that divert you from his astuteness. For I thought of him last Thursday, as the Government distributed half a billion euro to combat the rise in the cost of living and inflation.
It is a rite of passage for political journalists to obtain a pre-Budget quote from Mr O’Dea outlining how much he would increase the old age pension by. Almost invariably, he will also recommend an increased fuel allowance, which is of vital importance to pensioners seeking to heat their homes.
Like many people of achievement, Mr O’Dea’s caricature is just that. He is a highly educated man, a qualified accountant and barrister. Indeed, he taught former Taoiseach Brian Cowen law at one point.
If Budget 2022 had raised the old age pension by more than the eventual €5 we might not have had the strange, panicky pseudo-budget we witnessed this week. Had the warnings of similarly astute politicians to increase social welfare in line with already spiralling costs of living been heeded, then we might not have had to move at all last week.
THE €505m collection of measures to combat the cost of living was an unprecedented move in Ireland, less than four months after a budget. The Government said it acted because there appeared to be no stopping the inflationary juggernaut.
Back at budget time inflation was around 3%, and the European Central Bank had predicted it would soon revert to 2%, but by last week it had spiralled to 5.5%. So they had to act. Economists and politicians will tell you inflation is notoriously difficult to reverse.
In the US, the consumer price index rose by 7.5% last month. Whereas an ignominious US retreat from Afghanistan and a sinister Russian advance on the Ukrainian border strikes us, over here, as the biggest threat to President Joe Biden’s popularity they are not.
Inflation is his greatest challenge. In lines that could have come from a Bruce Springsteen song, President Biden said: ‘Inflation is up. It’s up. And coming from a family when if the price of gas went up, you felt it… it matters.’
It indeed matters. For the feared inflationary effect of Biden’s flagship $1.75trillion societal bailout emboldened two Democratic senators, Joe Manchin and Kyrsten Sinema, to vote down the measure.
The US Federal Reserve has the power to fix interest rates and print money to dictate a monetary policy that influences the monetary policy of the entire planet.
The US presidency has the power to call in Saudi Arabia and OPEC to get them to open the oil pipelines. All of this they have done and still inflation soars. With political results. In August, 51% of Americans approved of Biden’s handling of the US economy, now 37% do.
He has already, back in March, injected $1.9tn into the US economy. The actions and resources are beyond us. We can only hope that the deeply ingrained German fear of inflation will force action.
Economic instability and surging inflation led to the darkest time in German (and world) history and that nation, which essentially
dictates EU monetary policy, is sure to act.
The ECB, and not our Central Bank, controls our money supply, our interest rates and our monetary policy. So currency manipulation and strong action against gouging banks are beyond us.
And, sadly for Ireland, the two greatest drivers of inflation right now are also, it appears, beyond our control – fuel prices and the cost of housing.
Economists said this week that, in fact, dealing with excise duties on oil products would have been a more effective way of dealing with fuel inflation. And the leftist Dáil opposition Sinn Féin says that rent freezes are the only short-term way of confronting housing costs. There are other ways.
It went unmentioned this week that vast swathes of energy supply in Ireland are controlled by semiState energy companies. And there are always innovative measures for short-term fixes of the housing catastrophe.
WE GAVE up on rapid action here long ago. Yet there was a subtle political message in the cost of living bailout this week. The Government has finally, if modestly, shown that it is willing to move rapidly to outmanoeuvre the populist opposition.
Sinn Féin will be a high tax/high spend socialist government if it gains power.
What our centrist Coalition Government has shown since the beginning of the pandemic is that it is willing to be a high-spend government. Where the high tax will come from to fund that historic outlay, we are yet to discover.
Nevertheless, it has become clear in recent weeks that what Sinn Féin like to call the ‘out-of-touch’ Coalition is willing to act.
In this, they are following the military maxim of the Prussian general Carl von Clausewitz: ‘The enemy of a good plan, is the dream of a perfect plan.’
Our recent cost of living bailout, which is very modest compared to US supports and our own Covid supports, is far from perfect. As Biden’s March injection shows, there is a significant inflationary effect from government emergency injections to economies. It is estimated that we have spent €30bn here on Covid economic supports and direct payments since March 2020. That has clearly had an unnatural effect on prices.
The blunt instrument of a universal payment attracted criticism as billionaires, Government ministers and CEOs will all be eligible.
Still, it is action. And ministers assured me that it is the last one until the budget.
Until traditional tools for dealing with inflation – wage increases, FG-style tax cuts, Willie O’Deastyle social welfare rises, genuine housing costs measures – are taken in the budget, the Coalition has shown it can take on Sinn Féin,
Labour and the Social Democrats who all cited alternative moves.
Sinn Féin has made clear what it would do to reform a society that leaves far too many of us unable to capitalise on surging tax takes and a burgeoning foreign direct investment sector.
They said this week that they would have been far more ambitious in spending. They would increase taxes, particularly targeting those on more than €100,000 a year and really going after those earning over €140,000. High earners yes, but also junior doctors and tech executives who can take themselves elsewhere.
They have also said that they will fund a commitment to keep the pension age at 66 by removing tax breaks for those earning more than €60,000 a year.
And if you have a second (or investment) home, well forget about it. Sinn Féin leaders, like Eoin Ó Broin, have philosophically allied themselves with left-wing populists Podemos in Spain, Syriza in Greece and Jeremy Corbyn in Britain.
Podemos and Syriza have had very mixed results and if you think Boris Johnson has caused Britain chaos, many remain thankful that Corbyn didn’t get in.
A clash of ideologies, long predicted in these parts, beckons. Not just ideologies though, but narratives, as we have also pointed out.
The traditional dysfunctionality of our health system will soon return to centre stage. And housing, despite glossy promises, remains far from solved.
Housing and health are where they are because of Fianna Fáil and Fine Gael. The public have too long joined these parties at the blackjack table, and we are all on a losing streak.
Were we to add the trump card of an economy beset by inflation, and the temptation to chase losses with the gamble of an untried Sinn Féin becomes acute.