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Category: Asset 8News & Views

Irish woes a portent for U.S.?

January 5, 2010

By Staff Reporter

That’s the question posed in a recent Washington Post report that examined the post-Tiger economy in the Republic and posed two direct questions: “In Ireland’s deep budget cuts, an omen for a heavily indebted United States? Is this the ghost of America’s future?”
Like other heavily indebted nations around the world, Ireland is borrowing vast sums from foreign investors to plug its budget deficit, the Post story stated.
“Fearing that the country will buckle under the weight of so much debt, the Irish have an answer: Put the government on a diet.”
While outlining some of the spending cuts and tax hikes in the recent Irish budget, the Post opined that such drastic steps have put Ireland on the front lines of a global battle against runaway government spending and exploding budget deficits in the wake of the global financial crisis.
“The Irish solution,” according to the Post story, illustrates the tough choices ahead for countries in debt, particularly smaller, troubled nations.
“But in the longer term, analysts warn, even larger, wealthier countries now borrowing record amounts – most notably the United States – may impose difficult cuts to bring deficits back down to already high pre-crisis levels.”
Eventually, the report added, Americans would probably feel the sting of cuts, “even if they are phased in more gradually than the pull-the-Band-Aid-off-fast method being rolled out in Ireland.”
The Irish, the report continued, “offer a glimpse into just how hard that rollback can be for citizens who have come to count on government help, particularly as public assistance funds soared in many nations during the boom years.
The story then focused on a family in County Dublin a couple with two teenage daughters who are severely autistic. Suffice it to say, the family is struggling to keep up with bills, not least payments on the house bought during the property boom years of the now defunct Celtic Tiger.
The Irish, stated the report, know something about the price of running up a tab you can’t pay back.
“A mountain of debt and a failure of political will to make difficult cuts, officials here say, were major contributors to the ‘lost decade’ of the 1980s. The time was marked by near-zero net growth, soaring interest rates and mass emigration of Irish as unemployment climbed to nearly 18 percent.”
To date, the report added, the Irish are taking news of the sharp cuts with surprisingly little protest.
“Many Irish seem to view the cuts as cathartic, surrendering to a view that they deserve to suffer after buying in so completely to the reckless, credit-fueled growth of the late 1990s and 2000s. As the Irish seek penance for their excesses, they are gobbling up self-flagellatory bestsellers such as Fintan O’Toole’s ‘Ship of Fools: How Stupidity and Corruption Sank the Celtic Tiger.'”
The Post report concluded with a view into the future that will make many Irish shudder.
“Some have criticized the government for what they view as a thinly veiled message encouraging members of a new generation of Irish to set forth overseas to find their fortune, as many of their parents, grandparents and great-grandparents did. The new cuts specifically target Irish 20-somethings who cannot find work, reducing their unemployment benefits, in some cases, by as much as 30 percent.
“Analysts say thousands of young Irish have left for Britain, North America and Australia in recent months, with thousands more expected to emigrate next year.”

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