Evidence from different countries shows that economic downturns tends to lead to increasing demands for re-distributive policies; whereas periods of strong growth tend to lead to demands for lower taxes and less regulation. So far so obvious. But the interesting thing is to consider what this means in the context of the recession we have entered (and may well have to endure for some time).
Here are a few things I expect:
- there will be no significant cut backs in current government spending, especially on social welfare but also on middle class welfare (tax relief on mortgages, health insurance etc).
- there will be no significant cuts in public sector pay or employment levels (on the basis that there are no consequences for refusing to make and take cuts).
- there will be tax increases, firstly on the 'rich' (i.e.: other people), then on 'the rest of us'.
Mind you, it will leave an interesting gap on the right wing side of the political spectrum. Say for a party that champions better value for taxpayers (with an emphasis on lower taxes). One potential target for such a pitch: the generation that grew up with the Celtic Tiger (and who never quite imbued the traditional Irish guilt trip about money and the things it can buy) - they may well be open to persuasion.
Whatever happens, it'll certainly make for a far more interesting election next time round than the last one.