The Fiscal Treaty: A toxic straitjacket for future generations

A Yes vote in the Fiscal Treaty referendum means denying future Irish generations the right to have the fiscal flexibility to meet their own needs. By David Johnson.

In the late 1970s America was in love with nuclear energy. It offered a seemingly infinite source of cheap power, something of a priority given the oil crises of the decade. Then along came Three Mile Island and suddenly the US Government was on the defensive, trying to assure the citizenry that nuclear was safe, not just then but well into the future. Aside from the immediate threats of catastrophic meltdown, concerns amongst the populace were also rising over what to do with all the nuclear waste generated as a byproduct of energy production, waste that would remain harmful for up to 10,000 years. The government hit upon what must have seemed like a cracker of an idea: to take all the waste and bury it deep underground, miles away from any population centers where it couldn't really do anyone any harm.

However 10,000 years is a very, very long time, and in the wake of Three Mile Island the US government was under extreme public pressure to guarantee that such a method of storage was safe not only for the current generation, but for the 300 or so generations to follow.

10,000 years is basically all of human civilization - from the first walled neolithic settlements at Jericho to the present day. Newgrange is only 5,000 years old, the pyramids at Giza are 4,500 years old. The degree of transformation that global humanity has undergone in that period makes the challenge of keeping future generations safe from such a toxic repository over that time seemingly impossible. It fell to Thomas Sebeok, a professor of semiotics, to try and devise a plan. Given that any form of written or symbolic communication would almost certainly be rendered incomprehensible by the evolution of language over that time, and images or other visual communications would require a shared set of common understandings to draw from for them to convey any meaning at all, Sebeok determined that the only way to ensure that every generation for the next 10,000 years would know not to approach the nuclear waste dump would be to create a hereditary class of guardians, what he called an "atomic priesthood", who would verbally pass down a warning from generation to generation, long after the "why" had faded from memory.

In the end the concept proved too radical for the US government, so they thanked Sebeok for his work, then promptly ignored it, slapping up a few "Danger - Keep Out!" signs around the nuclear dump and shrugging their shoulders in the hope that future generations would be smart enough to figure out what to do with it themselves.

On Thursday we are being asked to vote on our own toxic nuclear dump. For the last decade Fianna Fáil waved neoliberalism in our faces as the cure for all of Ireland's economic woes. For a decade we all basked in the cheap energy of the Celtic Tiger, until the Three Mile Island of Anglo and Irish Nationwide, Seánie and Fingers, the Galway Tent and the Golden Circle, brought it all crashing down around us, and now poor Enda and Eamon are left with a steaming pile of toxic waste and are desperately trying to bury it before it kills us all off, and takes half of Europe with us.

Thanks to Goldman Sachs and the other institutional cheerleaders of neoliberalism, we are not the only ones buried under a pile of our own waste. The glow from a contaminated Europe is becoming so strong that it's keeping the Germans awake at night, and thus we have been presented with the Fiscal Treaty as they most responsible method of waste containment, and as a salve for the insomnia of our German Freunde.

If enacted, the treaty would limit the structural deficit of Ireland to 0.5% of GDP. Under the Stability and Growth Pact we agreed to limit the annual government deficit to 3% of GDP or less, and to keep overall government debt to under 60% of GDP. What the Fiscal Compact will do is impose harsh penalties if these three limits are breached, which could involve the unelected European Commission overturning our own national budget and imposing their own upon us, a frightening loss of sovereignty.

By enacting the treaty we would effectively be limiting the ability of future governments to react to the realities of their time, imposing a toxic straitjacket on them sewn from the waste of our own negligence. We would be choosing a quick-fix solution that suits the current German economy over the rights of future Irish generations to have the fiscal flexibility to meet their own needs.

Most alarmingly all the indications suggest that we will not have to wait 300 generations to see the shortsightedness of a Yes vote - it may not even take one. The time bomb at the heart of the treaty is the conflation of maximum debt and deficit with our GDP, for our GDP looks set to take a very big hit in the next four years. GDP is based on four categories, domestic consumption, investment, government expenditure and net exports, and our exports are the Achilles' Heel of our GDP.

Service exports account for almost 50% of our national exports, and foreign-owned companies, most of whom are American, account for well over 90% of these exports. Due to our low taxation and light-touch regulation, US tech and pharmaceutical firms have been attracted to Ireland mainly because of their ability - through the infamous Double Irish/Dutch Sandwich - to funnel all their non-US revenue through the books of their Irish subsidiaries and avoid paying US tax. In fact it is estimated that companies like Google manage to pay an effective tax rate of 2.4%, a far cry from our official corporation tax rate of 12.5% and even further away from the US rate of 35%. All revenue that these multinationals funnel through Ireland gets registered as Irish exports, even if that revenue is generated entirely in another country. As a result, one estimate suggests that our current exports are overstated by at least a third.

Any change to the ability of US multinationals to avoid US tax by laundering their global revenue through Ireland could cause our official exports to drop by a third, which would have a disastrous effect on our GDP. Faced with his own economic catastrophe, US President Obama has hinted many times at an overhaul of US corporation tax law, both to close loopholes that allow US multinationals to use Ireland as a financial base and to introduce incentives to keep their money in the US, and these changes are almost certainly to feature prominently in a second Obama administration.

Explicitly tying our future expenditure to GDP at a time when our GDP looks set to take a major tumble is an act of shortsightedness worthy of the nuclear industry. By voting Yes on Thursday we would be slapping up a few "Danger - Keep Out!" signs and shrugging our shoulders in the hope that future generations will be smart enough to figure out what to do themselves, while tying both of their hands behind their backs as we bury them up to their necks in our toxic waste.

With the traditional atomic priesthood of the working class, the Labour Party, who for generation after generation have warned us of the dangers of short-sighted capitalism, now lining up to hand us a shovel, the future isn't looking too good for our descendants.

And in a few years, when the real penalties start to kick in, that's when we'll realise that the folks we've been burying are ourselves. {jathumbnailoff}


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