Auscarity
Today the Irish Fiscal Advisory Council (IFAC) released its latest Fiscal Assessment Report. The 156 page document outlines the various scenarios for the public finances as we emerge from the COVID-19 crisis.
Below are selections of media headlines on their findings.
New York Times (by Reuters)
All are reporting on the same report, but interpreting it differently:
- The Irish Independent and Reuters imply that austerity is not needed
- The Irish Examiner and Irish Times imply that austerity is needed
This highlights how the word austerity is completely open to interpretation. So what does IFAC actually say about austerity? The word appears 11 times in the document.
Page 37:
Would a Severe scenario imply austerity being needed? Not necessarily.
Page 50:
it should be possible to avoid a return to severe austerity.
Page 52:
A need for severe austerity is unlikely in these scenarios.
The document couldn’t be clearer that it is not calling for or forecasting austerity. So why then did the Examiner and Times run with their headlines?
Because “auscarity” sells.
Auscarity is fearmongering about austerity.
It is creating austerity where it doesn’t exist.
Austerity is making a comeback in Ireland, after peaking in 2012 during the height of the eurozone crisis.
This comeback is inevitable, given the wide budget deficit Ireland is now running. Most usage of the word is constructive, including a healthy debate on whether austerity is necessary or not. Other uses of the word are destructive, building up fear of deliberate and unnecessary cuts or tax increases.
Austerity’s broad meaning in our political lexicon means we are likely to see its deployment for all kinds of policies, whether they fall under the definition of austerity or not.
- Any tapering of the €350 pandemic payment will be labelled “austerity”
- Any deferment of public sector wage increases will be labelled “austerity”
- Not increasing spending will be labelled, by some, as “austerity”
Austerity has a very specific definition which IFAC outline in their report.
Austerity can be taken to mean fiscal consolidation that leads to significant increases in involuntary unemployment. A more technical definition would be that austerity is fiscal consolidation that leads to a noticeably larger negative output gap. This definition implies that while austerity will always involve fiscal consolidation, fiscal consolidation could occur without austerity.
The last line is crucial. We need to better distinguish fiscal consolidation from austerity. Just because a payment is tapered or a pay rise deferred, doesn’t mean it is austerity.
The use of the term austerity to describe all kinds of undesirable fiscal events does a disservice to the term.
It is auscarity in action.
Next time you see the word austerity, ask yourself whether it is true austerity, or just auscarity.
- Is it a newspaper trying to sell more copies?
- Is it a politician trying to scare the electorate?
The uncertainty surrounding the fiscal deficit, and the risk of a further deterioration means we should ration the use of the term for now.
If things do get worse, then we’ll have a reason to use the term for its true meaning.
Along with writing here, look out for my blog contributions on the Carraighill website.
