Fintan O’Toole should steer clear of numbers
9 April, 2010
Fintan O’Toole wrote an opinion piece earlier this week in the Irish Times called “Bailout has turned us from citizens into serfs”. As usual, it’s an interesting and extremely well-written article. However, I’m again compelled to wish that O’Toole would stick to subjects in which he has some competence. He tells us:
There are 1.9 million people at work in the Irish economy. Their average earnings last year were €36,300. After tax, that’s €29,500 each. From this, each one will stump up an average of €4,600 just to pay the interest on the money the State is borrowing to fund the bank bailout…..Or, to put it another way, everyone lucky enough to have a job in Ireland over the next 10 years will be working most of one day a week to pay for Seanie, Fingers and the lads.
The numbers here are ludicrous. Where are the editors and fact-checkers? Assuming an interest rate of 6%, O’Toole would have us believe that the State is borrowing €145 billion to fund the bailout! In fact the real net cost will be a small fraction of that (and the government will argue that the cost is in any event smaller than what it would ultimately have cost us all if they had let the banks collapse).
He bases his numbers on this blog posting. At least the author of that blog is careful to advise as follows:
In fairness, it’s not clear that we have enough information to know that yet. If the banks raise their own capital we won’t need to borrow as much. Also, if we part-recapitalise the banks out of the National Pension Reserve Fund (which is what we did before) we will borrow less again.
And, more importantly, everybody seems to be forgetting the enormous value to the taxpayer of owning big percentages of BOI and AIB. These organisations (unlike Anglo-Irish and Irish Nationwide, I fear) will quite quickly return to profitability, and the government stakes will be worth billions.
The Irish Times wouldn’t habitually commission an economist or an accountant to write controversial articles on, say, theatre or art, where these are outside their sphere of competence. So why does it regularly publish economically illiterate articles on finance matters, written by a social and arts commentator, however brilliant he may be in those fields?