File Under “Austerity Doesn’t Work Without Political Buy-in”

So it turns out the Greeks aren’t the only ones capable of skirting austerity-friendly legislation, driving a wedge between de jure and de facto fiscal tightening. The latest from Ireland (via NYT):

DUBLIN — Anti-austerity protesters are claiming victory after the government acknowledged that around 50 percent of Ireland’s estimated 1.6 million homeowners failed to pay a new, flat-rate $133 property tax by the March 31 deadline. […]

Introduced on Jan. 1, the household charge was intended as a forerunner to a comprehensive property tax next year. It has become a lightning rod for widespread disenchantment on an assortment of issues like cuts to services, findings of political corruption, taxpayer liability for debts to private banks and even European legislation intended to enhance wastewater treatment from septic tanks. […]

The Irish government argues that it has no choice but to introduce the interim tax at the behest of its lenders and has vowed to identify and prosecute those who have refused to pay.

“We will begin with sending out letters and then escalate it from there to the maximum fine of 2,500 euros” — $3,330 — “on top of the outstanding amounts due in late fees and interest,” a spokesman for the Department of Environment said in an interview on Monday. “We will be taking people to court if necessary, and if there is refusal to pay, then that could be seen by a judge as contempt of court.”

That last sentence hints at the hidden costs of unpopular austerity programs, in the form of compliance costs. How much does it cost to have a judge make a ruling on whether a failure to pay a small fine is a contempt of court? I’d imagine pretty high, undoubtedly way way too high to have anything like half of the population held in contempt.

Obviously the government’s plan isn’t to hold half the population in contempt, but rather to turn up the social pressure in hopes of getting people to come forward and pay themselves  (though it’s worth noting that even this can come at a pretty high administrative cost, just in terms of keeping track of who’s paid, finding those who haven’t, etc). Maybe this will work, but I’m not too optimistic, especially for the Irish. Other peripheral economies with deep structural problems can (somewhat) convincingly spin a story of the need for shared sacrifice for the national good. But the Irish for the most part have a reasonably well-functioning economy, and are being asked to swallow deep-cutting austerity simply to pay off the misguided 2008 all-encompassing bank guarantee, much of which went to pay back foreigners. That’s a tough sell.

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