WHEN A ship springs a leak, the most urgent task may be to bail water, but not to the exclusion of watching whether there are rocks ahead.
The Budget shows all the signs of desperate attempts to balance the figures, but little sense of charting a course to safer waters. As a result, no one seems to even be attempting to see the long-term consequences of some of the proposed cuts.
Short-term thinking has characterised Fianna Fáil governments during both boom and bust. No one can expect to foresee all the consequences of any budgetary decision, but we can learn from past mistakes.
I am not suggesting that two-income couples are the biggest losers in the recession. Two-income couples with small children have been left in a very vulnerable situation because of a failure to plan sustainably. In the Celtic Tiger era, many such couples were hard-pressed to meet commitments, paying mortgages on ridiculously overpriced houses and often commuting punishing distances. Now, if one or the other, or both, lose jobs or suffer reduced hours, more than likely they will have no savings to cushion their losses.
You could argue that people parenting alone are even more vulnerable. But young, two- income couples should not be as vulnerable as they are, and government policies have contributed greatly to that vulnerability.
No one is suggesting that the recession is a picnic for single- income couples, either. Ironically, though, single-income couples are likely to be less overcommitted financially, and if the working spouse loses a job, in theory at least, the other person could re-enter the workforce. This paradox is explored in the US context by mother and daughter team Elizabeth Warren and Amelia Warren Tyagi in their book, The Two Income Trap. Elizabeth Warren is a Harvard law professor, and a bankruptcy expert. Amelia Warren Tyagi set up a health benefits firm.
The high numbers of middle- class Americans filing for bankruptcy (even though The Two Income Trap was published five years before the current crisis) led them to look at the hidden trap in the two-income lifestyle. Sending a second parent to work should make a family more financially secure, not less. But this reasoning ignores the fact that “when mothers joined the workforce, the family gave up something of considerable, though unrecognised economic value: an extra skilled and dedicated adult, able to pitch in and help save the family during times of emergency”. Our Government ignored this reality.
The numbers at work increased almost by a half between 1994 and 2001. Much of the labour force increase at this time was due to the entry of married women into paid employment. This made the dual-earner household the standard among younger couples.
But there was no compensatory move of men towards working inside the home. Further, as dual-earner households became the norm, choice often became harsh necessity. The chances of being a full-time parent became more remote, as two incomes were needed for a mortgage.
The fact that from 1987 on, the Government allowed the stock of social housing to run down was another factor. Due to a far too cosy relationship with developers, and benign faith in the wisdom of banks, house prices were allowed to spiral until the choice to have one spouse at home was only for the extremely well off, or those who favoured a frugal lifestyle.
The Government prioritised a supply of workers for the economy, and never seemed to give serious consideration to the fact that the care of children had to be sub-contracted, as did other tasks like care of the elderly. Individualisation sparked a brief revolt, and made Fianna Fáil wary for a short while of discriminating against those who wished to stay at home. In truth, individualisation was just the most obvious manifestation of policies that locked more people into the two-income trap.
The proposal to means test or tax child benefit risks deepening this trap. There are people in receipt of it who may not need it, but for the majority of people with small children, it is essential. It is hard to see how any move to tax it or limit it would do anything except reduce options further for already hard-pressed parents.
It is hard to see how changing a universal payment for children to an untargeted “free” year in pre-school is motivated by anything but cost-saving. While pre-school is of huge benefit to children in socially deprived areas, the universal payment allowed people to choose what was best for children and did not prescribe a single model for all.
The Warrens challenge what they call the “over-consumption myth”, an idea also prevalent in Ireland. Many commentators suggest the impetus for two-earner couples came from greed, a desire for a luxurious lifestyle. In Ireland, we sum it up as “losing the run of ourselves”.
The Warrens contend there may have been some couples like that, but they will be fine. If the second income was for luxuries, losing it means belt-tightening, but the basics will not be touched.
The couples in real trouble are those where the second income goes on essentials. The younger a couple is, and the younger their children, the more likely they are to be in this category.
bobrien@irishtimes.com