US think tank reminds Ireland spending could ‘get out of control’

One of the best-known conservative think tanks globally has warned the State not to intervene too much when warding off the economic effects of Covid-19.

The Heritage Foundation, which recommended scores of top hires for the US Trump administration, said the Government here must not be “heavy handed” in its crisis response and to be wary that “old interventionist habits die hard” with spending.

The think-tank mulled Ireland’s fiscal response to Covid-19 on Tuesday in a note co-authored by Terry Miller, who was the US ambassador to the United Nations under former president George W Bush. Mr Miller is now the foundation’s director of international trade and economics.

He is closely involved with producing the Heritage Foundation’s annual Economic Freedom Index, which ranks each country globally in terms of criteria such as its openness to free markets. In the most recent global index, released on St Patrick’s Day last month, the Heritage Foundation ranked Ireland sixth globally, well ahead of the US and all other European Union countries.

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In its note this week, the foundation warned there is “real risk” in relation to Ireland’s embrace of “deficit-spending measures” to tackle a crisis that it said may be larger than the 2008 financial crisis. It also said the levels of distress among Irish SMEs could “tempt Ireland’s Government to take a heavy-handed approach to financial intervention, imposing more government control”.

It said the State should help workers and employers “while being careful to avoid measures that permanently alter, in a negative way, the relationship between the Government and individuals or businesses”.

‘Out of control’

Speaking to The Irish Times, Mr Miller said he was generally a fan of Ireland’s economic policies. But he said the scale of the State’s interventions warranted a “gentle reminder” that spending could “get out of control”.

Some estimates have put the economic cost to the State of Covid-19 this year as high as €25 billion.

Mr Miller specifically warned against any potential further State intervention in the banking sector and advised the Government that, after it has spent to help workers and employers, it needs to “go away as quickly as possible” and avoid “long-term subsidisation” of the economy.

“The temptation with big spending plans is that people then want to bump up taxes and keep these measures in place for longer,” he said.

The Heritage Foundation is considered to be the pre-eminent think-tank in US right-wing politics and has had close links to every Republican president since Ronald Reagan, who adopted many of its suggestions.

It is funded by wealthy donors such as billionaire hedge fund heiress, Rebekah Mercer, while its trustees also include corporate luminaries such as media mogul Steve Forbes.