Another economic gathering in Budapest and a surprising poll

Today there was another economic summit lasting four hours. If I remember correctly, this is the third giant gathering of politicians, businessmen, and representatives of employees that has taken place since mid-October 2008 as a result of the economic crisis. Critics of the government claim that these meetings are a colossal waste of time. Why doesn't the government just sit down and come up with a plan? For one thing, if the government did that, its critics would then complain about the government's "reform dictatorship." One must keep in mind that the word "refom" has a very bad ring in Hungary. Hungarians came to the conclusion, based on long years of experience going back to the Kádár regime, that "reform" is code for the introduction of an austerity program. The history of Hungarian economic development for decades has seen wild fluctuations–relative prosperity financed largely by foreign loans followed by the urgent need to "tighten the belt." And although living standards for the most part have risen over this time period, people feel that they are doing nothing else but "making sacrifices." Thus when about two weeks ago Ferenc Gyurcsány mentioned reforms, one of the better political commentators in Hungary said that if he were the prime minister he wouldn't utter the word "reform."

There is some truth in this, especially since the healthcare reform was such a flop and the results of the referendum so devastating that the government immediately stopped all plans to introduce any new reforms.The SZDSZ's abandonment of the coalition was allegedly an answer to this "cowardly" running away from changing the economic and social structure of Hungary inherited from the Kádár regime. Yes, perhaps it was cowardly and too hasty a retreat and I understand SZDSZ's frustration, but the liberals must realize that the fiasco that was the referendum was mostly their doing.

Under duress, with the world economic crisis weighing on Hungary, the government is returning to the challenge of reform. This time Ferenc Gyurcsány is trying to up the ante; he referred to the government's plans as "more than reforms." He envisages something of a paradigm shift. He talked about "a model change, a new national, societal, and economic strategy." Details are not known except that it will be "a set of comprehensive changes in taxation, in employment policy, and social welfare." The only specific announcement was that no new budget is necessary, though they will have to tweak some of the numbers.

So how will the Hungarian model change? Most likely we will find out more on Tuesday when parliament convenes for an extraordinary session. (The official opening of the spring session is February 18.) There have been leaks and rumors about some of the items. One might be lowering personal income tax rates and raising sales tax on certain items (most likely, at least in part, the classic sin tax). But if tax rates are taken down, the number of taxpayers must increase. There are a number of different scenarios under which this could be accomplished. It is almost certain that able bodied people who are on the welfare rolls will have to work in local government jobs (legally) for their keep. These jobs would include low-level health care and education positions as well as the standard maintenance work. (This, of course, may interfere with their lucrative off-the-books income.)

Ferenc Gyurcsány promised to bring before parliament all necessary legislative proposals by July 1. (Not exactly the Obama timetable.) He said that some of the new proposals could become effective as early as September 1 while the rest will launch on January 1, 2010.

He may actually have the wind at his back. There is a brand new Szonda Ipsos poll concerning "reforms." It seems that the economic crisis has frightened people into supporting change. Eighty percent of the people consider reforms "important or outright indispensable." Ninety-three percent would like to see a smaller parliament, 86% want to see changes in party financing. Sixty-eight percent would like to see fewer local governments with fewer employees. (I must add that this is only wishful thinking because to change the law one needs a two-thirds majority and Fidesz will never vote together with the other three parties.) More than half of the people think that there must be pension reform. (It is not clear what they mean here, but people currently get pensions at an early age and can continue to work while still collecting a fairly generous pension.) Fifty-one percent are ready to support increasing sales tax (presumably targeted, otherwise it's a regressive tax) while lowering personal and business tax. Moreover, 51% would support child support only for families in lower income brackets. Thirty-eight percent would agree to freeze wages in the public sector. Fourteen percent are ready to freeze pensions. Sixty-one percent of MSZP sympathizers think that the future of the country is more important than their own income while 54% of Fidesz supporters think that helping the country under the circumstances is not their responsibility. When the question was posed whether they are ready to make material sacrifices in order for the country to survive these hard times, 39% answered in the affirmative, while 27% thought that the majority of the people are not willing to sacrifice. Although these results are clearly skewed in the "not in my backyard" direction, they may nonetheless help the government's efforts to introduce reform legislation.