In 2016, we will borrow €2,765,000,000 or €600 per man woman and child

[Brendan Burgess]

A great article from Dan O'Brien in today's Indo

Unhealthy tendency to binge is reflected in boom and bust Budget

"...let's dispel any notion that Tuesday's Budget was prudent.


This year, according to the Government's own figures on Tuesday, it will spend a lot more than it takes in. To be precise, the gap will be €4,385,000,000. Or, put in a less mind-addling way, almost €1,000 for every man, woman and child in the country.

To be in the red to this extent when Ireland is the "fastest-growing economy in Europe" and has the wherewithal to move back into the black makes little sense. To be running a deficit of that size when the Irish State is one of the most indebted in the world makes even less sense. Making still less sense is that the Government intends to narrow the gap only to €2,765,000,000 next year.

If any of the long list of risks that exist in the global economy materialises and knocks the Irish economy off track there will be precious little leeway to avoid a rapid return to austerity.

Running budget deficits in periods of strong economic growth, as is happening now, is something that very few economists support or defend. But what was most shocking about the Budget was the out-of-the-blue announcement to ramp up spending - this year and in future years (the drier detail of this is discussed below)."

 

[Brendan Burgess]

I have heard both Alex White and Brendan Howlin say since the Budget that this budget will reduce our borrowing.

I find that astonishing. Charlie McCreevy said "When I have it I will spend it". This government is saying "If we can borrow it, we will spend it". It is reckless behaviour, election or no election.

Brendan

 

[Sophrosyne]

Let's do a what if scenario.

What would happen if we did not borrow?

 

[mercman]

Well if we didn't borrow, we would be passing the boats in the Mediterranean heading to Syria, Lybia to check out how the other half live !

 

[Brendan Burgess]

We would cut our cloth according to our measure.

We would reduce social welfare payments towards the levels in other countries which are much richer than we are.
We would actually ask the lower paid to pay some tax, as they do in most other countries.

Brendan

 

[Sophrosyne]

Cutting our cloth according to our measure would involve a lot more than reducing welfare payments and the pittance that would be gained by increasing taxes on the lower paid.

 

[Brendan Burgess]

Hi Sop

We have to start somewhere. I gave two suggestions to get the ball rolling.

Perhaps you would suggest some others?

Brendan

 

[odyssey06]

I'll start with end all foreign aid. No foreign aid should be given out unless the government is running a surplus (and I mean a surplus with zero borrowings).
It's absurd that we are borrowing €600m then giving out aid of almost the same amount.

Next, introduce a 'bonus' % payment to public sector based on GDP growth - instead of restoring pay levels and then when things go down you have to cut which involves nonsense every year with unions.
This way you have a floating amount reflecting how the country is doing.
In good years there will be a payment, in bad years there will be none. This is what happens in many larger private companies. If there are no profits that year \ targets aren't met at a company level, there is no bonus.

 

[Brendan Burgess]

Next, introduce a 'bonus' % payment to public sector based on GDP growth

Interesting idea. The problem is that some public servants are overpaid and others are underpaid.

I might link it to the government deficit rather than GDP growth. If we have the money at the end of the year, we pay it. It would give the public servants a real incentive to become more efficient.

Brendan

 

[Setanta12]

-Increase childcare supports for third children allowing mothers to afford more than 2 kids and stay working. Ensure such supports are only for working mothers.
-Retain Central Bnak guidelines on mortgages. Yes, it is hurting now but was any solution going to be pain-free? (There are other solutions)
-Declutter/inform and incentivise private pensions - this area requires a huge amount of re-working.
-Freeze public-sector wages. Anecdotally, German take-home pay has remained the same in real terms over past 10 years.
-Introduce extra bands of income tax i.e. a new rate of 30% could be introduced for 'the squeezed middle' and perhaps funded by a % increase at upper levels; this would mean more could before the highest marginal rate of tax is paid. Optically it would be good. And it would be very real for incomes less than cEUR100K. There is no reason, other then Revenue computer systems, why we shouldn't have more than two rates.

 

[odyssey06]

Interesting idea. The problem is that some public servants are overpaid and others are underpaid. I might link it to the government deficit rather than GDP growth. If we have the money at the end of the year, we pay it. It would give the public servants a real incentive to become more efficient.
Brendan

Government deficit makes more sense actually, good point.

In my previous employer (large insurance company), there would be a bonus pot e.g. 5% of profits, to be divvied up between employees. Your performance ranking for that year would affect how much you got (e.g. 3-5% of salary). If the company had a bad year, no bonus. It wasn't perfect but at least it meant in good years you got a bit extra and how well you performed meant you got a bit more.

I know some people didn't like it because their own team might have done a great job but felt other parts of the company 'let the side down'. But it was connected to something 'real' rather than arbitrary goals set by teams themselves.

When we had our own currency, I think civil servants were less buffered from effects of government deficits - a devaluation would affect everyone as their punt would be worth less. We were all in the same boat.
But now if you are on a fixed Euro income, the performance of "Ireland Inc" is less important.

 

[Firefly]

It's incredible that we have to borrow at all - we're constantly told we have lower spending in health and education compared to european averages. We have no army worth talking about and we have every multinational worth their salt in our country (which means that well is relatively dry as a source of new income) and a very decent tourism industry.

Basically, we seem to have a 2-tiered economy - the private sector is flying ahead, but the state itself is knackered. We have the most progressive taxation system with anyone earning anything decent is paying a marginal rate of 50%.

And yet we are borrowing - madness!

At a personal level, why would anyone want to borrow for anything other that an asset such as a house or an education? Why is it different at a national level - isn't this just the same as going to the Credit Union for the weekly shop at Tesco?

 

[Protocol]

No income tax cuts
No PS payrise
No foreign aid

would go a good way to eliminating the 2016 deficit.

It won't get you more votes in the election, though!!

 

[Fella]

Need to cut all social welfare to the bone make people work, get rid of rent allowance sick of seen supposedly single mothers getting a nice house on there own when the partners actually lives there , too many people get medical cards its ridiculous most people I know have them a friend of mine on 100k a year has one because they where out of work a year ago for a few weeks and applied and got a 3 year one. Poor people in Ireland aren't poor they still have phones/laptops/cars/ skysports and go out drinking smoking whatever they want . There is not enough difference between the people who work hard and earn average wage and people who do nothing and abuse the system. this rent allowance is a joke , i don't want to live next door to someone that is getting rent allowance and has zero respect for the upkeep of the area or the house they got to pick for nothing. If you can't afford a house you should be housed in a ghost estate down the country . I know of a girl who rents her own place out and gets rent allowance for a 4 bed house elsewhere , not sure how theres people get away with it . Do revenue not bother checking she has her own mortgage already. Only way people will better themselves is if they have some hardship , make people so poor that they need to re educate or get a job doing anything.

 

[T McGibney]

we're constantly told we have lower spending in health and education compared to european averages.

This of course is a barefaced lie, based on bogus "% of GDP" statistics, as our GDP is severely inflated by multinational transfer pricing. Tellingly, they never use the more meaningful "% of GNP" yardstick.

And yet we are borrowing - madness!

At a personal level, why would anyone want to borrow for anything other that an asset such as a house or an education? Why is it different at a national level - isn't this just the same as going to the Credit Union for the weekly shop at Tesco?

Nail on head.

 

[Teatime]

The Dept of Education are spending an absolutely fortune on portacabins in schools. It's criminal.
A few select/connected portacabin distributors are making a killing. The rental costs are exorbitant.
The government would be much better off buying the portacabins or building school extensions.

 

[Sophrosyne]

Let's do a what if scenario.

What would happen if we did not borrow?

I meant this as a serious question.

As far as I know, only a handful of countries do not borrow.

Why do economists think that Ireland could manage without borrowing?

 

[Sarenco]

I meant this as a serious question.

As far as I know, only a handful of countries do not borrow.

Why do economists think that Ireland could manage without borrowing?

I think you will have to be more specific as to what you mean by "borrow".

I am not aware of any country that doesn't have existing debts that are refinanced on any ongoing basis through the issuance of new debt instruments. The reality is that no country can function if they are shut out of the debt capital markets without external assistance.

Is that your question?

 

[Sophrosyne]

I am questioning Dan O’Brien’s opinion.

Perhaps you would correlate what you say to his article.

 

[Sarenco]

Dan O'Brien's article relates to the budgetary deficit - the extent to which our current spending exceeds our current revenue - which ultimately increases our national debt.

We are required to achieve a balanced budget by 2018 but because of the unanticipated strong growth in revenue the Government could have decided to eliminate the budgetary deficit more quickly. instead, the Government decided on an expansionary budget and this is controversial at a time when the economy is growing strongly, particularly given the sheer scale of our national debt.

Obviously, if the Government had decided to expedite the elimination of our budgetary deficit, we would not have seen the scale of tax cuts and spending increases announced last week.