# Government Deficit.



## csirl (29 Apr 2010)

A lot of our government spending deficit is due to having to give billions to bail out the banks.

What would the deficit be if we did not give a cent to the banks?

One of the principal reasons given for bailing out banks is to maintain the countries credit rating, which we are told would slip, if the banks defaulted. If the credit rating is poor, the cost of borrowing goes up and this cost falls on the taxpayer.

But, if we had a balanced budget and dont borrow a cent, then credit ratings/cost of borrowing are irrelevent. I'd like to hear views on whether, in absence of giving any money to the banks or NAMA, we it would be possible for us to balance our budget through expenditure cuts alone. Has this option ever been considered?


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## Sunny (29 Apr 2010)

No because the banking costs have nothing to do with the deficit. The Government is still spending about €20 billion more on day to day costs than they bring in.


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## csirl (29 Apr 2010)

€20 billion is difficult to raise/cut, but not impossible. Slashing of certain SW payments, putting some discipline on the HSE and bringing the 50% of workers who pay no income tax into the tax net would go a long way. As would giving P45s to quango members.


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## Sunny (29 Apr 2010)

It is impossible to solve the €20 billion hole in one year. Thats why they are aiming for €3-4 billion a year over four years and praying for economic growth


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## csirl (29 Apr 2010)

Here's a suggestion how to raise it:

Raise an additional €5bn by reform of the tax system to include all workers (high and low) in the tax net.

Go down the PPP route for large capital infrastructure programmes - save €5bn in short term, but still get the projects built.

Shave 20% of the SW budget. Should be easy to do as our SW rates are way too generous in many areas. Can be achieved without hitting pensioners or short term unemployed badly. Savings of €4bn.

Shave 3bn off the public payroll through shutting down non-essential quangos, amalgamating councils, reductions of staff in other areas. Savings 3bn

Shave 3bn off the HSE budget - get rid of all the surplus administrative staff and make hospitals tender for business and get paid only for work done instead of in lump sums in advance. Savings 3bn

The above may cause some short term disruption in some areas, but are very very possible and may even have long term benefits. The current approach the Government is taking is going to hit everyone harder than the above long term. Why cant we take a manageable hit now instead?


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## Chris (29 Apr 2010)

csirl said:


> But, if we had a balanced budget and dont borrow a cent, then credit ratings/cost of borrowing are irrelevent. I'd like to hear views on whether, in absence of giving any money to the banks or NAMA, we it would be possible for us to balance our budget through expenditure cuts alone. Has this option ever been considered?



This is bang on the point. Given the boom of the pre-depression years, there is no reason why Ireland should not have had zero debt. If you have zero debt and no intention to take on any, you don't care about ratings.
Zero debt should be the aim of the government instead of the Keynsian BS that is thrown at us to justify the debts.



csirl said:


> Here's a suggestion how to raise it:
> 
> Raise an additional €5bn by reform of the tax system to include all workers (high and low) in the tax net.
> 
> ...




I'd vote for you!


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## jpd (29 Apr 2010)

Not sure that pensioners and/or short-term un-employed would consider a 20% cut as not being hit badly!


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## Purple (29 Apr 2010)

jpd said:


> Not sure that pensioners and/or short-term un-employed would consider a 20% cut as not being hit badly!



While I'm not sure I agree with csirl at least read what he said!



csirl said:


> Shave 20% of the SW budget. Should be easy to do as our SW rates are way too generous in many areas._ Can be achieved without hitting pensioners or short term unemployed badly_.


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## elcato (29 Apr 2010)

While csirl makes it out to be quite reachable, do you seriously think that such an option was not looked at till all the marches, strikes, public outcry put an end to it ? Your approach sounds reasonable to me and some others but not the masses I'm afraid. No offense but we need to be realistic here.


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## csirl (30 Apr 2010)

I suspect the masses would be happy if no money was given to Anglo and all the fat cats and speculators lose everything. Think about it - Seanie Fitz queing up to get assessed for rent allowance.


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## DerKaiser (30 Apr 2010)

csirl said:


> Shave 20% of the SW budget. Should be easy to do as our SW rates are way too generous in many areas. Can be achieved without hitting pensioners or short term unemployed badly. Savings of €4bn.


Why exempt pensioners? 

Couple of suggestions.

Achieve social welfare reform by ensuring as many of the essentials as possible e.g. medical card, public transport, utility bills (within reason)and accomodation are provided by the state, then slash the monetary benefits (including rent allowance).

I wouldn't focus on cutting public sector numbers, no point in putting more people on the dole. We do need to cast a very ruthless eye on rates of pay however. 

With 400,000 unemployed it does not make sense to have people in the more menial jobs on very good rates of pay. Private sector companies with a jot of sense should realise this as well. Higher paid public sector jobs should be reassessed if only out of solidarity

Income Taxes:
Forget about levies etc. Say the dole is cut to €7.5k p.a. then 0% tax up to this level (€15k for a family) 30% tax on the next €20k (€30k for a family) and 50% tax on everything above this.

Inheritance tax & Gift tax:
We need to get real on these. Unless a family business or the main family home is being passed on then tax the hell out of inheritances and gifts

Successful enterprise (the only way to emerge from the life support we are currently on). Look at what schemes have actually worked in the past and prioritise their continuation.


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## Chris (30 Apr 2010)

DerKaiser said:


> Why exempt pensioners?


Agree



DerKaiser said:


> Couple of suggestions.
> 
> Achieve social welfare reform by ensuring as many of the essentials as possible e.g. medical card, public transport, utility bills (within reason)and accomodation are provided by the state, then slash the monetary benefits (including rent allowance).


The more services government provides the more expensive it is to the tax payer. As government does not have to use resources in a profitable way, you are guaranteed to have huge wastage, which means increased costs of production. As the costs of production come out of taxes, this means a higher tax burden. The average citizen would pay less if a service is privately provided, while at the same time lowering the tax burden, than if taxes are taken to have the state provide the service.




DerKaiser said:


> I wouldn't focus on cutting public sector numbers, no point in putting more people on the dole. We do need to cast a very ruthless eye on rates of pay however.


This statement is fundamentally flawed. If a public sector worker is laid off, and was earning €30000, then there is a net gain in the public finances of about €20000 (€30000 - dole). This would mean that the tax payer could be taxed less, and have €20000 more to spend or invest, either of which would result in a benefit to the economy and employment. It would also force more people into the productive part of the economy.
This country has public services that are of absolutely no benefit, and exist purely to keep bureaucrats in jobs. My pet hate is that every county has a motor tax office, and some have two!!!! And this is just one of many services that could be cut by at least half through centralized services.



DerKaiser said:


> With 400,000 unemployed it does not make sense to have people in the more menial jobs on very good rates of pay. Private sector companies with a jot of sense should realise this as well. Higher paid public sector jobs should be reassessed if only out of solidarity


This is correct employing people for the sake of employment, or raising wages beyond their market value has a negative effect on the economy.




DerKaiser said:


> Inheritance tax & Gift tax:
> We need to get real on these. Unless a family business or the main family home is being passed on then tax the hell out of inheritances and gifts


While increasing taxation will plug a hole in public finances it will have a detrimental effect on the economy. Any form of taxation diverts money from private spending or investment, which will reduce the amount of production, which will lead to more unemployment and a reduction in wealth. This is the case whether it is income tax, capital gains tax or inheritance tax that is increased. 
Apart from that, why should someone pay taxes on assets that have already been heavily taxed by the original owner? 




DerKaiser said:


> Successful enterprise (the only way to emerge from the life support we are currently on). Look at what schemes have actually worked in the past and prioritise their continuation.



This point is partially correct, private enterprise and production will be what will bring the economy off it's knees. However, no government schemes have ever worked. A couple of bureaucrats and politicians, serving their own special interest groups, no matter how intelligent, are completely unable to take all the economic variables into account. What always happens is that the loudest or most influential interest groups benefits through some sort of stimulus, at the expense of all other tax payers. The free market is more than adequately equipped to most productively allocate investments.
The only thing that works is the profit AND loss system in deciding what industries and what enterprises most adequately increase productivity. Socialist and conservative redistributions, through taxing one group to benefit another group never cause a net gain to the economy. Quite the opposite, through the bureaucratic overhead there is an actual loss in spending and investment, resulting in more unemployment and less wealth.


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## dewdrop (1 May 2010)

What concerns me is that notwithstanding all the efforts the current deficit for first three months of this year compared with quarter ended March 2009was  increased by 1.1 billion mainly due to a drop in revenue of 1.3 billion whereas expenditure thankfully decreased by 207 million. Until revenue receipts start to increase i cant see how we are going to solve our problems.


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