This is a very dangerous pro-cyclical budget - the opposite of what we need

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TheBigShort said:
Id be interested in hearing when you think tax cuts should be introduced. During boom times? During recessionary times? During recovery times?
All I ever hear is that we cant afford it....ever!
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I have a similar view to @Purple on this - we should be maintaining a budget surplus over a 3-5 year period (excluding capital expenditure) before any tax cuts or increases to social welfare should be paid. This would demonstrate the ability to manage the finances over a period of time and that the increases in social welfare/reduction in income taxes can be afforded over a prolonged period.

If you look at the period leading up to the recession, and the Jobseekers payments during this period and how quickly they rose, one thing is certain - they did not fall half as quickly during the recession. In 2019, the Jobseekers payment will be 203 euro per week, mirroring the highest payment amount in the history of the state
http://www.welfare.ie/en/Pages/Budget-2019.aspx
2002 118.80
2003 124.80
2004 134.80
2005 148.80
2006 165.80
2007 185.80
2008 197.80
2009 203.40
2010 196.00
2011 188.00
2012 188.00
2013 188.80
2014 188.00
2015 188.00
2016 188.00
2017 193.00
2018 198.00
2019 203.00

In comparison, if you look at the taxes paid by those working you will see a very different story. The government found it very easy to add new taxes such as the Income Levy or USC on peoples incomes when times got tough, but they are much slower taking them away as times recover.
The same applied with the public sector pay deal during the boom times - its much harder to take something away once you have given it, rather than not give it until you know its sustainable in the medium term

So to answer your simple question of when should tax rates drop/social welfare rates rise when they are shown to be sustainable over a period of 3-5 years and the country can support the cuts/increases and maintain a current budget surplus in the process.
We definitely should not be reducing taxes or increasing social welfare rates while we have a current budget deficit
And this is before you start taking into account some medium term planning around future known costs such as the increase in costs to service the national debt when interest rates start to rise and the future pensions bill for both state and public sector pensions.

Whatever about the statement that this is no country for old men, I can assure you from my point of view the prospects of my children is not great either if we keep burdening our financial mismanagement onto their shoulders!
 
RETIRED2017 said:
Just for the record Go back and have a look at Total payroll take For a Person Paying PRSI A1 through payroll you will see they always paid a type of USC over and above any other group
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I accept that USC is a merger of various other levies such as the Health Contribution and Income Levy, but my point is more that its easier apply a new tax to offset any tax decreases rather than reduce social welfare increases previous given.

Between 2002 and 2009 the basic Jobseekers payment increased by 71% from 118.80 to 203.40 euro. Over the next two years it reduced by 7.6% and remained at a floor of 188 euro until 2017, when over 3 years it has returned back to 203 euro again.
So in the 7 years leading up to the crash, we an average increase of 12.09 euro per year, and in the 7 years after the crash we had an average drop of 2.20 euro per year.

And to be honest, I can fully appreciate this for people who worked during the boom times and paid into the system, it was right and equitable that they should have the security blanket that was sold to them. But on the same basis, there should not be increases in Jobseekers Allowance during periods of low unemployment.
 
Thank Duke

I can't find it online, so here it is as submitted. I don't think they changed it. It's on page 24 of the paper.

You are a high earning couple with a family who seem to have unlimited financial demands. Your two salaries are just about enough to cover your outgoings. But you are a bit worried. You have a big mortgage. Repayments are manageable at the moment because interest rates are low, but you will be in trouble if and when interest rates rise. You will be in even more trouble if one of you loses your job or takes a pay cut. And then, out of the blue, you win €20k in the Lotto. Do you pay down your mortgage or do you just meet even more of your family’s financial demands?

Well Paschal Dononue believes you should blow it on the family and that you shouldn’t worry about the mortgage.

Because that is exactly what is happening to the public finances. The economy is booming. Employment is at an all time high. Anyone who wants to work can get a job. But we have a huge mortgage - €200 billion of government debt. This huge debt doesn’t cost us much because interest rates are artificially low. And we have just won the Lotto in terms of the artificially high Corporation Tax take from the multi-nationals. So do we use the Corporation Tax Lotto win to pay down our national debt and protect ourselves against the expected interest rate rises? No, we increase spending everywhere we can. Increases in salaries for public sector workers? Check. Increases in social welfare rates? Check. Increases in pensions? Check. Christmas bonuses for everyone? Check. Paid parental leave for everyone? Check. Social Welfare for the Self-employed? Check. Tax cuts? Check.

The government is doing exactly the opposite of what it should be doing. It should be using the windfall from the booming economy and low cost of borrowings to pay down the national debt. Instead, it is using the windfall to increase government spending to an even more unsustainable level.

We should tell people that we simply cannot afford to continue paying the very high levels of pensions and social welfare payments.

When the next crash comes we will need to increase government spending to boost the economy, but the cupboard will be bare. We should be cutting expenditure now so that we can increase it when we need to.

We are making the exact same mistakes we made during the last boom and bust. When the property market was driving the economy and the government’s tax revenues, we put none of it aside so we had to cut back when the crash came. These cuts made the recession worse.

It is extraordinary that there is no party in the Dáil pointing this out. There isn’t even one TD pointing this out.

During the last recession, we were able to borrow to fill the gap between tax revenue and expenditure. But that option will not be open to us when the next crash comes. We went into the last recession with just €50 billion of national debt but now we owe €200 billion. The international markets which are throwing cheap money at us now will stop lending to us when they realise the gaping hole in our national finances.

The people who will suffer the most will be the people who have become dependent on high social welfare payments, free social housing and free health care. All of this will have to be cut back dramatically, irrespective of which government is in power. The money simply won’t be there and we won’t be able to borrow it.

We should wean people off the entitlement culture. We should tell people that if they choose welfare over work, then they are going to be poor and they are going to have poorer housing. We have to tell people that if they choose work instead of welfare, that they will have higher incomes now and higher pensions in retirement. And we have to give working people, particularly those in low paid jobs, priority in the allocation of social housing. At the moment we give people social housing in their own community whereas workers will often have to commute long distances. We have to turn this right around. If someone is not working, they should be offered social housing wherever in the country it is cheapest. And housing in the areas of highest demand like Dublin should be reserved for people working in Dublin.

Now is a good time to face up to this reality. The economy is booming and there are plenty of jobs. So people whose dole is cut will have the option of getting a job to increase their income and living standards. If we wait until the next recession and are forced to cut welfare, it will be far more difficult for people to find jobs to make up the lost income.
 
I've taken GNF's dole payments table and coloured in red the dole payment that was impacted by an incoming election. 2010 marks FF's last year in power- they basically increased the dole by 110% in 9 years at a time of when employment became easier and easier to find, staff shortages were an issue and eventually we hit max employment

2000 96.50
2001 106.66
2002 118.80
2003 124.80
2004 134.80
2005 148.80
2006 165.80
2007 185.80
2008 197.80
2009 203.40
2010 196.00
2011 188.00
2012 188.00
2013 188.80
2014 188.00
2015 188.00
2016 188.00
2017 193.00
2018 198.00
2019 203.00
 
Brendan,

I also think it could be mentioned that everyone should pay some amount on income tax, especially, the Universal Social Charge.
 
I don't think wage inflation (or any inflation) is a good thing in a country with such an open economy and already very high costs.
I think reducing the cost of living while maintaining wages, or increasing them as a slower rate than increases in productivity, is what we should be looking for. It is a harder thing to do and to measure but it is sustainable.
 
Apologies if I missed this being mentioned previously but the ratio of spend to tax cuts in the recent budget was a mind boggling 19:1.
That's Bertie-esque levels of spending and then some!

https://www.independent.ie/business...quandering-more-than-fgs-legacy-37415850.html
Total (capital and current) increases in voted public expenditure relative to Budget 2018 are €5.6bn.
It signifies a return to political promiscuity - on an industrial scale. Vested interest groups procured spending concessions relative to minimalist €291m income tax amendments.
A ratio not of 2:1 but an incredible 19:1. That's not even counting consumers coughing up an extra €466m at restaurants and hairdressers.
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>>Total (capital and current) increases in voted public expenditure relative to Budget 2018 are €5.6bn.

I don't mind capital expenditure so much because it tends to be one off, although the costs can be underestimated a bit
Current expenditure tends to be very difficult to reduce year on year, so tends to only go in one direction unless times of economic necessity !
 
The Irish Fiscal Advisory Council has issued a report saying more or less the same thing as what I and others have been saying in this thread and in my Sindo article.

Budget 2019 'not prudent economic management' - IFAC

It's an extraordinary indictment of the Budgetary policy.

Accusing the Government of repeating the policy mistakes of the past that have led to a boom-bust cycle, it said repeated failures to prevent unbudgeted spending increases - particularly in health - leave the public finances exposed to economic shocks.

"The council assesses that this is not conducive to prudent economic and budgetary management".

Fair play to them. They pull no punches.


 
The budget was about politics, not economics. Economic decision making based on political factors rarely turns out well.
 
Purple said:
The budget was about politics, not economics. Economic decision making based on political factors rarely turns out well.
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And, it wasn't even very good politics... FG seem to be burning their 'fiscal space' on people who'll never vote for them.
 
It's going to end very badly for the country, as we near the peak in the business cycle and government revenues stagnate or decline and the interest rates on the debt increases, wow its frightening,
 
Brendan Burgess said:
That is a very interesting point. But what about the pensioners who got €5 extra? Are they not FG voters?
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I was thinking more of the welfare spending, it seems like they lumped their 'fiscal collateral' all on the pensioners. I wonder if anyone will be convinced by nearly another billion thrown into the black hole of the health service. Certainly not enough to distance them from what FF would offer to the same cohort.

They seemed to forgot about "the people who get up early in the morning". I don't think the crumbs they sent in that direction would convince anyone to vote for them. And they didn't impress anyone who cares about keeping spending under control.
 
odyssey06 said:
I don't think the crumbs they sent in that direction would convince anyone to vote for them. And they didn't impress anyone who cares about keeping spending under control.
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All true of course. But which party would you vote for in the hope that they would act responsibly?
 
Brendan Burgess said:
All true of course. But which party would you vote for in the hope that they would act responsibly?
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There isn't one. Which is odd. They'll now end up in an open-ended bidding war with FF because they have no credibility as a party of fiscal responsibility.
 
Brendan Burgess said:
All true of course. But which party would you vote for in the hope that they would act responsibly?
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That’s a key point. The options are a fiscally irresponsible FG or an even more fiscally irresponsible FF. Labour are a dead duck, which is a pity, as the Left moves firmly into the “loony” category with the Sninners and Solidarity/ Anti Reality Alliance now occupying the “crazies” space previously ignored by the majority of voters.
 
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