Why does nobody disagree with the Fiscal Council's report?

I have searched for him and I can't find him anywhere

Perhaps he only wrote an article that was picked up by the IT? I heard him on a radio broadcast and I have him on my Twitter feed.

When we go into recession we will have to borrow more at higher interest rates than we can borrow today.
Investment today in critical infrastructure will assist in softening the longevity of future recessions. That investment is critical to support an increasing population. If we dont invest in schools and colleges, hospitals, roads, broadband, water etc...etc...today, we wont be in a position to invest in them during a recession.
 
When we go into recession we will have to borrow more at higher interest rates than we can borrow today.

We have €200 billion of national debt and €300 billion of unfunded pension liabilities.

When we go into another recession, we will not be able to borrow at any price.

That is why we should cut our national debt now so that we would have flexibility when things do go down.

Brendan
 
We have €200 billion of national debt and €300 billion of unfunded pension liabilities.

This is alarmist. They will be paid for from future tax revenues. That's how governments are financed. They have the right to tax people in perpetuity, that's why markets lend to them at very low rates

Also, the latest accrued liability for public service pensions is only €115bn.
 
Also, the latest accrued liability for public service pensions is only €115bn.

And how much is the social welfare pension's accrued liability?

It's not alarmist at all. Any other employer would have created a fund.

And we will all find out in a few years whether I am alarmist or not when the state can no longer afford to pay the contributory pension.

Brendan
 
May I ask to what extent, in monetary terms, should we cut national debt? From €200bn to where?

It would depend on the size of the economy and the tax take. But I would be happier with about €50 billion.

Then when we hit the downturn, we can borrow more without going bankrupt.

Brendan
 
Im sorry, but are you suggesting we cut the national debt by €150bn to €50, or cut it by €50 down to €150bn?
 
Unless you were contemplating 'a period of time' of several hundred years, then such a drastic reduction would herald the greatest economic crash this country has ever seen reducing our standard of living probably on par with Sierra Leone or worse.
One of the reasons we live in a developed economy is precisely because we have borrowed €200bn (since the foundation of the State) on our way to get here.
That is not to say keeping debt levels down or at least at increasing levels less than growth rates is a bad thing, it is not. But that is precisely what is occurring today, the debt level is increasing at a level that is less than the growth rate.
Most of the increase in borrowing can be attributable to capital spending. Meaning, even if we spend a horrendous amount on broadband for every home and business, it will mean that our IT infrastructure is better placed than others to capitalize on advances in IT markets. When a recession occurs, Irelands IT sector will be better placed to withstand it, and recover quicker from it.
Taking money out the economy to the extent that you have suggested would cripple the country.
 

This makes no sense at an IT level, or economics level. We won't be better placed than anybody if we over spend on a broadband solution that businesses don't need (because most of the cost is for isolated once off rural homes) OR that will likely be rapidly outdated by emergent technologies such as satellite broadband OR that means we have no reserves to cope with economic downturn.
If we spend a horrendous amount on broadband, it necessarily limits what we can spend on more essential projects.
Our growth rate is temporarily artificially inflated by corporation tax receipts, this is acknowledged by virtually every commentator. Our debt rate should be matched to the level of the real economy, and those corporation tax receipts treated as a windfall - to fund a debt reduction or real investment projects. And note to the government, spending 2 billion more than you need to on broadband is not an investment, nor is HAP payments to landlords.

In the event of a downturn, the cost of delivering capital projects will be less - witness the price inflation versus 5 years ago.
 
One of the reasons we live in a developed economy is precisely because we have borrowed €200bn (since the foundation of the State)
Since the foundation of the State?!
We owed less than €50 billion in 2007. By 2012 that had increased to over €200 billion.
Most of the increase in borrowing can be attributable to capital spending.
No, it isn't.
Of that increase of well over €150 billion a hundred billion is due to spending money on day to day things that we can't afford like public sector staff levels and pay, health services, welfare and pensions. We are like a family which re-mortgaged their house to finance doing their grocery shopping in M&S and going on foreign holidays instead of shopping in Lidl and staying at home.
 

Sorry Brendan but you clearly don't know very much about economics and public finances A country isn't like a firm that has to depend on sales. It has the unlimited right to tax its citizens in perpetuity. That's why markets generally lend to governments at low rates.


Your proposal to immediately cut €150 bn off the national debt is daft. Very simply, that's €10bn less spending every year for fifteen years.

€10bn a year is approximately one of:
  • 5 times child benefit
  • 4 times the entire cost of police and prisons
  • The entire public spend on the education system
  • All pensions, contributory and non-contributory
Yes, you would save a bit on debt interest, but you would also throw the economy into a recession, which would also damage tax revenues.


My own view is that fiscal policy should be tighter by about €2-€3bn a year at the moment, as a buffer for shocks. Your proposal is like something out of a libertarian wish-list.

PS: Tax revenues fell by 30% 2007-2010 and the state pension wasn't cut. Yes, there are pressures from ageing, but these are maybe €4-€5bn a year in 40 years' time.
 
We are like a family which re-mortgaged their house to finance doing their grocery shopping in M&S and going on foreign holidays instead of shopping in Lidl and staying at home.

This is not true. What matters is the borrowing and lending position of the nation. This is the current account of the balance of payments, which no one talks about very much any more.

This has been in surplus for the last few years, having been in deep deficit in 2007 and 2008 when, as a nation, we were indeed living beyond our means.
 
Unless you were contemplating 'a period of time' of several hundred years, then such a drastic reduction would herald the greatest economic crash this country has ever seen reducing our standard of living probably on par with Sierra Leone or worse.

This is the dilemma we face.

We have increased our borrowing by about €130 billion over the last ten years.

This was during a time when our economy has also been artificially inflated by artificial Corporation Tax revenues.

So we can continue living well beyond our means until we burst or we can start to address the problem. And addressing the problem will mean cuts which will affect the economy.

So we either do it now or else we leave the mess to our kids.

Brendan
 
By "immediately" I mean you would have to start immediately to make any impact.

So, you can see that I did not put a time frame on it.

But yes, we should make a start immediately. And while we have artificially high CT and a booming economy, we should be paying down our debt.

And, as I have pointed out earlier in the thread, when we hit the next downturn, we will be able to increase our borrowing again to stimulate the economy.

Brendan
 
Saying that we are not living beyond our means because we have a good balance of payments during a Corporation tax bubble while not repaying our debts is a nonsense. Did you read the link you posted?
Add to that the mounting proportion of our taxes which we must spend to fund our State pensions and we are heading for serious trouble.
 
Here is how our national debt has evolved according to the CSO

I have updated this to reflect the cash balances held by the government.



The €180billion figure needs to be reduced by about €20 billion or so to reflect the value of our stakes in AIB, BoI and ptsb.

Brendan
 

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