€4 billion in cuts -- too little, too late!

zootroid

jmayo wrote: »

Why hasn't one single quangoe being axed ?
Oh wait they have yet another consultation body set up to report on these.
What is it ?
Perhaps a quangoe to oversea the axing of fellow quangoes ?

Cuts need to be made now, not tomorrow, not next December.

This is the one thing that bugs me. Government ministers refuse to take responsibility for government agencies that they are responsible for. They can't make decisions, so they outsource it by setting up a committee. The simple criteria should be: does it provide value for money? No? Then you're gone.

Justin Collery

Great post OP, I'm delighted to see I am not the only one looking around me and wondering why can no one else see the obvious.

I do not want to labour the points already made about spending being too high and the inability to increase taxes to make up the shortfall. +1 from me.

I would like to add that I believe the estimates for growth over the coming years are exaggerated. They do not seem to me to take account of the continued deleveraging - the sucking of cash out of the economy by the banks. This is necessary, but I think will put a lag on growth. The overhang of private debt in the economy and the lack of new credit will suppress revenue from VAT and income taxes, making a bad situation worse.

The truth is I see no viable plan to get out of this mess. No creditable 5 year plan has been presented. I also see no alternative from the opposition. My only real question is do we go bust in 18 months when the country cannot borrow any more, or is there a trigger (I'm thinking Greece) which makes it happen sooner.

Diarmuid

donegalfella wrote: »

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You lost most of the anti-cut people at +. They don't do maths.

Liam79

donegalfella wrote: »

This post has been deleted.

Stalker Alert! If you see this man loitering outside your childs school, looking angry, taking down car regs of every single teacher, be sure to call the police!!

P. Breathnach

donegalfella wrote: »

This post has been deleted.

I think there is general agreement that this is a problem.

And I don't think I'm alone in objecting to this. Ireland is now widely regarded across the international community as a country that has thrown all notions of fiscal rectitude out the window.

I'm not going to be drawn on that: it's another argument.

There's no "dislike" of public servants or welfare recipients involved here, nor does my post denigrate them as "wasters and spongers." Regardless of our feelings toward them, we can't afford to pay them what they are currently receiving. That is just objective economic fact.

I don't know how much of what is posted on this forum you read, but I imagine that you are aware of the tenor of much of the discussion here. I wasn't suggesting that you denigrated them in this post (although you have been less than kind about public sector employees in other discussions).

Believe it or not, there are moderates within the public sector who will admit that many in their cohort are overpaid, that the PS union leaders are too aggressive and unreasonable, and that many PS employees are out of touch with the true state of the country.

One of my good friends, a young primary school teacher, admits that she felt ashamed and embarrassed to be seen picketing outside her school last month. Many of the parents of the children she teaches are unemployed; they consider her to have a plum job, a good salary, and generous time off. She knows at least two mothers who now walk their children to school because the family can no longer afford the expense of taxing and insuring a second car—and yet no teacher at the school has a car older than an "05" model.

Generalities and anecdote. I consider myself a moderate, and do not have a fundamental objection to the measures taken to reduce public sector pay; I will even go so far as to say that I think it wrong that my pension was not adjusted in a somewhat similar way.

So, back to your question: what am I talking about?

First, the bit that you didn't quote, I presume because you don't disagree with it: the economic effect of taking so much demand out of the system, and the need to reduce expenditure in a phased way.

Second, the bit you did quote and question, perhaps because I did not spell it out clearly enough: the balanced budget is a shibboleth beloved of right-wingers, many of whom also want taxes kept as low as possible. The implication of adopting such views are that the state could not, and would not, provide financial support to the unemployed, the ill, and the old, and the level of public service would be reduced to a fraction of what we now have. I saw your post as a Trojan horse for libertarianism. Perhaps not intentionally so, but you might agree that your views tend to reflect the libertarian views that you profess elsewhere.

jmayo

Liam79 wrote: »

Stalker Alert! If you see this man loitering outside your childs school, looking angry, taking down car regs of every single teacher, be sure to call the police!!

Great contribution there :rolleyes:

milnerr3

donegalfella wrote: »

Young people are "horrified" to have their dole cut to €100 or €150 a week, when the comparable rate in the UK is £47.95 (€52.75) per week for anyone aged between 16 and 24.

in full agreement with many of the sentiments expressed in the initial post...the social welfare system here is a joke! i know that economic comparisons between britain and ireland are unsound, but in relation to social welfare, in britain the unemployed are focused on finding employment through state initiatives, whereas here in ireland the focus for the unemployed is soley on getting the dole...

amacachi

donegalfella wrote: »

This post has been deleted.

I agree with a lot of what you say on a lot of topics but it's easy to pick one example to show we're paying more than the UK. Other than young people sitting with their parents the UK's dole is pretty much on par with ours. People will point out their low dole but for families there are a lot of other payments available which in most cases bring it right up to our rate.

nesf

Liam79 wrote: »

Stalker Alert! If you see this man loitering outside your childs school, looking angry, taking down car regs of every single teacher, be sure to call the police!!

Don't contribute crap like this to threads if you want to retain your ability to post here. Attack the post not the poster!

Rookster

The country is still in a very seious situation and the Public Sector will have to take another cut next year as well. Especially those on the higher salaries.Why are assistant principals on 70k a year? All the wages will have to move downwards and the pension levy should be increased as the ordinary taxpayer is still funding the vast majority of these very generous pensions. If the Public Sector wants to retire on a big fat pension, then pay for it yourselves.

Arsenal1986

milnerr3 wrote: »

donegalfella wrote: »

Young people are "horrified" to have their dole cut to €100 or €150 a week, when the comparable rate in the UK is £47.95 (€52.75) per week for anyone aged between 16 and 24.

in full agreement with many of the sentiments expressed in the initial post...the social welfare system here is a joke! i know that economic comparisons between britain and ireland are unsound, but in relation to social welfare, in britain the unemployed are focused on finding employment through state initiatives, whereas here in ireland the focus for the unemployed is soley on getting the dole...

Its only for new applicants so those ppl already on who are horrified neednt worry!

alejandro1977

One of my good friends, a young primary school teacher, admits that she felt ashamed and embarrassed to be seen picketing outside her school last month. ...

She knows at least two mothers who now walk their children to school because the family can no longer afford the expense of taxing and insuring a second car—and yet no teacher at the school has a car older than an "05" model.

Liam79 wrote: »

Stalker Alert! If you see this man loitering outside your childs school, looking angry, taking down car regs of every single teacher, be sure to call the police!!

DF's statement seems to me to clearly imply that it was his female friend who noticed that "and yet no teacher at the school has a car older than an "05" model" - and was embarrassed about it.

Your anti Private Sector rants are not doing your arguments any favours.

brianthebard

DF in 'the government was not thatcherite enough!' shocker.

P. Breathnach wrote: »

Where are all those posters who argued that you cannot tax your way out of a recession? The reasoning is that you should not throttle demand.

The same reasoning applies to cuts. You cannot cut your way out of a recession.

While it is necessary to tackle the exchequer deficit, the government is between Scylla and Charybdis. In consultation with the ECB, it is trying to find the middle way. Let's not run our economic policy on the basis of disliking public sector wasters and dole spongers. And let's not allow DF's Greek gifts delude us into dismantling the state.

At least someone willing to acknowledge the downsides of cuts, good post P.B.

FlutterinBantam

Good start.

We cannot afford Public service/HSE/Social welfare bill.

Thems the facts.... hard facts.

No use keening and moaning,had to be done.

Most of the people affected wouldn't stoop down to pick a 50c piece off the floor.


Let's get on with it, and stop pandering to the people who think that it's the State's job to look after them while they make little of no effort.

Stark

Rookster wrote:

Why are assistant principals on 70k a year?

Because ordinary teachers at the top of the payscale are on 70k a year and an assistant principal has far more responsibility.

Rookster

Stark wrote: »

Because ordinary teachers at the top of the payscale are on 70k a year and an assistant principal has far more responsibility

.

You don't get it. Why should someone who works 7 or 8 months a year be on an excessive salary like this? That is the point!

Valmont

Donegalfella, when are you going to start the Irish Libertarian party so we can all join and march on Leinster house in 2011?

Stark

Rookster wrote: »

You don't get it. Why should someone who works 7 or 8 months a year be on an excessive salary like this? That is the point!

I do get it. I think all the teachers on €70k salaries should have their salaries cut. There are far less assistant principals though and they have far more responsibilities so they're not the people to be looking at.

Eliot Rosewater

Note how the principle attacks made against the original post, from P Breathneach and brianthebard, didn't actually address anything said in the post, but rather the political dispositions of the OP.

danman

Donegalfella, as a fellow Donegal man, you will be awere of people with crossborder jobs.

A prime example of wage diiferentials between the 2, is my own wife.

She worked in the public sector in NI for almost 10 years.
She moved jobs to the south, 2 years ago.
She was on the equvilant of 40,000euro in the north, she started the exact same job in the south on 65,000euro. over 50% more than she was on before. She actually ended up at the bottom of the pay scale. For her experience, she should have been on 80,000euro, but the sourthern board didn't recognise her experience in the north.

The exact same job. 40,000euro more, 100% more.

She was upset last night, untill I reminded her that she is still far better off than 2 years ago.

Public sector pay had to be cut, and if the unions try to stop reform next year, they will be cut again.

P. Breathnach

Eliot Rosewater wrote: »

Note how the principle attacks made against the original post, from P Breathneach and brianthebard, didn't actually address anything said in the post, but rather the political dispositions of the OP.

Do indeed take note of what was said. I dealt with points made in the original post; I elaborated when DF asked for clarification. The original post incorporates a political point of view, something that is hardly objectionable in a political discussion forum, and I made it clear that I have a different point of view.

You, on the other hand, merely attacked me, and did not deal with the issues under discussion.

Rev. BlueJeans

brianthebard wrote: »

DF in 'the government was not thatcherite enough!' shocker.

Brianthebard in thanking and +1ing every suggestion that involves expenditure, without any concept as to where the money is going to come from, shocker.

brianthebard wrote: »

At least someone willing to acknowledge the downsides of cuts, good post P.B.

What would you have the state do to come up with the money for all this hug a teacher/guard/traveller/long term unemployed nonsense?

What part of €3bn in interest repayments as of now has escaped you, and those who think that we shouldn't be cutting from a basis of artificially high tax receipts based on transitionary returns due to property?

What part of you fails to realise that like it or not (and I sure don't), our tax base needs widespread reform?

brianthebard

Rev. BlueJeans wrote: »

Brianthebard in thanking and +1ing every suggestion that involves expenditure, without any concept as to where the money is going to come from, shocker.

couldn't even come up with your own line? :rolleyes: Don't know where you've come up with the idea that I just want to increase spending but go ahead, have fun with your strawmen.

Rev. BlueJeans

brianthebard wrote: »

couldn't even come up with your own line? :rolleyes: Don't know where you've come up with the idea that I just want to increase spending but go ahead, have fun with your strawmen.

Go on then. Share with us where all the money for these baubles is going to come from.

Permabear

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johnnyskeleton

donegalfella wrote: »

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By the end of the year, Ireland's deficit could well be €27bn as well as the 11 month figure doesn't include a projection for december nor does it take into account annual only expense issues (e.g. gap in social welfare fund). The BoE puts the deficit at 25bn for 2009 and nearly 22bn for 2010.

The 2010 figure for deficit is 3bn below 2009 but includes 1bn magic income from the bank guarantee scheme and doesn't include any further recapitalisations. Income tax is to rise slightly in 2010, despite predicted job losses and the very real wage cuts in the public sector (which will result in lower income tax and vat receipts).

Forgetting any possible recap for the moment, if the finances went through as planned it would take €3-4bn out of the economy. That's about a 2% drop in GDP. Yet the government predicts a reduction of gdp of 1.5%. So the private sector is apparently going to grow by 0.5% next year.

Let's forget about speculative things such as the ERSI's prediction that there will be up to 70k more job losses and look at what we know. Companies that went bust in 2007 are only reflected in our GDP in 2009. This is because of a) company returns are filed the following november and b) time lag in statistics. So the firms that ceased trading in 2008 only affected our returns etc in 2009 and have not yet been reflected in the CSO's statistics. A lot of firms stayed open over christmas 08 only to close in jan 09. This is why there was a spike in signing on at this time. Dell, which was worth 5bn to the economy, will only be reflected in the 2011 GDP statistics.

So let's assume that between business closures and scaling down (lets be generous and say only half as severe as 2009's figures) GDP drops by 3.5%. The government are relying on something which will bring a 4% rise to the economy in 2010 which will mitigate the majority of the losses not yet accounted for and the cuts in public borrowing. In 2011 assuming no cuts in the 2011 budget, something will have to bring in a 3% or more increase in GDP to balance out the loss of Dell alone so as to give us 0% growth.

I don't disagree with what youre saying, but it should be noted that even if taken at their height, the government's plan doesn't add up and are based on seeing high levels of growth in the next few years. It's hard to see growth coming from anywhere because we are too expensive and, for all the talk of the smart/green/buzzword economy, we simply don't have all that much to attract hard science jobs. It's all just wishful thinking really.

A short sharp correction might do more to help, but it still won't solve the problem. I calculate that if 10bn was cut, it would reduce the deficit by 2-3bn and we would need 12-15bn to be cut next year as well.

Equally, if we look at David McWilliam's suggestion of a 25% instant cut to the whole government budget get us back on track, this would result in 15bn in gross cuts, less the additional 5bn in interest, increased sw claims etc, and say 3bn in reduced income tax/vat, we would only be really reducing the deficit by 7bn, and the drop in GDP which would follow would probably negative these cuts as regards deficit as % GDP.

So in short, I don't see that there is much that can be done to rectify the problems at the moment. One solution leads to another problem and vice versa.

cson

National debt is almost €16,000 for every man, woman and child in this country. That's going to have to be paid somehow and Lenihan is deluded if he thinks the worst is over. NTMA lists the debt at €67bn, to put it in simple terms, it would require 17 more budgets like yesterdays to clear that. Just to contextualise things for posters here who seem to be of the opinion that adding more to that debt will make it disappear.

P. Breathnach

donegalfella wrote: »

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Well, it would have helped if we had generated some budget surpluses in recent years, but that didn't happen to any worthwhile extent. Had we done so, we could have taken some heat out of the market and created a reserve that could now serve us quite well. But the right-wingers in government wouldn't have that: tax cuts were preferred as a political option. So we don't have any fat to see us through a hungry period and, yes, that is a problem.

More generally, an economy can sustain moderate exchequer deficits in the long run. The real increase in the national debt can grow more or less in line with economic growth; the nominal increase can be in line with growth + inflation. Obviously, that's a long-run average, and the amount of increase can vary from year to year.

Ireland in 2009 is like a person who has taken a large salary cut. He now earns €31,000—but wants to continue living the lifestyle of someone who earns €55,000, so he makes up the difference between his income and his expenditure with credit cards and personal loans. Unfortunately, he can only sustain that pretense for so long. Eventually he will face mounting debts, and he will struggle just to pay the interest on what he has borrowed. That's where we're headed if we continue to regard living within our means as some kind of right-wing shibboleth.

I agree that we have an acute problem, and the debt cannot be allowed grow at those grotesque rates. The difference between us is one of judging how quickly we should slow it down. I am inclined to trust the judgement made by the government in consultation with the ECB. In addition to the economic judgement, there is the question of a political judgement: how far the government can go without causing great hardship and social discontent. My impression today, one day after the budget, is that they got it about right overall. I'm hearing squeaks of protest rather than howls of protest.

The state has provided support to the unemployed, the ill, and the old for decades. It has always maintained public services. But never before has the state inflated social welfare and the public sector so quickly. Our public sector wage bill has grown from €10 billion in 2001 to €21 billion in 2009. Social welfare spending rose from €7.8 billion in 2001 to €20.4 billion in 2009. Welfare recipients and public servants enjoyed the fruits of the economic boom—but now that revenue is back to 2003 levels, they refuse to accept that the boom is over and that the money is no longer there to meet their demands.

That's human nature. You could not push public sector pay and social spending back to 2003 levels in one go (not that I expect that we will go all the way back there, anyway). As I already said, the difference between us is one of judging how rapidly we should retrench.

SkepticOne

P. Breathnach wrote: »

The same reasoning applies to cuts. You cannot cut your way out of a recession.

This is a good point. The cuts won't directly get us out of recession. In fact, they will have the effect of making the recession worse in the short term, but that doesn't mean they aren't necessary.

Unfortunately, we've gone well beyond the point where the government can stimulate the economy back into activity so we've ride the roller-coaster all the way down before it comes back up.

Sand

@P. Breathnach

Well, it would have helped if we had generated some budget surpluses in recent years, but that didn't happen to any worthwhile extent. Had we done so, we could have taken some heat out of the market and created a reserve that could now serve us quite well. But the right-wingers in government wouldn't have that: tax cuts were preferred as a political option. So we don't have any fat to see us through a hungry period and, yes, that is a problem.

Are you saying the size of the cuts in taxation ( which accompanied increased economic activity and revenue, as youd expect ) outstripped the ridiculous growth in spending on social welfare and the public sector?

The fiscal issue is not down to tax cuts. It is down to a program of tax cuts allied to a massive, politically motivated spending binge based on unsustainable revenue derived from a property bubble encouraged by state policy. This massive spending binge was justified on socialist grounds, not right wing grounds - the deposing of evil right wing McCreevy, the emergence of The Last Socialist in Ireland, and the constant harping from Labour and the Trade Unions to spend, spend, spend.

If McCreevy had been retained we could have expected a far greater degree of restraint on spending (there still would have been an increase, McCreevy *is* a politician - benchmarking was a disastrous policy that cost the state 1 billion and first emerged on McCreevys watch) than we saw on Cowens shift.

I agree that we have an acute problem, and the debt cannot be allowed grow at those grotesque rates. The difference between us is one of judging how quickly we should slow it down. I am inclined to trust the judgement made by the government in consultation with the ECB

The problem is one of perspective then: No one advocating cuts on spending is unaware of the deflationary aspect of such cuts. But they are very aware that this spending is being funded by borrowing, borrowing that needs to be serviced. And the longer this borrowing continues, the greater and greater portions of revenue must be sucked out of the state and sent abroad to service that debt. Too say nothing of how much of public sector wages are heading north to shop, acting as an economic boost to the UK, not to us.

Some may think - well, not my probem. My kids, or their grand kids will just have to work harder. But I'm worth it.

But we need to take responsibility and recognise that we cannot live on our national credit card - we need to cut spending ASAP. It wont be easy, but choking off economic growth and public services by diverting as much as a third of all revenue we can reasonably expect to raise to servicing debt each year has its own economic impact.

Cut now, or suffer more later. Personally, given that choice, I prefer to cut now. There will be deflation, but its the lesser of two evils. Especially given we are only talking about returning to 2001-2003 living standards, not the 1840s - though given the reactions to the budget from the usual parasites you wouldnt know that.

As I already said, the difference between us is one of judging how rapidly we should retrench.

It comes down to how much of a national debt you want to pass down to future Irish to service.