Is it time to phase out the concept of national debt?

eth0

If there is ever a time that we get this whole mess behind us. My idea would be that there would be a constitutional amendment that would prevent governments from increasing the debt once the current deficit is gone.

You see it is only too tempting for governments to borrow large sums of money to pay for infrastructure and leave their successor with a massive heap of debt and these lads can't say "we're not going to build anything new and pay off the debt instead" they will be hugely unpopular and not get re-elected, so the old crowd gets back in to borrow some more.

Maybe if we can manage this we could get a more direct form of democracy, since there will be strict spending limits. Even in the good time I remember hearing about a "short term return to borrowing". This was during the tiger when the money was supposed to be rolling in and they were still overspending.

ArmaniJeanss

What happens near the end of a financial year when we suddenly realise that our 'income' is going to fall short of our projected outgoings by say a Billion and borrowing is no longer an option?
Suddenly the government has no way of paying the PS wages, the childrens allowance, the dole, whatever. The money isn't there. Anarchy???

And borrowing/debt is not of itself always a bad thing for governments. Lets say someone came up with a plan to fix the health service. A genuine fix, everyone studied it and realised it would solve all the problems and we'd have the best health system in the world. It would also save €2.5B a year from our current health budget.
But it would cost €50B up front. If we could borrow that €50B, pay it back at €3B a year for 30 years and clear the debt/interest would it be a justifiable move? Even though as of Day1 we would have added a staggering €50B to our debt.

GSF

ArmaniJeanss wrote: »

What happens near the end of a financial year when we suddenly realise that our 'income' is going to fall short of our projected outgoings by say a Billion and borrowing is no longer an option?

Monthly reporting saves you year end nightmares

fliball123

GSF wrote: »

Monthly reporting saves you year end nightmares

Weekly reports...for a body such as the ps who are supposedly very bright according to those on these boards you'd think that a simple task of weekly/monthly reports would be achievable..Good Opening post by the way and a good way to move forward

I am pie

Weekly reports, of the national spend ? Which would take more than a week to accumulate the data, compile into a readable format and god knows how long to discuss any required change of plan ?

Crazy plan is crazy.

fliball123

I am pie wrote: »

Weekly reports, of the national spend ? Which would take more than a week to accumulate the data, compile into a readable format and god knows how long to discuss any required change of plan ?

Crazy plan is crazy.

Really not if every individual department spends say 20/30 mns a week updating an excel spreadsheet..this is very basic. Ala your department has a yearly budget, break it down to weeks you have your weekly budget it would take maybe 2 weeks before you realise that there is either a problem with the budget or that you are overspending in some areas...Say an simple example Dept A has a budget of 52k ... thats 1 k a week..Dept A employ 3 people and that is working out at 2k a week..Straight away we know its been under budget at the start...If each cell or unit within the structure of the PS were asked to micromanage their spend we may actually get somewhere and its not like they have not got the managers to do so

Tea drinker

Corporations with far bigger spend than Ireland are able to manage finances fairly ok. (ok have less staff reporting)

A possibly more interesting approach to your question OP is, if the concept of a nation is dissapearing - why not the concept of it's debt

OS119

fliball123 wrote: »

...Ala your department has a yearly budget, break it down to weeks you have your weekly budget it would take maybe 2 weeks before you realise that there is either a problem with the budget or that you are overspending in some areas...

and if the spend is uneven and unknowable throughout the FY?

say winter fuel payments: no spend at all till December, then all hell breaks loose for 8 weeks and wipes out the budget, the weather clears up and you heave a sigh of relief, then in late February the snow returns - what happens to the strict FY budget then?

how about the Gardai and Army - all goes reasonably well and roughly as planned and then there's an upsurge in terrorist activity halfway through the year that just goes on and on - overtime goes through the roof, the spend on fuel and training goes up, you need to look at recruitment, you may need to buy more equipment (public order kits, bomb disposal 'wheelbarrows', perhaps another two AGS helicopters, C-IED jamming gear, etc) there's increased anti-gun running activity by the NS, customs and the AC to be paid for, and you may need to look at improving the security of national/economic and political infrastructure - so do you get to January and say, 'sorry boys, we've hit the budget, we're back to peacetime tempo despite two bombs going off in Dublin last night'?

what happens to your list then?

thetonynator

OS119 wrote: »

and if the spend is uneven and unknowable throughout the FY?

say winter fuel payments: no spend at all till December, then all hell breaks loose for 8 weeks and wipes out the budget, the weather clears up and you heave a sigh of relief, then in late February the snow returns - what happens to the strict FY budget then?

how about the Gardai and Army - all goes reasonably well and roughly as planned and then there's an upsurge in terrorist activity halfway through the year that just goes on and on - overtime goes through the roof, the spend on fuel and training goes up, you need to look at recruitment, you may need to buy more equipment (public order kits, bomb disposal 'wheelbarrows', perhaps another two AGS helicopters, C-IED jamming gear, etc) there's increased anti-gun running activity by the NS, customs and the AC to be paid for, and you may need to look at improving the security of national/economic and political infrastructure - so do you get to January and say, 'sorry boys, we've hit the budget, we're back to peacetime tempo despite two bombs going off in Dublin last night'?

what happens to your list then?

Could we not plan to have a couple of billion left over to allow for all the inevitable small issues that crop up?

And we wouldn't need to got rid of borrowing completely, we could try balance the budget every year, and plan to spend less and in an emergency we could borrow a billion over a year if we had to. But there needs to be a limit to it, instead of the ridiculous deficit we have now.

whydoibother?

I think the amount of borrowing allowed should be linked to economic growth. We may need a deficit in difficult times like now, but in good times, say if there is 2% growth, there is no excuse for a government increasing our debt so that they can do a give-away budget to get themselves reelected. Even in the difficult times, I would have limits.

Icepick

Banning borrowing altogether is silly, but restricting deficit to a certain % of GDP (+-) would be beneficial.

ardmacha

Banning borrowing altogether is silly, but restricting deficit to a certain % of GDP (+-) would be beneficial.

This thread is rather off the point. Ireland had a low debt/gdp ratio in 2008, but the private sector was accumulating debt like there was no tomorrow and unwinding that mess has meant an inevitable increase in public debt. Simplistic ratios are not the solution, more complex measures are required.

Icepick

ardmacha wrote: »

This thread is rather off the point. Ireland had a low debt/gdp ratio in 2008, but the private sector was accumulating debt like there was no tomorrow and unwinding that mess has meant an inevitable increase in public debt. Simplistic ratios are not the solution, more complex measures are required.

Of course, that couldn't be the only measure.

thetonynator

Icepick wrote: »

Banning borrowing altogether is silly, but restricting deficit to a certain % of GDP (+-) would be beneficial.

Hasn't the EU got a plan to have us all limit out deficit to 3% of GDP soon?

bnt

thetonynator wrote: »

Hasn't the EU got a plan to have us all limit out deficit to 3% of GDP soon?

Not a plan as such, but it was a requirement for entry to the Euro, under the terms of the Maastricht Treaty. The Government deficit - how much they could go over budget in a year - was limited to 3% of the annual GDP. Deficits are measured per annum, but Debts are the absolute figure irrespective of time, and that was limited to 60% of GDP. It's pretty clear, now, that some countries were fudging the figures, just a wee bit ...

Part of the "problem" with the Euro situation is that the ECB and/or European Parliament can set targets, but there are political limits on how they can enforce the targets. They can't force Ireland to raise corporate tax rates, for example. which we know they'd like to do. So there can't really be much of a "plan" coming from the European side, and that's why current discussions are primarily about defaults and bailouts.

spider guardian

Even if such a measure was brought in would we have governments employing 'creative accounting' to get around fiscal limits like what happened with the Stability and Growth Pact?

As Icepick said above, restricting borrowing to a % of GDP would be sensible, as I think would restricting the spend of borrowed money to infrastructure and other tangible investmenst as opposed to spending it on wages or other day-to-day expenses.