Should the full 9 billion adjustment be done in december ?

fliball123

syklops wrote: »

I know economists hate hearing the "in my household" analogy, but, I have a 3000 euro credit card bill. It so happens my take home pay this month came to exactly 3000 euro. Should I pay off my credit card bill right away, saving myself interest and not owing anyone any money, or just pay it off in increments over the next few months? I'll have to pay the money off anyway. Yes I could pay it all off at once, but I would have no money for food or rent. I would owe zero money to the bank but I would be starving from not having food, I'd have no ticket to get to work so might lose my job, and I could get turfed out from my flat for not paying the rent. Not an exact same scenario but similar.

You said getting the 9Bn is as easy as getting 2.5 from the Public Service, 2.5 from the dole(I assume you mean social welfare), and 4Bn in taxes. 1 Billion is 1 thousand million. With a population of about 5 million, Ireland has about 1.3 medical card holders. For what ever reason that they have a medical card the government has decided that 1.3M cant afford healthcare, so it is logical they cant afford any additional taxes as well. That means you need to get 1000 euro in tax from every single one of the other 4Million people. That includes toddlers, pre-teens, teenagers, welfare recipients, and the elderly. Considering you just took 2.5Bn from the dole and welfare recipients, that leaves them in an even worse situation with regard to paying additional taxes. Parents of 5 children will have to pay 3500 thousand in additional taxes, so basically a tax on children.

Its completely undo-able.

It has to be done or the country will default and then we will really be in the sh1tter...look I dont want taxes any more than the next person..but if we could do this we could see a large amount of our debt and deficit go via telling the trioka to fcuk right off with their promissory notes....That figure of 9billion is not mine its what we are borrowing

tayto lover

syklops wrote: »

I know what you mean. One of the worst points of the economic downturn IMO is that the entire population has turned into armchair economists. Now an armchair football manager I can just about stand, armchair economists are a step too far.

They saw the great job the "professional economists" did over the last 10 years and decided they could do just as good a job. Especially as their mistakes make no difference.

The Tree of Liberty

Blackbra32 wrote: »

I don't think there is any point in dragging it out for another 3 years. I think what the country really needs is one big adjustment that will put more taxes on the rich as well as cut oap and other welfare payments.

They could start by cutting the PS wastage such as the lengthy list of allowances published the other day. Clear out the quango boards (still nowhere near started with a paltry 48). Cut the rate of dole to encourage people to take up lower paid jobs and clear out half of the administrative civil and public servants ahead of frontline cuts.

Of course while Labour are in government none of this will happen, but the country will go bust as the spending is totally unsustainable.

Additional taxes will only compound the situation as we can see from the recession in the last two quarters of 2011. And all this before the big crash comes in Australia, on which we are dependent for emigration.

The deficit needs to be closed rapidly but I would favour two tranches of heavy cuts to the deadwood and no additional taxation as more taxes will be counter productive.

[Jackass]

Am I the only one who thinks the current fiscal policy is retractionary and a large budget defecit should be allowed run in order to expand the Economy? There's zero growth and in the mean time we're taking more and more money out of the Economy.

I'd much rather see an acceptable defecit agreed upon that could be put on a 10 year moratorium whilst we implement the measures required in order to have a profitable economy once again and thus have the ability to repay rather than trying to strangle ourselves in order to service these loans.

Curtail the banking reserve ratio, give a minimum lending threshold and effectively, through the banks we own, instigate a productivity initiative.

We need to be putting out more money to grow the Economy, not servicing a debt and removing wealth from the economy...

Thoughts?

GCU Flexible Demeanour

[Jackass] wrote: »

Am I the only one who thinks the current fiscal policy is retractionary and a large budget defecit should be allowed run in order to expand the Economy? <...>

We need to be putting out more money to grow the Economy, not servicing a debt and removing wealth from the economy...

Thoughts?

Many people think like you, and have said so on this very thread. What I, and a few like me, find troublesome is how the point we're making - which is that so much of our expenditure leaks out in imports that stimulating demand cuts our own throats - seems to be ignored. We make the point, but people don't seem to even acknowledge it. Oul Constantine can be a bit fast and loose with data be times, but the article below is good and to the point

http://trueeconomics.blogspot.ie/2010/06/economics-05062010-economics-of-fiscal.html

<...> there is no conclusive evidence that borrowing at 5 percent amidst double-digit deficits and ‘investing’ in public services does any good for the economy.

Firstly, one has to disregard any evidence on fiscal stimulus efficiency coming out of the larger states, like the US, where imports component of public and private expenditure is much smaller than in Ireland. The US estimates of the fiscal stimulus multiplier also reflect a substantially lower cost of borrowing. Even if Ireland were to replicate US-estimated fiscal stimulus effects, higher cost of our borrowing will mean that the net stimulus to Irish economy will be zero on average.

Second, international evidence shows that for a small open economy, like Ireland, the total fiscal multiplier effect starts with a negative -0.05% effect on economic growth at the moment of stimulus and in the long run (over 6 years) reaches a negative -0.07-0.31%. Add the cost of financing to this and the long-term effect of deficit financed stimulus for Ireland will be around -2.3% annually. <...>

MissFlitworth

¬zfr|dDDD

daheff

as i see it

Irish economy is 'too open' -we're too dependent on the rest of the worlds economy booming to have our economy working.


whatever about wastage in the PS, the long term way out of this is to produce something (anything!) that we can export and sell to foreigners so that whenever the world economy starts to boom again we can benefit again.

When we get back on our feet we need to drastically overhaul the PS & make it more efficient & cost effective.
then we need to move our economy to not be so vunerable to the world economy (close it a bit)


Short term- the solution to the world economic problem might just be the thing that the Germans are terrified of.....inflation!! Inflation reduces the relative size of the debt & repayments...makes them more managable.

So long as the bundesbank has a strangle hold of the ecb, then inflation will be off the table.

ardmacha

but it has done so during the period when public services delivered to the population actually contracted due to previous privatizations and the expansion of private services substitutes (e.g in education and health, as well as transport etc)

I think you are confusing fact with selective use of facts embedded in an opinion blog. For instance, the numbers in third level education increased by a quarter between 2000 and 2007, which could only be characterised as a contraction in blog-blog land. Gurdgiev well knows this, as he was teaching some of these people.

As a share of GNP, the net exchequer pay and pensions outlay in 2015 is projected to be 0.4 percentage points below the 2008 level, representing a relatively modest decline.

On the contrary, this represents a remarkable decline. The need for public service provision does not diminish in a recession, taking third level again as an example which has increased by a further 10% over the 2007 level. So you'd expect the cost of public services to increase as a proportion of GNP, when in fact it has declined.

antoobrien

[Jackass] wrote: »

Am I the only one who thinks the current fiscal policy is retractionary and a large budget defecit should be allowed run in order to expand the Economy? There's zero growth and in the mean time we're taking more and more money out of the Economy.

The fact that we are already running a large deficit and it's not helping growth kinda undermines the theory that we should be running a bigger one, especially as the markets think we're just on the border line for sustainability as it is.

If we try to borrow more money the markets ill shut us out again. The only other way to get more money is taxes or selling stuff off - neither of which are exactly palatable.

Maura74

antoobrien wrote: »

The fact that we are already running a large deficit and it's not helping growth kinda undermines the theory that we should be running a bigger one, especially as the markets think we're just on the border line for sustainability as it is.

If we try to borrow more money the markets ill shut us out again. The only other way to get more money is taxes or selling stuff off - neither of which are exactly palatable.

Put a wealth tax on properties or on people earnings at the top making millions rather than trying to get blood from a stone such as attacking the poorest at the bottom.

The Lib Dem party is trying to get implemented soon in UK, should be interesting to see if they will succeed with the Tories millionaire cabinet that he is Deputy PM.

http://www.bbc.co.uk/news/uk-politics-19690327

eire4

How about we also look into ways of bringing in new revenue instead of it all being about cuts. For instance you could legalize Marijuana for medical purposes and regulate it as such. That would be a new source of revenue plus it would create jobs and the knock on effect that causes.

[Jackass]

antoobrien wrote: »

The fact that we are already running a large deficit and it's not helping growth kinda undermines the theory that we should be running a bigger one, especially as the markets think we're just on the border line for sustainability as it is.

If we try to borrow more money the markets ill shut us out again. The only other way to get more money is taxes or selling stuff off - neither of which are exactly palatable.

Well, not really regarding us already running a budget deficit.

The difference being that we are borrowing in order to meet day to day expenditure of the Government, so it is much less about investment and a lot more about surviving.

Of course this needs to be curtailed, but in my opinion, bridging the deficit in terms of spending on investments should be done in line with cutting expenditure on day to day running of the country.

This would involve a large public sector wage adjustment, social welfare adjustments, review of grant system - and not to target the less well off, but to bring in efficiency to Government departments, restructuring of how that workforce is used (such as moving over staffed administration departments to reduce numbers and redeploy administration staff to Hospital and Policing services, so as to free up many of the specialist workers and increase efficiency and front line services whilst also making cuts).

Regarding taxation, you can't tax your way out of a recession. There's not a massively convincing body of research that I'm aware of that is conclusive one way or the other, but I'm of the belief that cutting expenditure (i.e. wages) is a more effective way of bridging a deficit than increasing tax.

If we look at the Laffen Curve model and use the 1980's as a case study, the Government tried to tax their way out of a recession in the past and the result was the increased tax amount actually yielded less tax revenue than at the lower rate. This is mainly due to people on high wages being taxed heavily leaving the country (brain drain), self employed under declaring tax to survive, lower income workers moving on to welfare as it is no longer worth their while to work at such high tax rates and had a reverse effect on what was intended. There is an optimum point at which you can charge tax and after that point, tax Revenue, despite being charged at a higher percentage rate, begins to fall. Say for example charging a base rate of 30% vs 60% will yield the same amount of revenue, but collecting tax at 65% will yield less Revenue than collecting tax off the same people at 35% (% rates for illistration only).

Cuts in wages, in my opinion, are more palpable and thus more effective than keeping wage rates the same, but having people see a massive chunk of what they are earning at the higher rate going to the Government, rather than them seeing their earning less but a reasonably small amount is going to the Government (even though the net effect of both is virtually the same).

What I was referring to when I talked about running at a large deficit and having a mortorium on repayments is based along the Keynesian type model that the less money you have, the more you should spend. If we are borrowing to service our day to day bills and then taking what we are earning to repay these borrowings, we're merely running around in circles and strangling any kind of potential growth. Imagine someone who is earning 200 euro per week, and is buying 250 euro worth of goods a week on their credit card, and they're trying to cut their credit card expenditure down to 210 euro a week, but still have to service the loan with all of their earnings (remember, cutting the budget deficit doesn't mean we're getting out of debt, we're still spiraling into more and more debt, we're just trying to reduce the level at which we're free falling into more debt, but we're hemerging money..).

Imagine this same person goes to the bank and says this is unsustainable, there's a minimum I can live on, which is say 210 a week, but I'm only earning 200 a week, so no matter what, I'm going to keep building debt above what I earn each week, getting more and more into debt, and I can't do anything productive with my money as it's all going into paying this credit card bill back. So how about you lend me 1,000 euro to set up my own small business, and this can increase my earnings and then once I'm back on my feet and have a lot more money coming in I wont use the credit card any more and I'll set up a payment plan to clear this debt, but just need a mortorium on the repayments for a year...That is essentially what I'm suggesting.

Get a loan agreed at E.U. level, or at least a freeze on payments for 10 years, use money raised from bond sales (which we've done suprising well with) to spend a few billion on investment in the Economy, upgrading road and rail networks, investing in business parks and incentive schemes for new business like subsidies, grants and Government loans, which once taken off will hopefully create employment, more investment in foreign markets to encourage relocation to E.U. / Irish markets from Britain, China & U.S., general all round innovation pumping money into expansionary measures within the Economy to create real growth, which will automatically raise Revenue through tax collection but most of all market this as a massive stimulus package to the Irish people and have it visible in small firm investments and return positivity to the markets and market it as our climb out of the recession. Consumer sentiment is critical in all of this, as no matter how much money is in the Economy, you need to have credible Government policy to influence how the consumers react to growth.

All the while, in the background, revamping our welfare and civil service structures to make them cheaper and more efficient.

I'm not saying I know this will work, but I definitely think it would be better than what we're doing right now, which is just kicking the can down the road and running around in circles, where as this would be a real attempt at growth and recovery, despite the many hurdles there would be in setting it up.

rugbyman

Blow fish ,

thanks for the link to Seamus Coffey. fascinating. was aware of the stuff but was not too sure of the reasoning.

Rugbyman