We need to manage our national finances more prudently.

Peanuts said:
The biggest problem I think is that politicians do not get rewarded for doing the right thing, i.e. Governments not getting re-elected. That leads to overspending/tax -cuts in order to 'buy' votes. I don't know how we get around that.
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Don't think there's a solution, there is a growing discussion that western democracy doesn't work on most levels.

The Democracy that Socrates advocated 2500 years ago was novel but I don't think he would have foreseen it been the way that billions would be ruled.

Freedom is such a cliche today and when ones takes a little time to look at the world, the 90% of the global population that are struggling with lifes problems want solutions now, whatever the cost.

I honestly think that we are worse off in totality than at any other time in history, in the mid 1950s there was a report that showed, even only 10 years after the war the planet had enough to feed, house and educate the global population, if that was done then we probably wouldn't be in the mess that we've endured since.

Political parties will say what they want and people will vote for them based on that, but people also have a responsibility to understand, question and hold to account any promises made, but we don't.

And to get back to the OP there are plenty of ways that could be looked at in order to create that responsibility but " turkeys don't vote for Christmas "
 
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Hi Coyote

You highlighted only half of what I said. Did you not see the first half?

there are differences between managing the family finances and managing the public finances, we should apply the same general principles to both.

I fully acknowledge the differences between them, but the same general principles apply. We should try to live within our means. We can spend more in the bad times and spend less in the good times.

The problem with saying "family finances and public finances are different" is that people say that it's ok for the government to run up massive spending as later generations will pay it off.

Are you suggesting that the current government is managing the public finances well? Do you think that they are right in blowing the artificially high tax take and the artificially low cost of servicing the government debt?

Do you think that they should be spending a lot more and taxing a lot less?

Brendan
 
Charlie McCreevy was berated for the opposition for not spending enough.

Just as Paschal Donohoe is now.

Both claimed to be managing the finances prudently. Charlie wasn't and Paschal isn't either.

Apparently what Charlie actually said was "When I have the money I will spend it, but when I don't, I won't."

Although no one seems to be able to find the original source of the quote.

Brendan
 
Purple said:
So what, we are still borrowing to fund current public expenditure, or do you think we shouldn't build any roads or schools or hospitals?
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Hi Purple

I think you might have misunderstood Coyote's figures?

He is saying the opposite.

At the moment, we are not borrowing for current expenditure. We are borrowing for capital expenditure.

I think we are all agreed that borrowing for appropriate capital expenditure is ok.

Brendan
 
Brendan Burgess said:
...We need a structural solution to this political problem. We should give the Irish Fiscal Advisory Council, or some new statutory body, the power to manage the public finances for the long-term. Take it out of the hands of politicians. It would decide whether a surplus or deficit were appropriate, and the government of the day could make choices on spending and taxation within those limits. If the government wanted to increase public expenditure, then they would have to increase taxes. If they wanted to cut taxes, they would have to cut public expenditure. But they couldn’t cut taxes and increase public expenditure unless the IFAC decided that running a deficit was the correct strategy at that time....
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Couldn't agree more Brendan, there is a structural deficit. In fact there are two structural deficits you've highlighted: 1) the politicians, 2) the power/ability to manage things competently.

The second is just as important, as in Ireland there is a complete lack of accountability for delivery in our "permanent government", which rarely is called out. Why politicians put up with this I'm not quite sure, as they take on all the risk when outlining their grand plans, which they then have little ability to ultimately control.

My proposal, there is a ready-made model we could apply. Taking a leaf out of the EU's book, we should establish an Irish "Commission". Its job being to propose legislation, implement & enforce it, and manage the budget. Perfect, no, but a damn sight better than what we have in place today.
 
NoRegretsCoyote said:
No, no, and no. Pooling our resources via taxes is an exercise in collective action, and it needs clear lines of accountability to those who contribute and benefit. Handing this over to an unelected body takes the power to far away from the people.
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Coyote, I would agree with you ideologically.

And it probably works well enough in Nordic countries and in Germany.

But it just doesn't work well in Ireland. We go from boom to bust. We had austerity when it would have been better if we could have afforded to spend. We are spending like crazy now, when we should be cutting back.

Brendan Burgess said:
We should give the Irish Fiscal Advisory Council, or some new statutory body, the power to manage the public finances for the long-term.
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I mentioned IFAC but it could be another body. But if we have another body, then we won't need IFAC.

We have handed the power over the setting of interest rates much further from the people - the ECB.

Wasn't interest rate policy under the control of governments for a long time and most of them have now handed it over to their Central Banks?

Brendan
 
Brendan Burgess said:
Charlie McCreevy was berated for the opposition for not spending enough.

Just as Paschal Donohoe is now.

Both claimed to be managing the finances prudently. Charlie wasn't and Paschal isn't either.

Apparently what Charlie actually said was "When I have the money I will spend it, but when I don't, I won't."

Although no one seems to be able to find the original source of the quote.

Brendan
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I seem to remember it was outside Department of Finance and was and RTE interview and the surplus running up to the budget was €4bn , It was George Lee's report and interview.
 
Brendan Burgess said:
You highlighted only half of what I said. Did you not see the first half?
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I quoted you in full!

Brendan Burgess said:
Are you suggesting that the current government is managing the public finances well? Do you think that they are right in blowing the artificially high tax take and the artificially low cost of servicing the government debt?
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I don't follow it closely enough any more to have a strong opinion. What I would say is that it is notoriously difficult to tell the difference in Ireland between temporary and permanent tax revenue.


Brendan Burgess said:
The problem with saying "family finances and public finances are different" is that people say that it's ok for the government to run up massive spending as later generations will pay it off.
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Of course it's okay. Sovereigns are perpetual, households are not. We are borrowing today so that future generations will have better public infrastructure. This will allow more economic activity to service the debt. In my experience accounting training can make it harder to understand this point as you end up looking at individuals and enterprises all the time and not at the big picture.

There is also the fact that on the demand side the financial system needs trillions in safe assets. Real interest rates are still negative. It would be a crazy government that would turn away free money to generate better public services in the pursuit of parsimony for its own sake.
 
I might not like a government increasing spending on social welfare and Sláinte Care and stuff like that. But I recognise the government's right to do that. But they should be obliged to raise taxes to fund expenditure.

Brendan
 
Brendan Burgess said:
But it just doesn't work well in Ireland. We go from boom to bust. We had austerity when it would have been better if we could have afforded to spend. We are spending like crazy now, when we should be cutting back.
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Ireland's boom-bust cycle is partially natural in origin due to an extremely open labour market.


Pro-cyclical fiscal policy don't help of course but I think the changes brought in after the last crash (Fiscal Council asssessment, and macro- and micro-prudential rules for banks) make the risk of boom-bust much lower.
 
Brendan Burgess said:
Hi Purple

I think you might have misunderstood Coyote's figures?

He is saying the opposite.

At the moment, we are not borrowing for current expenditure. We are borrowing for capital expenditure.

I think we are all agreed that borrowing for appropriate capital expenditure is ok.

Brendan
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No, I got that but which we choose to borrow for is just an accountancy issue. We could just as easily say that we are not borrowing for Capital expenditure but are for Current expenditure and allocate our resources that way.
We have increased current expenditure in a time when the economy is is a growth cycle. We're now going to start chasing inflation with increases in welfare and the wages of State employees and we are borrowing money to cover the total tab.
We can say that the borrowing is for Capital expenditure. Good!
We can say that the borrowing is for Current expenditure. Bad.
We can say that the borrowing is to service our debt. Even worse!

The bottom line is that we are borrowing and if we weren't increasing current expenditure we'd have to borrow far less.
 
mojoask said:
The second is just as important, as in Ireland there is a complete lack of accountability for delivery in our "permanent government", which rarely is called out. Why politicians put up with this I'm not quite sure, as they take on all the risk when outlining their grand plans, which they then have little ability to ultimately control.
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Very important point.
 
Sorry, I don't follow that at all.

It is not just an accountancy issue.

There is a huge difference between borrowing money to build the M50 and borrowing money to give teachers a salary increase.

Brendan
 
NoRegretsCoyote said:
Of course it's okay. Sovereigns are perpetual, households are not. We are borrowing today so that future generations will have better public infrastructure. This will allow more economic activity to service the debt. In my experience accounting training can make it harder to understand this point as you end up looking at individuals and enterprises all the time and not at the big picture.

There is also the fact that on the demand side the financial system needs trillions in safe assets. Real interest rates are still negative. It would be a crazy government that would turn away free money to generate better public services in the pursuit of parsimony for its own sake.
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But we're not doing that. The shortcomings in our health service are structural in nature. We are paying people more and hiring more people without addressing those shortcomings. We are also increasing pensions and other social transfers. That doesn't improve the social infrastructure for future generations, in fact it will probably do the opposite.
 
Brendan Burgess said:
Sorry, I don't follow that at all.

It is not just an accountancy issue.

There is a huge difference between borrowing money to build the M50 and borrowing money to give teachers a salary increase.

Brendan
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If you don't give the teachers a pay rise you'll have to borrow less money to build the M50.

So, why not say we're borrowing to give the teachers a pay rise and allocate the money for their pay rise to the M50? It's all coming out of the same pot.

The number of people working in the HSE increased by more than 20% between 2014 and 2020. There's now 135,000 full time equivalent employees working in and for the HSE. That cost as much as the new National Children's Hospital will ever cost.
 
I see the point you are making, but it's not really correct.

It assumes that we should not borrow to build the M50. There is actually nothing wrong with borrowing to build the M50.

Brendan
 
NoRegretsCoyote said:
Ireland will spend about 5% of national income this year on capital infrastructure. The government will run an overall small surplus so none of that 5% will be borrowed.
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Coyote

I am trying to understand your overall point.

Are you saying that our finances are sensibly managed? That running up the borrowing over the last number of years is not a problem? That we have spent the Corporation Tax windfalls and low cost of servicing the debt well?

And there is no risk of the state getting into difficulties when any or all of the following happens:
1) A fall off in Corporation Tax Revenue
2) A rise in interest rates causing an increase in the cost of servicing debt
3) A recession which will hit general tax revenues and increase our social welfare bill
4) The cost of Mica, refugees etc
5) Some other unexpected economic shock.

Brendan
 
Brendan Burgess said:
It assumes that we should not borrow to build the M50.
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I am perfectly happy with borrowing for capital investment.

There will be no borrowing for capital investment this year. Some posters on this thread are even claiming that we are borrowing for current expenditure, whereas in fact we are borrowing for neither!
 
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