Borrowing for capital expenditure yes. If government can identify capital projects that will generate an economic return that exceeds the cost of capital then borrowing to finance them makes sense.
However as I understand it we are borrowing €1 billion a month to finance current expenditure.
Cutting public expenditure is usually discussed in terms of taxing to spend, but in our case at present we are borrowing to spend. Therefore every euro less that we borrow would indeed reduce the size of the economy by a euro or perhaps more through a multiplier effect.
However every euro borrowed today reduces public expenditure in the future.
If you were hungry would take the food off your child's plate for your self. That is exactly what we are doing today except that at least would be more honest.
And returning to the real world, how would you propose this sudden brake to spending should occur?
Cut spending on health by X%, cut all public sector employees' pay by Y%, and cut all social welfare payments by Z%, and voila, problem solved?
Before we think about applying a brake to current spending, we need to take our foot off the accelerator. Current expenditure has been on the rise for at least the last two years. Meanwhile we have been slashing the capital expenditure that might provide a Keynesian stimulus (if, as BB pointed out above, you believe in such things).
Those who are vocally opposed to austerity in Ireland might want to wait until we actually have some.
Mandelbrot: Can you explain why you think it is a poor choice of analogy. We are borrowing one third of every thing we spend. It is the next generation that will have to repay our borrowings. I think the comparison with taking food from a child's plate is very appropriate.
If Ireland backs itself into a corner where we are no longer able to borrow there would be no money available to pay for any aspect of government spending and starving might be less metaphor and more like reality.
The issue isn't whose lifestyle we are borrowing to support or whether we spend too much or too little on social welfare.
I'm going to make an argument that I reckon is fairly analogous to your original post above:
"Pollution from the burining of fossil fuels damages the environment and will cause serious problems for future generations - so we should amend the constitution to prohibit the burining of fossil fuels."
The fact that people (and the wider economy) depend on fossil fuels, in the exact same way that they currently depend on borrowed public money, and I can't provide a viable suggested alternative to the use of fossil fuels (or borrowed state money), pretty much negates what is in theory a good idea.
The bottom line for me is that State borrowing should be minimised - that's just common sense and hardly boat rocking.
.................................................................................................I'm going to make an argument that I reckon is fairly analogous to your original post above:
"Pollution from the burining of fossil fuels damages the environment and will cause serious problems for future generations - so we should amend the constitution to prohibit the burining of fossil fuels."
The fact that people (and the wider economy) depend on fossil fuels, in the exact same way that they currently depend on borrowed public money, and I can't provide a viable suggested alternative to the use of fossil fuels (or borrowed state money), pretty much negates what is in theory a good idea.
The bottom line for me is that State borrowing should be minimised - that's just common sense and hardly boat rocking.
I'm going to make an argument that I reckon is fairly analogous to your original post above:
"Pollution from the burning of fossil fuels damages the environment and will cause serious problems for future generations - so we should amend the constitution to prohibit the burning of fossil fuels."
The fact that people (and the wider economy) depend on fossil fuels, in the exact same way that they currently depend on borrowed public money, and I can't provide a viable suggested alternative to the use of fossil fuels (or borrowed state money), pretty much negates what is in theory a good idea.
The bottom line for me is that State borrowing should be minimised - that's just common sense and hardly boat rocking.
That seems a reasonable analogy. The issue of increased green house gases is something new and as Purple points out there may be several possibilities to deal with it, these are not well understood yet.
Methods for dealing with debt are well understood. There are only three ways, increased productivity, increased workforce or inflation.
None of these are likely to be available to Ireland over the next generation on anything like the scale that is needed.
-We already have productivity levels near the highest in the world, any increase can only be marginal,
-we already have workforce participation rates near the highest in the world,
-prospects for future population movements don't augur well for a workforce increase.
-there is very strong political will in Germany and other Eurozone countries to resist inflation
We may figure out a way to resolve the green house gas issue. We know the ways to resolve debt and they are not going to be available to us
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