Spending on infrastructure usually helps to grow the economy. Spending money which is taken in part from the wealth creating sector of the economy on pay rises that are not tied to productivity increases does not have a net positive impact on growth and living standards.
We need to manage our national finances more prudently.
- Thread starter Jazz1945
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Yes.
How do you know this. Is there any evidence to support it.
In the Irish context, if there was evidence that the wealth generating sector was struggling to raise finance for investment, you might have a point, but (outside the housebuilding industry, and that for very specific reasons), I see no evidence that there is any shortage of finance for investment.
As for increased productivity, in most public sectors areas, especially health but also education, the problems being experienced are problems of management and governance rather than lack of productivity.
Spending twice as long teaching LC maths students Algebra for the same pay, or the same length of time for less pay, does nothing to address the reasons why Matrices were dropped from the LC maths course. There are huge issues of the education system being fit for purpose, or indeed agreeing what the purpose might be.
An electronic medical records system could transform the health service, irrespective wether nurses are rostered for 35.5 hours or 39.
It is easy to see issues in the public services, but bringing them all back to money either 'give us more' or we don't get value for money' are just lazy responses from people who do not wish to engage in the difficult discussions as to how public services should be reformed.
You would need to know the relevant expenditure multiplier.
I will have a look.
Ireland’s Spending Multipliers – Irish Fiscal Advisory Council
www.fiscalcouncil.ie
What do the results show?
The paper’s results show that government spending may have positive and significant initial impacts on Irish economic activity, though these effects tend to disappear and/or become statistically insignificant over the longer term. Caution is warranted. We find large differences in fiscal multiplier estimates, and we find very limited evidence that the effects are significant in the medium to long run. While this is to be expected in the case of a small open economy such as Ireland, where higher imports can offset the overall impact on output, it underscores the need for caution in drawing strong inferences from the results.People who claim that higher public/State expenditure will boost the economy are presuming that the relevant expenditure multipliers are large and positive.
I would not be so sure.
A quote from the Fiscal Council paper on multipliers:
"Our findings suggest that there is some evidence of positive, significant initial impacts on economic activity associated with fiscal policy, yet these effects disappear over the longer term. The estimated impacts are wide-ranging and uncertain, with limited evidence of positive impacts on the economy from government consumption as a whole. Within this, we find broadly negative—though insignificant effects—from public sector wages. Investment spending tends to have higher short-term multipliers, but the significance disappears over the medium to long term. This is consistent with theory and with the fact that Ireland’s relatively large dependence on imports leads to high leakages of income (Cronin and McQuinn, 2014)."
There are huge leakages out of the Irish economy, so much extra public spending leads to more imports.
I would not be so sure.
A quote from the Fiscal Council paper on multipliers:
"Our findings suggest that there is some evidence of positive, significant initial impacts on economic activity associated with fiscal policy, yet these effects disappear over the longer term. The estimated impacts are wide-ranging and uncertain, with limited evidence of positive impacts on the economy from government consumption as a whole. Within this, we find broadly negative—though insignificant effects—from public sector wages. Investment spending tends to have higher short-term multipliers, but the significance disappears over the medium to long term. This is consistent with theory and with the fact that Ireland’s relatively large dependence on imports leads to high leakages of income (Cronin and McQuinn, 2014)."
There are huge leakages out of the Irish economy, so much extra public spending leads to more imports.
Not even Paul Murphy would come out with that as a justification for uncontrolled spending. That banks and insurance companies are clamouring to buy government bonds !!
They are forced into buying them by government regulations, they are not free buyers of bonds and guess what irish banks are required to hold much more of those bonds than their European counterparts which explains why Ulster bank and KCB are leaving, along with other irish specific reasons
Governments are basically "shaking out" financial institutions for their own funding requirements.
As for "negative real interest rates" yes that is correct but it is because the ECB is forcing down interest rates by continuing to buy those bonds and not allowing interest rates to rise but that long cycle looks to be ending as inflation now almost out of control
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Kind of. (Edit: @Protocol 's post above provides a better answer)
It's not about access to finance, it's about the overall impact of taxation on economic growth, especially increases in what are already high rates of taxation. In general borrowing to replace the cash you have paid in tax is not ideal.
People are either hard working or not hard working. Systems and processes are either efficient or inefficient. It is very important to make that distinction. A person who works very hard in an inefficient process is working hard but working inefficiently.
Think of a factory where someone had to run between two machines which are 100 metres apart to keep them operating. That is inefficient. Moving the machines together would increase efficiency.
It doesn't matter how fast they run, it will still be inefficient. A hospital admission system which requires two administrator to input the same data at two different stages of the patient admission process is inefficient, it doesn't matter how fast the administrators work. Inputting the data once would improve efficiency.
I agree. Paying the teacher more just sucks up more public money. That is not efficient in that there is no return on the investment.
Exactly, so agree to shorter hours if they agree to an electronic medical records system being introduced and the job losses in admin and the changes in work practices for the Nurses to better utilise the time they have freed up.
I agree.
Sophrosyne
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Don’t apologize, I am not disagreeing with everything you say.
I wouldn’t agree that the entire system is broken, but yes, we do have issues.
The problem is not always one of transparency, though sometimes it is, but it can be a lack of data. This leads to idle speculation, often presented as irrefutable fact, as to what the problems actually are.
Some time ago I posted here, here and here about cost outruns in the Health budget. You can see that lack of data, untimeliness of data transfer and misalignment of the Health Vote and the HSE budget rendered reports meaningless so that oversight and budget planning was obstructed significantly.
You could say that the same is true of other “problem” departments.
Most of the fiscal reports I have read, contain numerous annotations and caveats to the effect that they are compiled on the basis of available but inadequate data. This, of course, devalues reports despite the best efforts of their authors who usually call for better and more timely reporting so that realistic budgets can be set and performance analysis improved greatly.
Issues cannot be pinpointed and dealt with unless they can be identified clearly.
Government departments and State agencies need to embrace technology and/or better technology in order to manage their businesses and to provide the necessary information for oversight committees to interrogate.
I think you've a good point there about productivity @Purple. Unfortunately thats exactly how the original Social Partnership was supposed to work in the late 90s, but in reality its never really been established that it worked, because some unions always saw it as a bargain they could later demand to renegotiate. Hence we have a scenario where most public sector office workers are demanding a reduction in hours from 37-39 to under 35 (https://www.rte.ie/news/2022/0414/1...orking hours saw,hours or more were unchanged.) while junior doctors are still on a workload that is simply bananas (https://www.thejournal.ie/junior-doctors-burnout-overtime-working-conditions-5743137-Apr2022/)
'It' being tax from the wealth producing sector. There is an ideal level of tax in any economy, and it certainly is not zero. Personal taxes in Ireland are high, that is possible because wages are high. A French computer programmer would rather €100k in Dublin and pay an effective tax rate of 40%, than earn €50k in Toulouse and pay effective tax rate of 25% [I admit I made up the numbers}, but the point is that high pay and high taxes are connected.
The problem is that many of the 'machines' in our Health Service are producing unwanted or dud parts. Many people in hospital beds should be in nursing home care. Whether there are 3 nurses or 5 looking after them is secondary.
My local private hospital does MRI scans until 11pm. That is effective use of valuable machinery. However many of the scans are completely redundant. No one in the system has the courage to say to a complainant with a sore arm, 'you don't need a scan go home and it will get better by itself'.
Sophrosyne
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Not the best example in the world - diabetes, heart problems, rheumatoid arthritis ....
Doctors order scans after a series of questions and a physical examination of the patient.
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But the marginal tax rate is what people look at. It's also what makes people work shorter hours.
We have expensive childcare and very high marginal tax rates and we wonder why women with children worker short hours.
Taxing wealth creation reduces wealth creation. Taxing wealth retention does not.
I agree, but the healthcare Unions resist all meaningful change so nothing meaningful changes.
Yes, as should be the case in every publicly funded hospital.
That's up to the GP that sent them there.
They also order them because they aren't competent enough to make a proper diagnosis, because they are trying to keep their patient happy or because they want them out of the room and the next patient in.
Possibly not the best example of what I was trying to illustrate, which ws that the problems in the health system go beyond how hard people work or how efficient the processes are.
Preventative health care, treatment at the lowest appropriate level, giving people the treatment they need rather than the treatment they expect. There are many other more general example of improved approaches that could transform the health service more effectively than staff working longer or faster.
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And the health system management is too weak to change that, mostly because it lacks the political support to do so.
I worked briefly many years ago in one of the Universities. The University employed teams of maintenance staff and grounds keepers. Each group had their own uniforms. The restrictive practices were a joke. Two guys came to paint my small office one day, set up ladders dust covers etc. disappeared for a week, came back and finished the job in 2 hours. I understand they did nixers in the time they were allocated to my office.
The university never challenged this directly, they simply brought in outside contractors and paid them a contract price. They bought off the existing staff with pay rises and generous redundancy packages. Today the University employees very few maintenance staff and those are on revised contracts.
The Health Service management have never been strong enough to launch something like this or indeed any other reform plan.
A friend of mine just left his relatively well paid job in the HR department of a University. He said that he just couldn't deal with a place where work practices were so bad and so little work was actually done. He reckoned that he was becoming unemployable in any private sector job as he was losing the ability to actually do any work.
Public sector workers are not seeking a reduction of hours to under 35 hours , why would they when an independent review body has already stated that the vast majority of public sector workers be returned to a standardised minimum full time 35 hour week ( not under 35 hours ).
The Government has accepted this recommendation and the good news is that it comes into effect today !
It's certainly good news in our house. Herself is currently taking some parental leave, but as she will still work the same hours, it means that she will in effect get a pay rise. Likely many thousands of staff in the same boat. So a big thank you to everyone for this and apologies to anyone affected by reduced resources / increased national debt payments in the future. But sure, we're alright Jack.
And you're never going to be able to out bribe \ out spend the parties of the magical money tree, losing game to get into.
Sophrosyne
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I appreciate what you are getting at, but my main point is that we shouldn’t have to guess.
Spend and outruns should be based on verifiable facts.
As the saying goes, “In God we trust! Everyone else must bring their data”.
For instance, a review by health economists at RCSI University of Medicine and Health Sciences and University College Cork and published in BMC Health Economics Review, shows that Health surveys in Ireland are not capturing enough information about patients’ use and cost of health services and the economic consequences of disease.
These surveys are carried out in the absence of an electronic medical records system, which would provide the kind of information you mention.