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Brendan Keenan: Post-Budget tax regime will mirror that of dreaded '80s


SPN

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Brendan Keenan's article today shines a very bright spotlight on that big white elephant in the corner of the room - the chronic government overspending that has made a bad situation immensely worse.

Brendan Keenan: Post-Budget tax regime will mirror that of dreaded '80s - Brendan Keenan, Columnists - Independent.ie

The next two austerity Budgets are designed to close the €6bn gap between tax revenues and basic public spending. After that, money must be found for the costs of the national debt.

The IMF reckons that, even with normal growth, the gap is around €10bn a year. One could argue with that figure, but it is certainly substantial. Even if growth does not pick up next year, it is still imperative that the €6bn be raised.

These iron-hard facts get little place in the Budget debates, largely because no one can see how Irish families are to find these kinds of revenues. But find them they must, unless the size of the State is drastically reduced.

Strangely, that never gets a mention, despite its extraordinary growth in the 2000s. All the austerity so far has succeeded only in keeping public spending at a constant level, even as national income falls.

The spending deal pitched to the Troika at the end of 2010 proposed to increase tax revenues back up to 2006 levels, and to bring government spending back down to 2008 levels - leaving a gap of €5 billion a year that we would somehow be able to borrow from some unspecified source.

The big problem with that strategy is that it is not possible to screw 2006 levels of tax out of an economy that is operating at 2002 levels.

Even if it was possible, where is the morality in forcing people in the real economy to endure extra hardships just so that the Bertie's vote buying promises in the mid noughties can continue to be honoured?


The IMF reckons that, even with normal growth, the gap is around €10bn a year.
There is no way to avoid the fact that this €10 Bn comprises +/-€5 Billion of PS pay, perks and pensions, and +/-€5 Bn of Social Welfare.

The spin from the CPG Rev2.0 proposals is that Howlin is going to achieve savings of €1 Billion a year.

In the real world the savings will have to be of the order of €5 Billion a year. No ifs, buts or maybes!


We learned in the 1980s that you can't solve an overspending problem by taxing the life out of the productive economy, and by jayzis did we test that theory to destruction.

In the 1987 General Election the PDs beat Amateur-FF into 4th place, because by 1987 the people had gotten very fed up of Amateur-FF actively preventing full flavour FF and FG from implementing the economic strategies that should have been implemented 5 years earlier.

I expect we will see the exact same thing happen in 2017 unless something is done that will see proper common sense economic policies being implemented BEFORE we hit the wall.

As things stand, by 2015 the Government will have racked up more than €100 Billion of new debt to fund chronic overspending in the years 2009-2014.

Just imagine if we had racked up this debt to build out a new 21st century standard infrastructure in Health, Education, Transport, Energy and Communications to replace the legacy 19th and 20th century infrastructure 100%.

We could have done that.

But instead we chose to keep on paying 2008 levels of pay, perks and pensions to the insiders, and 2008 levels of social welfare.

In 2015 we will end up only being able to barely afford 2000 levels of pay, perks and pensions for the insiders, and 1998 levels of social welfare, plus the interest on the €100 Billion, and we will still have the creaking, battered and obsolete 19th and 20th century infrastructure.

That's a lose:lose situation by any standard.


I had a small bet that the marginal tax and social security rates would approach the levels of the 1980s before this crisis is through.
Fixing a problem of chronic overspending by racking up taxation levels didn't work in the 80s, and it isn't working now.

How long do we have wait before people wake up to this reality and make the changes that are urgently needed?
 

thegregster

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In the 1987 General Election the PDs beat Amateur-FF into 4th place, because by 1987 the people had gotten very fed up of Amateur-FF actively preventing full flavour FF and FG from implementing the economic strategies that should have been implemented 5 years earlier.
That should be labour.
 

SPN

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spidermom

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What do you suggest SPN??

(specifics mind!!)
 

SPN

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Mr. Bumble

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ruserious

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What is really killing us is the really high interest rates the ECB/IMF is charging us to borrow to repay our debts to European banks.
 

culmore

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stop all secial welfare, let people work for their money.
 

Red_93

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Sinn Fein The Amateur FFailure Workers, Spoofers, Shítehawk Labour Party to give them their full title
You get wittier and wittier with every post. :roll:
 

SPN

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What is really killing us is the really high interest rates the ECB/IMF is charging us to borrow to repay our debts to European banks.
The Banks borrow the money to roll over their borrowings at between 0.75% and 1.5% if I remember correctly.

However this thread is about the Government overspending, not about legacy bank funding issues.
 

LDF

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Keenan is right and nobody should be surprised because we have a coalition of two parties - an unreformed Labour Party and a FG Party slavishly following the failed doctrine of Fitzgerald. Taxes will keep going up, spending will keep going up and growth will keep falling. The sooner the last of Garrett's children retires the better for all of us - the next GE should see a few of them gone. Good riddence.
 

gijoe

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What do you suggest SPN??

(specifics mind!!)
€5billion in Social Welfare cuts are entirely possible if only a government would develop a pair of balls. Cut the the standard €188/week rate to a rate that eliminates a lot of fraud by cutting the couples rate from €312 to say €155 per person and thereby eliminating the lone parent living with a partner merry go round. That will be a €33/week cut in the basic rate - surely worth a billion or so in savings. Cut child benefit down to a standard €80 and get rid of the 3rd and subsequent child and twins etc premium payments - thats the guts of another billion. Cut the elderly benefits packages - circa €500million. Eliminate the rent allowance - another €500million (just in case you think that is drastic Greece just closed down their whole housing department in their cutbacks i.e. all social went out the window). Cut the pension from €230 to under €200 another €500 million or so. Cuts in whole programmes to make up the difference and there you go!
 

dresden8

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Keenan is right and nobody should be surprised because we have a coalition of two parties - an unreformed Labour Party and a FG Party slavishly following the failed doctrine of Fitzgerald..
Err, a FG Party slavishly following the failed doctrine of Cowen and Ahern.
 

seabhcan

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What do you suggest SPN??

(specifics mind!!)
Up to 50% of PS wages are recycled as income tax/levies back to the gov. So cutting wages by €5bln does not close the gap by €5bln - more like €2bln. Then you have to consider the knock on drop in spending, which will probably cut another 500 mln from Vat receipts.

Similarly, cutting social welfare will have an impact on the retail sector and vat receipts.

Its not as simple as the OP suggests.
 

Mr. Bumble

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Up to 50% of PS wages are recycled as income tax/levies back to the gov. So cutting wages by €5bln does not close the gap by €5bln - more like €2bln. Then you have to consider the knock on drop in spending, which will probably cut another 500 mln from Vat receipts.

Similarly, cutting social welfare will have an impact on the retail sector and vat receipts.

Its not as simple as the OP suggests.
SPN - "But we can't continue spending more than we earn". Rinse and repeat ad nauseam.
 

niall78

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Err, a FG Party slavishly following the failed doctrine of Cowen and Ahern.
Wasn't that the Green doctrine as well?

SPN was a big Green guy here. I'm sure deep down he's delighted that FG and Labour are following his fail parties, failed policies.
 

SPN

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SPN - "But we can't continue spending more than we earn". Rinse and repeat ad nauseam.
If we earn €2 and we spend €3 then we have to be able to obtain the €1 in the difference?

It's all very well to slag me for pointing out how unsustainable this "strategy" is, but it is going to have to end some day.

When do YOU think it should stop?

At €100 Billion of new debt?
At €150 Billion of new debt?
At €200 Billion of new debt?

Please feel free to tell us how your plan will play out in the future, and most of all, where the money will come from.
 

Mr. Bumble

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If we earn €2 and we spend €3 then were will we obtain the €1 in the difference?

It's all very well to slag me for pointing out how unsustainable this "strategy" is, but it is going to have to end some day.

When do YOU think it should stop?

At €100 Billion of new debt?
At €150 Billion of new debt?
At €200 Billion of new debt?

Please feel free to tell us how your plan will play out in the future, and most of all, where the money will come from.
It's your OP. You were asked for specifics. Ar aghaidh leat.
 
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