The myth that FF ever paid down the national debt

johnfás

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I've done a simple little graph showing the Irish national debt between FF coming to power in 1997 and 1999. We do not have absolute figures for 2010 because the year has not yet ended but it will be considerably higher than the 2009 figure. The graph dispells the myth that Fianna Fáil ever really paid down the national debt. Our level of debt in 2006-2007 (what you might call the height of the boom) was roughly the same as it was a decade previous.



The only thing that did change was the ratio of debt to GDP as is demonstrated by the graph below which comes courtesy of the NTMA. As the standard international comparator of debt is as a percentage of GDP the politicians were able to spin the illusion that our national debt was falling. This is akin, in a domestic context, to pretending you have actually paid down your mortgage simply because you got a pay rise. This only changes your ability to repay your loan, rather than decreasing your loan itself.



Beyond this, we know that GDP is not really the best measure of the Irish economy and has not been since the mid to late 90s as we attrached alot of foreign direct investment. I have not yet looked up the tables, but it is likely that our debt to GNP ratio has been alot higher than people are led to believe by the GDP figures.

In 2006 construction accounted for roughly 23% of GDP (it would be even higher as a percentage of GNP) as compared to an EU average of 12%. Even if we required a higher than European average rate of building we know that this was grossly over inflated fuelled by cheap credit. These construction figures generated two illusions in the Irish economy - 1) that our GDP was higher than it rationally should have been and 2) that our employment levels were higher than they rationally should have been. Ireland never really achieved full employment - the only time that we achieved it was thanks to and during an unsustainable building boom. The net result of this is that if you were to write out part of the construction sector from our GDP figures (the unsustainable overspend) our debt:GDP ratio would have been even higher than FF pretended that it was.
 


Chrisco

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But that is the international norm:

the capital is never paid back; the economy grows and inflates it into irrelevance.
 

anfieldabff

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I've done a simple little graph showing the Irish national debt between FF coming to power in 1997 and 1999. We do not have absolute figures for 2010 because the year has not yet ended but it will be considerably higher than the 2009 figure. The graph dispells the myth that Fianna Fáil ever really paid down the national debt. Our level of debt in 2006-2007 (what you might call the height of the boom) was roughly the same as it was a decade previous.



The only thing that did change was the ratio of debt to GDP as is demonstrated by the graph below which comes courtesy of the NTMA. As the standard international comparator of debt is as a percentage of GDP the politicians were able to spin the illusion that our national debt was falling. This is akin, in a domestic context, to pretending you have actually paid down your mortgage simply because you got a pay rise. This only changes your ability to repay your loan, rather than decreasing your loan itself.



Beyond this, we know that GDP is not really the best measure of the Irish economy and has not been since the mid to late 90s as we attrached alot of foreign direct investment. I have not yet looked up the tables, but it is likely that our debt to GNP ratio has been alot higher than people are led to believe by the GDP figures.

In 2006 construction accounted for roughly 23% of GDP (it would be even higher as a percentage of GNP) as compared to an EU average of 12%. Even if we required a higher than European average rate of building we know that this was grossly over inflated fuelled by cheap credit. These construction figures generated two illusions in the Irish economy - 1) that our GDP was higher than it rationally should have been and 2) that our employment levels were higher than they rationally should have been. Ireland never really achieved full employment - the only time that we achieved it was thanks to and during an unsustainable building boom. The net result of this is that if you were to write out part of the construction sector from our GDP figures (the unsustainable overspend) our debt:GDP ratio would have been even higher than FF pretended that it was.
Well done excellent analysis.
What do you expect from those turds, they were cooking the books in the early 80's and they are still cooking the books.
The new government can expect a few nasty surprises once they take control. FF are a corrupt, undemocratic party that put cronyism ahead of any concern for our country.
Just go, for gods sake go.
 

hammer

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Well done. Proper analysis.

Everything Fianna FAIL says or does should be questioned.

They are a party of "spinners" & LIARS.
 

euroboy

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I'm no fan of the government and how they have ran the economy, but during the boom times there was always a certain level of national debt due to the nature of what comprises public debt. That doesn't mean that FF lied or misled the people when they said it was paid down. There will always be a base level national debt.

During the period 1999-2008, we had an average national debt of 30-35bn, but that compromised of state saving schemes with an post, and cash reserves at the ntma, and some borrowing for capital spending. The state saving schemes alone account for 10bn of that 30bn. The NTMA usually held 10-20bn in cash(money that was borrowed but unspend for good financial planning/emergenices)

For the government to have nil national debt, it would have meant we would have had to send out cheques to all the people who had money in prize bonds, installment savings. It would also meant the NTMA would have no spare cash reserves.

So I think people must be cautious about jumping on the anti-ff bandwagon over the national debt. There is alot to criticise FF on, but the national debt up to 2008 is not one of them.

It's failure to fix the tax system once the bust happened, has resulted in us borrowing 15-20bn last year and this year, to bridge the deficit gap. That is something to be critical off. We should have had tomorrow's budget 3 years ago.
 
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McDave

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I've done a simple little graph showing the Irish national debt between FF coming to power in 1997 and 1999. We do not have absolute figures for 2010 because the year has not yet ended but it will be considerably higher than the 2009 figure. The graph dispells the myth that Fianna Fáil ever really paid down the national debt. Our level of debt in 2006-2007 (what you might call the height of the boom) was roughly the same as it was a decade previous.



The only thing that did change was the ratio of debt to GDP as is demonstrated by the graph below which comes courtesy of the NTMA. As the standard international comparator of debt is as a percentage of GDP the politicians were able to spin the illusion that our national debt was falling. This is akin, in a domestic context, to pretending you have actually paid down your mortgage simply because you got a pay rise. This only changes your ability to repay your loan, rather than decreasing your loan itself.



Beyond this, we know that GDP is not really the best measure of the Irish economy and has not been since the mid to late 90s as we attrached alot of foreign direct investment. I have not yet looked up the tables, but it is likely that our debt to GNP ratio has been alot higher than people are led to believe by the GDP figures.

In 2006 construction accounted for roughly 23% of GDP (it would be even higher as a percentage of GNP) as compared to an EU average of 12%. Even if we required a higher than European average rate of building we know that this was grossly over inflated fuelled by cheap credit. These construction figures generated two illusions in the Irish economy - 1) that our GDP was higher than it rationally should have been and 2) that our employment levels were higher than they rationally should have been. Ireland never really achieved full employment - the only time that we achieved it was thanks to and during an unsustainable building boom. The net result of this is that if you were to write out part of the construction sector from our GDP figures (the unsustainable overspend) our debt:GDP ratio would have been even higher than FF pretended that it was.
Excellent post JF. The resort to GDP here has always been a phoney exercise misrepresenting the actual state of the Irish economy. It works for countries with strong indigenous industries, which is why it is an official stats standard. But the GDP model distorts the Irish economy whose "GDP" economy is grossly inflated by the internal accounting of MNCs which use Ireland to launder profits.

GNP is a closer reflection of the realities of the Irish economy. I'd be interested to see if you can retrieve a graph which expresses Ireland's debt in GNP terms.
 

euroboy

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Beyond this, we know that GDP is not really the best measure of the Irish economy and has not been since the mid to late 90s as we attrached alot of foreign direct investment. I have not yet looked up the tables, but it is likely that our debt to GNP ratio has been alot higher than people are led to believe by the GDP figures.
.
Yes, if we were to use debt/GNP, it would surely yield a higher debt burden. But given that during that period our national debt was a base level, it just meant that we decided to have considerable savings with an post, and signifcant cash reserves as a percentage of our yearly national income. What comprised our debt then, was very healthy and nothing to be ashamed of.

But I would agree, the politicans got alot of political capital from using GDP figures. But the point is, it is normal if not desirable for us to have some level of national debt.

What is not desirable is if that national debt is due to current spending. Excluding the bank bailout, we have added over 30bn to our national debt over the last 2 years to pay for teachers, social welfare, guards, etc. That is what has caused the nominal debt line to shot up since 2007. From our failure to have a tax system that generates enough tax revenue to fund state spending(plus a little borrowing allowed for stimulus or automatic stablisation) is a grave failure.
 
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McDave

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Why is it excellent?

Because it fits with an agenda of bashing the government.

Plenty to bash FF with, but this is not one of those sticks.
I'm giving my opinion euroboy. And in my opinion, GDP has always been a phoney yardstick of our economic performance, and one routinely abused by self-serving FF spokespeople. Johnfas has called it well, and provided excellent visual evidence.

Anyway, what's with this trolling "agenda of bashing the government" horsepoo? I'm happy to bash this atrocious government. By fair means or foul. It's long past time to be rid of them, don't you agree.
 

gombeennation

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aint no votes in ireland for being prudent and paying off your debts. no siree. much better to pump any excess money we had into a giant ponzi scheme - keep the cash flowing around - con people into thinking we had a real economy. that will get you votes - and thats exactly what the thieves/liars/conmen did. had to come to an end at some stage - that stage is now.
 

euroboy

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I'm giving my opinion euroboy. And in my opinion, GDP has always been a phoney yardstick of our economic performance, and one routinely abused by self-serving FF spokespeople. Johnfas has called it well, and provided excellent visual evidence.

Anyway, what's with this trolling "agenda of bashing the government" horsepoo? I'm happy to bash this atrocious government. By fair means or foul. It's long past time to be rid of them, don't you agree.
GDP/GNP/Happiness index, people will always use whatever suits their point.

My point is that having some level of national debt during the boom(real or otherwise) was both necessary and desirable. Necessary in that the state must build a reputation on the int'l markets(though alot of our borrowing was domestic), and desirable in that we should have cash reserves if it we pay interest on it.

Using GNP or GDP is relevant.

However, saying that the government is wrong to have done that is what I don't like.

What has Johnfas called well? and what does his graphs provide visual evidence of? He has provided graphs, but his analysis is wrong and its been jumped on by people who want something to bash the government with.

And not, I don't think I agree with you that using foul means is okay to bash the government with.
 

euroboy

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aint no votes in ireland for being prudent and paying off your debts. no siree. much better to pump any excess money we had into a giant ponzi scheme - keep the cash flowing around - con people into thinking we had a real economy. that will get you votes - and thats exactly what the thieves/liars/conmen did. had to come to an end at some stage - that stage is now.
There are very legitmate reasons for the government not to have paid off its debts in full. Firstly, it provided a safe saving scheme for citizens that was and continues to be used by savers. Secondly, it was wise for the NTMA to always have cash on hand. (but i would agree, it might have been better if that cash on hand was money taken out of the booming economy). Thirdly, sometimes even if we don't need to borrow, it is wise to have an established relationship with borrowers(though they have soon turned on us).
 

McDave

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And not, I don't think I agree with you that using foul means is okay to bash the government with.
Considering the foul nature of what FF has visited on Ireland in the last 13 years, including the bank guarantee, any means to get rid of them is fair. As I reckon most voters would agree...
 

euroboy

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Considering the foul nature of what FF has visited on Ireland in the last 13 years, including the bank guarantee, any means to get rid of them is fair. As I reckon most voters would agree...
I wouldn't have must faith in what the voters think about things.

Those voters that ran eyes first to FF when it was ruining this country with its reckless policies.

Now those same voters will run to whatever party will promise them the sun, moon and stars, oh and the odd freebie, perk and benefit without asking them to pay. Of course, the best vote winner will be that no-one except the bankers will suffer.

But thats democracy for you. Once Lab-SF + FG ruin the country, their voters will run back to FF.
 
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flavirostris

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But thats democracy for you. Once Lab-SF + FG ruin the country, their voters will run back to FF.
I don't think so. you lot have fcked up a bridge too far this time
 

jpc

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I wouldn't have must faith in what the voters think about things.

Those voters that ran eyes first to FF when it was ruining this country with its reckless policies.

Now those same voters will run to whatever party will promise them the sun, moon and stars, oh and the odd freebie, perk and benefit without asking them to pay. Of course, the best vote winner will be that no-one except the bankers will suffer.

But thats democracy for you. Once Lab-SF + FG ruin the country, their voters will run back to FF.
That's a fine bit of pre revision revisionism there.
How exactly will they top the FF ruination of the nation?
 

orbit

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There are very legitmate reasons for the government not to have paid off its debts in full. Firstly, it provided a safe saving scheme for citizens that was and continues to be used by savers. Secondly, it was wise for the NTMA to always have cash on hand. (but i would agree, it might have been better if that cash on hand was money taken out of the booming economy). Thirdly, sometimes even if we don't need to borrow, it is wise to have an established relationship with borrowers(though they have soon turned on us).
That's all true, but it's the Alice in Wonderland attitude to words and turning their meaning upside down that's the problem. I remember Coughlan saying on the radio that "we paid off the debt", when we clearly hadn't. It's that very loose connection with numbers (and logic) that has us in the present mess.
 

gombeennation

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GDP/GNP/Happiness index, people will always use whatever suits their point.
and FF are the masters of the con - using anything other than the real figure.

My point is that having some level of national debt during the boom(real or otherwise) was both necessary and desirable. Necessary in that the state must build a reputation on the int'l markets
reputation as what? borrowers who borrow when they dont need to?
what a wonderful plan.


and desirable in that we should have cash reserves if it we pay interest on it.
what? can you elaborate on that. i don't understand what you are getting at.

Using GNP or GDP is relevant.
it is relevant when you are trying to spin figures. a wise man once said "people will always use whatever suits their point." and no one better than FF at that.

However, saying that the government is wrong to have done that is what I don't like.
why don't you like it? too close to the bone?
 

MDaniel

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(...) 1) that our GDP was higher than it rationally should have been and 2) that our employment levels were higher than they rationally should have been. Ireland never really achieved full employment - the only time that we achieved it was thanks to and during an unsustainable building boom. The net result of this is that if you were to write out part of the construction sector from our GDP figures (the unsustainable overspend) our debt:GDP ratio would have been even higher than FF pretended that it was.
This is very impressive. We have to make sure to spread this story around. Will anyone have the opportunity to say this during The Frontline tonight? Is it still broadcast Live (or 30 seconds Live delayed?). They might have pre-recorded it because of the weather.
Maybe the Budget has been prerecorded as wellpetunia
 


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