Hello Ronan – your last sentence is arguably the most important, as I believe there are lots of Irish people who are so disillusioned and confused by what the politicians standing for election are offering, that they might not bother to vote at all. Or worse still vote on the basis of sound bites or extremist views.
A suggestion for the undecided or “All politicians are the same” voter: make a list of the candidates that you dislike the most and work backwards up the list. That way you will arrive by default at your number one, two and three.
And then having voted, you can legitimately complain about the next Government and the actions it takes to shape our economy and country. Everyone’s vote counts and the polling station is one of those few places where no one else can tell you what to do.
John Mack
,
Excellent clarity, sensible approach. When Sarkozy, whom I dislike, accused Ireland of following the “American model” he probably meant, among other things, cutting taxes while increasing government spending, thus piling up dangerous levels of public debt that would sap the economy. He also probably meant lax regulation of businesses, especially the banks. American neo-liberalism is a total failure. Unfortunately in the US we will probably be unable to undo this policy. But in Ireland you can and you must.
The thing to emphasize is that taxes must be raised to pay off the debt that the Irish people themselves (not the badly managed banks), through their elected representatives, are responsible for. This kind of commitment to payment is fair, and the Irish people, and we observers from abroad, above all have been asking for fairness.
Cutting spending is also fair, and must be done in a fair way. Your broad suggestions define where fair cuts can be focused.
Why not invite the candidates too answer to a panel of you four on TV? (then YouTube). You are not “burners,” you have learned to speak lay economics, and you will be able, in this forum, to give a fair chance for sensible solutions to be heard – from the candidates for office.
[…] This post was mentioned on Twitter by Ronan Lyons, conorlittle. conorlittle said: RT @ronanlyons: Two questions on economic policy you should ask your #ge11 candidates http://bit.ly/f7ofWS #in […]
Thanks for the comments so far (and for those wondering, no I haven’t switched from Oxford to Cambridge!).
R
Shane Gleeson
,
Hi Ronan, could you expand on the last point in Q1? Cant get my head around it: “This is closer to 3% than 6% and would effectively mean “burning bondholders” by 50% domestically, while allowing the EU to protect senior bondholders.”
Great post. Your figures imprint very clearly the dire state of the public finances and give a really compelling visual description of the relative costs of state spending for each citizen. But I do not share your interpretation of this.
Your explanation of the deficits is pretty weak IMHO. You forget the key driver of any economy is growth. The key problem in Ireland is that economic growth has been fuelled by government spending, a credit bubble and a boom in consumer spending. It is the absence of productive outlets for capital in the real economy that has us in this mess. The policy hubris of Irish govts is not pro-cyclical spending, but their evasion of the structural weaknesses of the private sector by hoping to grow an economy by consumption alone.
I wrote about this in more detail on irishquestion.com Feel free to add your comments.
Great distillation of our economic challenge into two sharp questions. The data in your second chart are very powerful. Previously unimaginable debt numbers which bamboozled the financially traumatized electorate are immediately understandable when presented on a household basis.
Could you send me a copy of the data so that I can tinker with the presentation?
Hi Shane,
That’s well spotted – I was talking this post through with someone and I realised I short-cutted this point significantly by just giving the start and end. Effectively the only reason we want to “burn bondholders” is to reduce the national debt associated with the collapse of the Irish banking system. If we “burnt” them by half, say, instead of €50bn debt, we would have €25bn debt. This would halve our annual interest repayments.
The same thing could be achieved by halving the interest rate involved, without touching the amount. While this sounds like a cheat, it’s worth remembering that, because countries live forever and grow, it is almost never in a country’s interest to pay back the principal on national debt (which is why none ever do). All you need to do is service the debt, hence the ability to achieve what we want (halve the cost of the bank bailout) through a different channel.
Thanks one and all for the comments.
R
Michael J Connolly
,
With all the negative comments about the banking sector and so called corrupt people has anyone calculated what the banking sector has paid in taxes, levies etc to the state since 2000?? Also what dividends have been paid out to Irish shareholders and again what taxes have been collected on the dividends??
I wonder what the net position really is !!!???
John Mack
,
According to Brian Lenihan’s latest messenger boy statements, the ECB is adamant: no negotiations on anything. In effect, “Your government stuck it to you. Then we stuck it to you. Now live with it. You elected those bozos, not us. Age viriliter.”
Questions:
… Can Lenihan’s statements be trusted?
… If Europe is adamant, what advice would you give the new Irish government?
Finbarr O'Mahony
,
Hey Ronan, nice post. Quick question:
“Introducing an annual property tax, based on land value”.
My concern with this would be retired folk who had bought their property when prices were much less than they currently are, even post bubble. Could this be implemented in a way that ensure that they won’t be forced to sell their home to pay the tax based on the new value?
Hi Finbarr,
There are two ways of doing this:
(1) Deciding as a society that we don’t want to include citizens over a certain age in this, and giving them an exemption.
(2) Acknowledging that older people may often be in a situation of sitting on a lot of wealth (their property) but being at the same time income-poor, and deferring all tax liabilities until their death.
There is no right answer, but if we don’t tax some homes, we are just increasing the tax burden on other homes. There are no easy ways out of this.
Thanks for the comment,
Nice post. Looking at the graph suggests an average monthly tax bill of about €2,800 per month or nearly €34,000 per year!! That’s a respectable income, not a tax bill. Just shows the scale of the expenditure problem we face. We either have to raise taxes to fund it, or cut expenditure to match our revenue. The fiscal deficit has got lost in the GE campaign and has the potential to be a bigger problem than the banks ever will be.
Hugh Quigley ,
Hello Ronan – your last sentence is arguably the most important, as I believe there are lots of Irish people who are so disillusioned and confused by what the politicians standing for election are offering, that they might not bother to vote at all. Or worse still vote on the basis of sound bites or extremist views.
A suggestion for the undecided or “All politicians are the same” voter: make a list of the candidates that you dislike the most and work backwards up the list. That way you will arrive by default at your number one, two and three.
And then having voted, you can legitimately complain about the next Government and the actions it takes to shape our economy and country. Everyone’s vote counts and the polling station is one of those few places where no one else can tell you what to do.
John Mack ,
Excellent clarity, sensible approach. When Sarkozy, whom I dislike, accused Ireland of following the “American model” he probably meant, among other things, cutting taxes while increasing government spending, thus piling up dangerous levels of public debt that would sap the economy. He also probably meant lax regulation of businesses, especially the banks. American neo-liberalism is a total failure. Unfortunately in the US we will probably be unable to undo this policy. But in Ireland you can and you must.
The thing to emphasize is that taxes must be raised to pay off the debt that the Irish people themselves (not the badly managed banks), through their elected representatives, are responsible for. This kind of commitment to payment is fair, and the Irish people, and we observers from abroad, above all have been asking for fairness.
Cutting spending is also fair, and must be done in a fair way. Your broad suggestions define where fair cuts can be focused.
Why not invite the candidates too answer to a panel of you four on TV? (then YouTube). You are not “burners,” you have learned to speak lay economics, and you will be able, in this forum, to give a fair chance for sensible solutions to be heard – from the candidates for office.
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Ronan Lyons ,
Thanks for the comments so far (and for those wondering, no I haven’t switched from Oxford to Cambridge!).
R
Shane Gleeson ,
Hi Ronan, could you expand on the last point in Q1? Cant get my head around it: “This is closer to 3% than 6% and would effectively mean “burning bondholders” by 50% domestically, while allowing the EU to protect senior bondholders.”
Great post btw!
Steve Daley ,
Hi Ronan,
Great post. Your figures imprint very clearly the dire state of the public finances and give a really compelling visual description of the relative costs of state spending for each citizen. But I do not share your interpretation of this.
Your explanation of the deficits is pretty weak IMHO. You forget the key driver of any economy is growth. The key problem in Ireland is that economic growth has been fuelled by government spending, a credit bubble and a boom in consumer spending. It is the absence of productive outlets for capital in the real economy that has us in this mess. The policy hubris of Irish govts is not pro-cyclical spending, but their evasion of the structural weaknesses of the private sector by hoping to grow an economy by consumption alone.
I wrote about this in more detail on irishquestion.com Feel free to add your comments.
Steve Daley ,
For readers of this blog, the 2 questions you should ask every candidate who knocks on your door are:
1. Do you believe state spending can save the economy?
2. How do you propose to restructure the economy to expand domestic productvity not resell value?
Comments welcome at IrishQuestion
Johnny Waldron ,
Ronan,
Great distillation of our economic challenge into two sharp questions. The data in your second chart are very powerful. Previously unimaginable debt numbers which bamboozled the financially traumatized electorate are immediately understandable when presented on a household basis.
Could you send me a copy of the data so that I can tinker with the presentation?
Great work!
Johnny
PS: Glad to hear that you remain a dark blue
Ronan Lyons ,
Hi Shane,
That’s well spotted – I was talking this post through with someone and I realised I short-cutted this point significantly by just giving the start and end. Effectively the only reason we want to “burn bondholders” is to reduce the national debt associated with the collapse of the Irish banking system. If we “burnt” them by half, say, instead of €50bn debt, we would have €25bn debt. This would halve our annual interest repayments.
The same thing could be achieved by halving the interest rate involved, without touching the amount. While this sounds like a cheat, it’s worth remembering that, because countries live forever and grow, it is almost never in a country’s interest to pay back the principal on national debt (which is why none ever do). All you need to do is service the debt, hence the ability to achieve what we want (halve the cost of the bank bailout) through a different channel.
Thanks one and all for the comments.
R
Michael J Connolly ,
With all the negative comments about the banking sector and so called corrupt people has anyone calculated what the banking sector has paid in taxes, levies etc to the state since 2000?? Also what dividends have been paid out to Irish shareholders and again what taxes have been collected on the dividends??
I wonder what the net position really is !!!???
John Mack ,
According to Brian Lenihan’s latest messenger boy statements, the ECB is adamant: no negotiations on anything. In effect, “Your government stuck it to you. Then we stuck it to you. Now live with it. You elected those bozos, not us. Age viriliter.”
Questions:
… Can Lenihan’s statements be trusted?
… If Europe is adamant, what advice would you give the new Irish government?
Finbarr O'Mahony ,
Hey Ronan, nice post. Quick question:
“Introducing an annual property tax, based on land value”.
My concern with this would be retired folk who had bought their property when prices were much less than they currently are, even post bubble. Could this be implemented in a way that ensure that they won’t be forced to sell their home to pay the tax based on the new value?
Ronan Lyons ,
Hi Finbarr,
There are two ways of doing this:
(1) Deciding as a society that we don’t want to include citizens over a certain age in this, and giving them an exemption.
(2) Acknowledging that older people may often be in a situation of sitting on a lot of wealth (their property) but being at the same time income-poor, and deferring all tax liabilities until their death.
There is no right answer, but if we don’t tax some homes, we are just increasing the tax burden on other homes. There are no easy ways out of this.
Thanks for the comment,
Ronan.
Seamus Coffey ,
Hi Ronan,
Nice post. Looking at the graph suggests an average monthly tax bill of about €2,800 per month or nearly €34,000 per year!! That’s a respectable income, not a tax bill. Just shows the scale of the expenditure problem we face. We either have to raise taxes to fund it, or cut expenditure to match our revenue. The fiscal deficit has got lost in the GE campaign and has the potential to be a bigger problem than the banks ever will be.