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A budgetary illusion
Read more about: Economy, Government, National Development Plan
The centrepiece of today’s announcement of public spending cuts by Brian Lenihan and Brian Cowen is a claim that the motivation is to cut only current spending while preserving capital spending. This may make for pleasing-sounding spin and apparent commitment to the NDP but it ignores one simple thing: capital projects don’t exist in isolation. They need people and operations and maintenance to function i.e. they need current spending. If you cut only current spending, then you’re squeezing the ability to effectively operate whatever capital facilities you do manage to build.
The deeper issue is that the apparent rule of thumb that they came up with: “cut current, preserve capital” is a poor substitute for having had in place a medium-term budget framework linked to the annual budget announcements which would have allowed for a more structured modification of spending when the bad news came. This is just one institutional reform that could easily have been done in the good times, and now will have to be cobbled together on the back foot in the bad times. Indeed, any breach of the Stability and Growth Pact (about which the Brians were extremely evasive today) will require some such framework. We’re going to be pinned down on basic fiscal economics for quite a while.
Nicholas Sarkozy, when he became President of France, cut public representation by 50%.
Ministers Cowen & Lenihan should do the same, but by 70%.
A Cabinet of Six Ministries;
Cut all Government spending;
Reform all Taxation - the principal method for controlling spending;
Abolish Political Donations;
Reform the trade union movement and make the Labour Court rulings appelate;
Freeze all pay rises for 18 months;
For all the state agencies, their excuse is that they can’t cut them right away because they have a statutory basis so it takes new laws to abolish them. This shows the risk of the Dail just rubber-stamping agency after agency in legislation. There is a lot of past political failure to account for.
Then change the Laws.
That is the job of an elected Government.
They say that turkeys don’t vote for Christmas, but Ahern has been booted out and consigned to the dustbin of history.
Time to move forward; to show that change is possible; that Corruption is over; that Waste is yesterday and that honest, honourable, hard-working men & women will come into their own, without being feather-bedded by social tinkering.
Remember that compound Inflation between 1930 and 1957 was around 3%.
A postage stamp and a box of matches cost the same in 1957 as it had in 1930!
People paid cash for what they bought.
They saved for what they could not immediately afford…
…Because they knew the price would be the same as soon as they had saved enough.
This all ended when Fianna Fail (Dr. Ryan) introduced Turnover Tax (TOT) at 2.5%. It raised so much extra money - to waste on social projects - that he doubled it, to 5%, the following year.
Then George Colley (FF) introduced Deficit Budgeting and it was downhill from therein out.
In 1977, FF abolished Domestic Rates - the final nail in Ireland’s coffin.
The tragedy is that children in the age group 14-25 have never known how to do without; what is is like to be told “We cannot afford to buy you a new toy telephone, or the latest imported trainers…”
Have a look — any day of the week - at what is being dumped — Refrigerators; TV sets; perfectly good clothes; food…
These are CORI’s - Sean Healy’s people - who need new for old to retain his highly personal definition of human dignity.
If Cowen really means to tackle the enormous problems he inherited form the profligate Ahern, he Must start with …
WASTE
I meant to write “From the profligate Ahern…”
And, of course, I should have mentioned Decimalisation - the biggest single inflationary act of madness that was ever introduced - and Metrication - another golden opportunity to inflate prices.
Not forgetting that milk prices are distorted by Dairy companies manufacturing Ice Cream, which is made from powder - not milk.