Chop and tax it all into shape now

Bits_n_Bobs

I am just wondering about the perceived wisdom of spreading the cuts over 5/6/7 years (if we include the last two years) is actually correct?

If the new government were to have an emergency budget and just cut/tax enough to balance the bloody budget this year i.e. circa 9 billion in one fell swoop, would the Irish economy collapse completely? Or would there be some return in confidence as certainty would be brought to the national finances?

Is it the possibility of civil unrest that is staying their hand, or a lack of political courage? Or am I being mad and it would indeed lead to the whole economy collapsing (more than it already has)?

Permabear

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whatstherush

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Under statement of the year me thinks:)

RichardAnd

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Well if I lost my job and needed to cut back I would do it in one swoop, not over an extended peroid of time whilst borrowing to cover the gaps. Realistically, this should have happened but let's say it did how would things have worked out? What would taking 20 billion out of an economy in one budget do to a country?

Permabear

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Idbatterim

The problem to massive all-in-one-go cuts is political resistance. In particular, our government has not been willing to stand up to the unions and welfare dependents.

I totally agree with the above and have just made a similar point in another thread. When I look broadly at the main problems. The PS and welfare are the elephants in the room, you know things are rotten to the core when staying at home and living off welfare is better than going out working and contributing to society. There needs to be a total reform of the welfare system, whereby its linked to what you paid in, or it drops incrementally over time. The current system is a lose - lose, and that includes those that are on it long term! Its a great country, every knows their entitlements, but scoffs at their obligations and responsibility!

Bits_n_Bobs

Well it makes little sense to me to 'spread' the pain out over a number of years. I think a few years ago there was a (mistaken) belief that Ireland would return to strong growth and thus negate the adjustment that is required to balance the books. In that scenario spreading the pain over a number of years made some sense.

Given growth is not really going to be the panacea to get us out of this mess surely its better facing up to all the pain right now rather than 95% (the remaining 5% of pain having been negated by some growth) in 2014/15?

I have no idea if chopping x billion in one go would be utter economic suicide, but if it's not I think they should go for it, at least we would all have some certainty - even if it is of the 'this is exactly how bad things can get' variety. And with certainty would come confidence and possibly stronger growth as a result.

Also politically I would imagine by dishing out the pain now, whatever new government comes into power will have 5 years of things (possibly) improving before having to face the electorate?

Permabear

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Bits_n_Bobs

Pretty positive that letting the entire banking system go to the wall would not have resulted in a positive outcome for anyone, but having it still lurking along from crises to disaster at the moment is not exactly a positive outcome either.

I do think that the best outcome now would be for whoever gets into power to just hammer into all the difficult decisions once and for all and get them out of the way. Anything else is just prolonging the misery/uncertainty and adding to the debt burden. I think there is a certain level of dishonesty on the part of politicians to the electorate inherent in dribbling out these decisions over a 4/5 year period - all it achieves is a lack of (possible) protest at the scale of the decisions at a cost of increased debt - debt which is entirely avoidable.

jimmycrackcorm

It might have been the best thing ever to make the cuts as it would have forced the Social welfare and public sector back to pre-boom costs. Given the rout in the private sector that has occurred anyway, the impact there would not have been as traumatic. We'd have a chance then to correct things properly and achieve growth by now.

Bullseye1

Why didnt we just the banks fail.