Austerity isn't really working is it?

Augmerson

Is there some kind of belief going about these days that the imposed austerity we are experiencing in Ireland and across Europe is not only required but also good for us?

I just think, from having listened to a few conversations with acquaintances or friends of friends and having read through a few Irish internet forums and beyond, that some people (at home at least) think higher taxes and more budget cuts are the only way to go.

I can see some kind of rational in the idea. Government expenditure is higher than Government income. Something has to change. What I don't agree with, is how this is approached. We are in are sixth year of austerity and recession. There is still serious unemployment and emigration. I don't believe austerity is working, in fact I feel it's just prolonging the recession. It's keeping us back.

I don't have any foolproof response to what should be done to tackle our current situation, other than say we should have done exactly what Iceland has done (but the chance to do that has passed) but cutting more and more money out of the economy like we are now doesn't work. If we could inject billions into our financial institutions, why can't we do the same for the economy with jobs programs or public works? I just think this is all madness, and I am sick of some people, political institutions and elements of the media promoting the idea that this is all getting us somewhere.

Perfectly willing to listen to the other side of the fence about this.

Also, in before anybody calls me crusty, hippy or lefty for feeling this way.

Gambas

Austerity would be living within your means.

We are borrowing billions p.a. to run the state. What ever it is, it isn't austerity.

As for not working, have you seen an Irish bond yield chart in the past while? Plenty people who are prepared to fund the state believe it is working.

Iceland did what it had to do, Ireland did what it had to do. The different responses were down to differing circumstances. There was a certain range of options for both, but there was no overlap between the two sets of options.

whiskeyman

Ievenhadtosellmyspacebar!damnausterity!

super_furry

What's the alternative?

Augmerson

Gambas wrote: »

Austerity would be living within your means.

We are borrowing billions p.a. to run the state. What ever it is, it isn't austerity.

As for not working, have you seen an Irish bond yield chart in the past while? Plenty people who are prepared to fund the state believe it is working.

Now, I will be the first to admit my understanding of economics and finance is not great, but these bond's, are in essence, people buying our debt. Is that right? Or am I completely wrong?

ilovesleep

Austerity is the route that we are being led on and IMO a stimulus package has to accompany austerity or it's just going to lead us around in circles.

keith16

super_furry wrote: »

What's the alternative?

death by snu snu

Turtwig

I hate to say it but we haven't really had "austerity", all we've had is a lowering of expenditure closer to pre-boom levels. Things may be bad, but I think it's a bit of stretch to claim it's austerity.

Praetorian Saighdiuir

It's all own hill when you hit 85

true

Gambas wrote: »

Austerity would be living within your means.

We are borrowing billions p.a. to run the state. What ever it is, it isn't austerity.

+1. Our public servants, politicians, social welfare recipients and pensioners are still paid far too much. Double in Navan compared to Newry. Its not them that are suffering from real austerity.

Gambas

Augmerson wrote: »

Now, I will be the first to admit my understanding of economics and finance is not great, but these bond's, are in essence, people buying our debt. Is that right? Or am I completely wrong?

That is correct. The bonds can subsequently be sold on on the secondary market, from one party to another. The price that is paid on the secondary market reflects the risk that the bond will not be repaid in full. This is tied to the economic outlook for the state. If it looks like we are on the right track and are as sure to be able to pay back our debt because we are likely to have decent revenues the the risk and the line on the chart drops.

The problem with unemployment is a different one. You have 250k people - mostly men with limited or no qualifications who worked in an unsustainably bloated construction industry. Construction will come back, but not bring 250k jobs back. Maybe 50k. So what are the other 200k going to do?

Thrill

super_furry wrote: »

What's the alternative?

Miniature Irish flags for everyone?

Gbear

It's always more difficult to cut spending than it is to never have set the spending level so high.

Whatever about the current goverment, they inherited a nonviable spending structure when they took over.

Unfortunately, it's never a case of making the most logical cuts but the cuts that you can get away with - hit front line staff because they can rather than tackling the hole hierarchy and general public service wastefulness that exists on a systematic level.

I'm sure if the government could act unilaterally they might fancy doing things a bit differently.

Gambas

ilovesleep wrote: »

Austerity is the route that we are being led on and IMO a stimulus package has to accompany austerity or it's just going to lead us around in circles.

Stimulus package = Magic money from the magic money tree.

Leaving aside what you'd do with the stimulus package, and the fact that what we make we export and what we spend money one is invariably imported, the obvious question is....where does this stimulus package come from? You mean borrowing how many tens of billions, and why would you think anyone would want to lend even more money to a country that is in the red zone regarding the size of its debt?

Anynama141

Irish austerity isn't a choice - saying that austerity isn't working is like saying that gravity isn't working because you're falling to the ground after stepping off a cliff. The fact that you don't like some of the consequences does not mean it isn't working.

So let's be clear: Ireland is doing austerity one way or another because Fianna Failure bankrupted the country and we are in massive debt. We have no choice.

European austerity is another matter - in theory, the ECB could start printing money and dole it out via European governments via soft loans or whatever, but this would not be painless either - you would effectively be robbing savers (usually the old) by inflating away their savings, and inflation is a terrifying phenomenon once you let the genie out of the bottle - to the extent that in most developed countries, the central bank's key role is to prevent inflation.

Unfortunately, it's a complicated question, while the public just wants easy answers and demands then from the politicians. Good help any politician who tries to do the right thing (Labour, for example). The Irish public demanded more and more spending from FF, and they got it, and it ruined us. Now they want to spit out the only medicine available and vote in whoever is promising easy answers.

We never learn.

Augmerson

Gambas wrote: »

The problem with unemployment is a different one. You have 250k people - mostly men with limited or no qualifications who worked in an unsustainably bloated construction industry. Construction will come back, but not bring 250k jobs back. Maybe 50k. So what are the other 200k going to do?

Well, here are my ideas, far-fetched though they may be. We could either pay everybody to emigrate to Canada, Australia or New Zealand - yes, not the nicest tactic ever employed, but desperate times call for desperate measures.

Or...

We could initiate a Public Works program, a sort of New Deal type product, much smaller, which could maybe get 50 to 80k working for awhile - finishing estates, upgrading roads etc. Hopefully that many people in work would have a knock on effect on the economy. People spending. Tax intake increases and so on.

padd b1975

Jernal wrote: »

I hate to say it but we haven't really had "austerity", all we've had is a lowering of expenditure closer to pre-boom levels. Things may be bad, but I think it's a bit of stretch to claim it's austerity.

Heres a fairly good comparison between a country with a similar standard of living to ours and a country suffering real austerity.

https://www.youtube.com/watch?v=sZdZewBXVUo

coffee_cake

What austerity

Gambas

Augmerson wrote: »

Well, here are my ideas, far-fetched though they may be. We could either pay everybody to emigrate to Canada, Australia or New Zealand - yes, not the nicest tactic ever employed, but desperate times call for desperate measures.

Have you told the Canadians/Aussies about this? I have a feeling they may have an opinion on the matter

Or...

We could initiate a Public Works program, a sort of New Deal type product, much smaller, which could maybe get 50 to 80k working for awhile - finishing estates, upgrading roads etc. Hopefully that many people in work would have a knock on effect on the economy. People spending. Tax intake increases and so on.

Sounds great. But that is tantamount to working for your dole (because again, we don't have the means to pay them substantially more) and that tends to make folks who get angry about unemployment even angrier for some reason. Unfortunately, it isn't the case that the government and civil service are stupid and there is an easy answer.

Saying "No to austerity" is like saying "No to nighttime".
Saying "Austerity isn't working" is like saying that clouds don't work. Austerity is about balancing the books, that's what's happening, so it's working in and of itself.

Anynama141

Augmerson wrote: »

Is there some kind of belief going about these days that the imposed austerity we are experiencing in Ireland and across Europe is not only required but also good for us?

I just think, from having listened to a few conversations with acquaintances or friends of friends and having read through a few Irish internet forums and beyond, that some people (at home at least) think higher taxes and more budget cuts are the only way to go.

I can see some kind of rational in the idea. Government expenditure is higher than Government income. Something has to change. What I don't agree with, is how this is approached. We are in are sixth year of austerity and recession. There is still serious unemployment and emigration. I don't believe austerity is working, in fact I feel it's just prolonging the recession. It's keeping us back.

I don't have any foolproof response to what should be done to tackle our current situation, other than say we should have done exactly what Iceland has done (but the chance to do that has passed) but cutting more and more money out of the economy like we are now doesn't work. If we could inject billions into our financial institutions, why can't we do the same for the economy with jobs programs or public works? I just think this is all madness, and I am sick of some people, political institutions and elements of the media promoting the idea that this is all getting us somewhere.

Perfectly willing to listen to the other side of the fence about this.

Also, in before anybody calls me crusty, hippy or lefty for feeling this way.

Two points on Iceland:

1. They are still in serious trouble, their spending power has collapsed with the collapse of their currency and they've reinflated their property bubble.
2. They could only do what they did because they have their own currency. We did not.

Amirani

Augmerson wrote: »

We could initiate a Public Works program, a sort of New Deal type product, much smaller, which could maybe get 50 to 80k working for awhile - finishing estates, upgrading roads etc. Hopefully that many people in work would have a knock on effect on the economy. People spending. Tax intake increases and so on.

1. How do you pay for such a public works program?

2. When you build/finish more houses, the supply of houses will increase causing prices to drop, sending people further into negative equity. How does this solve anything?

Augmerson

Gambas wrote: »

Have you told the Canadians/Aussies about this? I have a feeling they may have an opinion on the matter

I got the idea from the Canadians! All the provinces west of Ontario seem to send all of their "unwanted" west to British Columbia on the trains because the climate in BC is a lot more tolerable in winter and beautiful in summer than say the prairie states.

coffee_cake

Augmerson wrote: »

We could initiate a Public Works program, a sort of New Deal type product, much smaller, which could maybe get 50 to 80k working for awhile - finishing estates, upgrading roads etc. Hopefully that many people in work would have a knock on effect on the economy. People spending. Tax intake increases and so on.

Putting the govt/country further into debt isn't the answer to balancing the books

StewartGriffin

Jernal wrote: »

I hate to say it but we haven't really had "austerity", all we've had is a lowering of expenditure closer to pre-boom levels. Things may be bad, but I think it's a bit of stretch to claim it's austerity.

Agreed. Coming close to the end of March and look at the amount of 131 cars on the road - over 15000 in Dublin alone.

padd b1975

Gambas wrote: »

The problem with unemployment is a different one. You have 250k people - mostly men with limited or no qualifications who worked in an unsustainably bloated construction industry. Construction will come back, but not bring 250k jobs back. Maybe 50k. So what are the other 200k going to do?

Ireland has been for the most part of its existance an exporter of labour.

The harsh reality for the 200k you speak of (conservative estimate IMHO) is that in order for them to return to the Irish labour market, they are going to have to aquire new skill sets.

Its either that or emigrate.

68Murph68

Augmerson wrote: »

We could initiate a Public Works program, a sort of New Deal type product, much smaller, which could maybe get 50 to 80k working for awhile - finishing estates, upgrading roads etc. Hopefully that many people in work would have a knock on effect on the economy. People spending. Tax intake increases and so on.

This has been tried a lot and the historical evidence is that it just doesn't work. There are really no reasons to think why it would work in Ireland.

Any stimulus program of the type you are proposing would have to be funded by borrowing.

Even if this worked it would not fix the serious underlying problems in the economy merely delay them some bit.

It would be the kick the can down the road solution.

As an aside its truely amazing how quickly the electorate forget with regard to Fianna Fail's mismanagement of the economy.

ilovesleep

StewartGriffin wrote: »

Agreed. Coming close to the end of March and look at the amount of 131 cars on the road - over 15000 in Dublin alone.

Well, that's the this recession and austerity - there's some doing well, others and others are in the middle, probably, more than likely, sliding. Just because there are 15,000 2013 cars on the road in dublin alone, doesn't mean that we're all doing well and in a position to buy a new car or any car.

Augmerson

68Murph68 wrote: »

This has been tried a lot and the historical evidence is that it doesn't work.

Any stimulus program of the type you are proposing would have to be funded by borrowing.

Even if this worked it would not fix the serious underlying problems in the economy merely delay them some bit. It would be the kick the can down the road solution.

I'm not going to say I'm an expert here, but, didn't the New Deal get the US back on it's feet? Or....was it the onset of WWII?

Peregrine

Augmerson wrote: »

We could initiate a Public Works program, a sort of New Deal type product, much smaller, which could maybe get 50 to 80k working for awhile - finishing estates, upgrading roads etc. Hopefully that many people in work would have a knock on effect on the economy. People spending. Tax intake increases and so on.

You're right it would have a knock on effect on the economy. It'll send house prices down again, leave us with hundreds of fully finished but empty houses and in debt for building roads we couldn't afford at the moment.

The 200,000 limited skilled or unskilled workers have to find a a skill or they're not working..
I've said this before, you can't have a country where everybody works in SPAR, or a building site for that matter.

StewartGriffin

ilovesleep wrote: »

Well, that's the this recession and austerity - there's some doing well, others and others are in the middle, probably, more than likely, sliding. Just because there are 15,000 2013 cars on the road in dublin alone, doesn't mean that we're all doing well and in a position to buy a new car or any car.

Understood. But the annoying part is these are the guys who ring up Joe Duffy crying that they can't put food on the table if they lose their next pay increment.