Solutions for The Irish Solutions for The Irish EconomyEconomyJustifying and Outlining Elements of Fiscal StimuliTom O’Connor- CITLecturer in Economics & Public Policy
Table 1- Justifying Table 1- Justifying StimulusStimulus
Date Unemployment
Tax Take Exchequer Deficit
31st Dec 2007 198,000 47.8 billion 1.6 billion
May- June 2008
201,800 Down 1.45 billion
5.65 billion
31st Dec 2008 352,000 41.6 billion 12.7 billion
31st Dec 2009 436,956 33 billion 24.6 billion (Inc paid Anglo 4 billion)
Two Years 08+ 09
238,956 14.8 billion 20.6 (minus Anglo)
Comments on Table 1Comments on Table 1Fall in taxes accounts for 14.8 billion of
the 20.6 billion deficit (leaving Anglo out)
Spending had slipped somewhatThe Major problem was taxes based on
dramatic increases in unemploymentGovernment policy has ignored the
unemployment the by far the single biggest cause of the exchequer deficit & falling taxes
Why is the government so Why is the government so Foolish?Foolish?It wants to use unemployment to
implement a ‘structural correction’ to the Irish labour market and economy
High unemployment used as justification to drive down minimum wage and wages across the economy
Government pinning hopes on lower waged workers becoming more ‘competitive’ incentivising employers to employ them more cheaply as part of an economic recovery
Year Unemployment
Real GDP Growth
1987 16.6 4.71988 16.2 5.21989 14.7 5.71990 13.4 8.51991 14.7 1.91992 15.4 3.31993 15.6 2.71994 14.3 5.81995 12.3 9.61996 11.7 8.31997 9.9 11.71998 7.5 8.51999 5.7 10.72000 4.3 9.22001 3.8 6.22002 4.3 6.1
Need for Stimulation Need for Stimulation Thatcherite government policies on
wages and reserve army of labour will not work. They are a race to the bottom.
Competitive advantage through higher education and training can sustain decent living wages through increased value added and productivity.
This requires new targeted investment and re-skilling
Ahead of the Curve (2005)Ahead of the Curve (2005)Sustainable energy (govt cut SEI budget in April!!)
TelematicsBiomedical devicesBiopharma (govt cut funding for courses!!)
High quality food exportsHealth and education services for export
Ahead of The Curve (2005) for 15 years.
Package 1Package 1Government needs 5 billion at least
stimulus 2010 + 2011Companies should be vetted and
viable one’s aided within 3 monthsGovernment should give 50% grants
in return for shares to be redeemed over 10 years and 50% in loans
High quality retraining should happen in parallel through state training agencies to match the skills needs necessary
Package 1 ContinuesPackage 1 ContinuesRe-training allowance of 330 Euros Priority should be given to
indigenousViable and strong State Owned
Enterprises which would pay dividends to state and should be part of this
A state Development Bank should be set and work alongside higher budgets for Enterprise Ireland.
Package 2Package 2Schools building programmes
(extra 400 million)Revolutionising mental health
services as provided for in Vision for Change (2006) = 750 million.
Publicly provided geriatric facilities (extra 300 million)
Package 3Package 3Government purchases 50,000
housing units for 5 billion @100k each35,000 sold to those on waiting lists at
100k each.15,000 rented by local authorityBanks finance the purchase of 35,000: Govt gets back 3.5 billion, saves 270
mill on rent allowance. Net cost = 1.23 billion