When would fiscal necessity override government contractual obligations?

[patslatt]

Past governments have built up huge future contractual obligations and entitlements that future governments will struggle to pay for. Even so,the present government is blithely promising universal free health care in coming years without a clue how to pay for it. The present value of government pension obligations accumulated to date is around €110 billion,€110,000 per average Irish family,around two thirds of which is public sector.

Under the fiscal necessity rule,a future government could cut back drastically on its contractual payments to avoid bankruptcy or prolonged economic stagnation and depression. It is interesting to speculate about the economic and political scenarios that could trigger that:

-Diminishing returns on taxation occur as higher taxes depress economic activity,so a billion euro planned increase in taxes might depress the economy so much that little increase in tax collection results. After the frenzy of tax increases in the past four years,diminishing returns must be getting close.

-In a continuing economic depression,political resistance grows to the burden of public sector pay and pensions,which are about €5 billion a year higher than normal thanks to benchmarking.This leads to the rise extremist political parties and an alarmed government responds by cutting pay and pensions.

-After several more years of economic depression,an establishment political party forms a government that abandons austerity, defaults on sovereign debt and cuts pay and pensions.

Given weak international export prospects in developed economies,these scenarios look more plausible than the government's hopes of growing our way out of debt.

[ruserious]

Another day another public sector rant *sigh.

[Mr. Bumble]

Another day another public sector rant *sigh.

It's Pat. Nuff said.

[wombat]

Another day another public sector rant *sigh.

Its a rainy afternoon and there are no decent matches on tele

[Mr. Bumble]

Its a rainy afternoon and there are no decent matches on tele

Scotland v England at 5.00. Will be a good match.

[hmmm]

Given weak international export prospects in developed economies,these scenarios look more plausible than the government's hopes of growing our way out of debt.

Muddling through and small incremental changes are the plausible scenario, as they always have been. These dramatic overnight sea changes of public mood are fantasies, they rarely occur except in desperate scenarios.

Budgets for the next few decades will slowly cut back on the welfare state and the vast unneeded public services that have developed, but in a manner that allows society time to adapt.

[neiphin]

It's Pat. Nuff said.

Its a rainy afternoon and there are no decent matches on tele

[Analyzer]

Good question.

So far the way we have dealt with the fact thwat the state is living beyond it's means, is via more and more borrowing.

Actually thinking about the sustainability of the fiscal situation is a serious concern.

[Sailor]

Past governments have built up huge future contractual obligations and entitlements that future governments will struggle to pay for. Even so,the present government is blithely promising universal free health care in coming years without a clue how to pay for it. The present value of government pension obligations accumulated to date is around €110 billion,€110,000 per average Irish family,around two thirds of which is public sector.

Under the fiscal necessity rule,a future government could cut back drastically on its contractual payments to avoid bankruptcy or prolonged economic stagnation and depression. It is interesting to speculate about the economic and political scenarios that could trigger that:

-Diminishing returns on taxation occur as higher taxes depress economic activity,so a billion euro planned increase in taxes might depress the economy so much that little increase in tax collection results. After the frenzy of tax increases in the past four years,diminishing returns must be getting close.

-In a continuing economic depression,political resistance grows to the burden of public sector pay and pensions,which are about €5 billion a year higher than normal thanks to benchmarking.This leads to the rise extremist political parties and an alarmed government responds by cutting pay and pensions.

-After several more years of economic depression,an establishment political party forms a government that abandons austerity, defaults on sovereign debt and cuts pay and pensions.

Given weak international export prospects in developed economies,these scenarios look more plausible than the government's hopes of growing our way out of debt.

I agree that Faircare is poorly thought out but I don't think they said it would be free - is it not based on universal insurance?

[lying eyes]

wHAT Goverment---German or French?..........