Brendan Keenan's article today shines a very bright spotlight on that big white elephant in the corner of the room - the chronic government overspending that has made a bad situation immensely worse.
Brendan Keenan: Post-Budget tax regime will mirror that of dreaded '80s - Brendan Keenan, Columnists - Independent.ie
The next two austerity Budgets are designed to close the €6bn gap between tax revenues and basic public spending. After that, money must be found for the costs of the national debt.
The IMF reckons that, even with normal growth, the gap is around €10bn a year. One could argue with that figure, but it is certainly substantial. Even if growth does not pick up next year, it is still imperative that the €6bn be raised.
These iron-hard facts get little place in the Budget debates, largely because no one can see how Irish families are to find these kinds of revenues. But find them they must, unless the size of the State is drastically reduced.
Strangely, that never gets a mention, despite its extraordinary growth in the 2000s. All the austerity so far has succeeded only in keeping public spending at a constant level, even as national income falls.
The spending deal pitched to the Troika at the end of 2010 proposed to increase tax revenues back up to 2006 levels, and to bring government spending back down to 2008 levels - leaving a gap of €5 billion a year that we would somehow be able to borrow from some unspecified source.
The big problem with that strategy is that it is not possible to screw 2006 levels of tax out of an economy that is operating at 2002 levels.
Even if it was possible, where is the morality in forcing people in the real economy to endure extra hardships just so that the Bertie's vote buying promises in the mid noughties can continue to be honoured?
There is no way to avoid the fact that this €10 Bn comprises +/-€5 Billion of PS pay, perks and pensions, and +/-€5 Bn of Social Welfare.The IMF reckons that, even with normal growth, the gap is around €10bn a year.
The spin from the CPG Rev2.0 proposals is that Howlin is going to achieve savings of €1 Billion a year.
In the real world the savings will have to be of the order of €5 Billion a year. No ifs, buts or maybes!
We learned in the 1980s that you can't solve an overspending problem by taxing the life out of the productive economy, and by jayzis did we test that theory to destruction.
In the 1987 General Election the PDs beat Amateur-FF into 4th place, because by 1987 the people had gotten very fed up of Amateur-FF actively preventing full flavour FF and FG from implementing the economic strategies that should have been implemented 5 years earlier.
I expect we will see the exact same thing happen in 2017 unless something is done that will see proper common sense economic policies being implemented BEFORE we hit the wall.
As things stand, by 2015 the Government will have racked up more than €100 Billion of new debt to fund chronic overspending in the years 2009-2014.
Just imagine if we had racked up this debt to build out a new 21st century standard infrastructure in Health, Education, Transport, Energy and Communications to replace the legacy 19th and 20th century infrastructure 100%.
We could have done that.
But instead we chose to keep on paying 2008 levels of pay, perks and pensions to the insiders, and 2008 levels of social welfare.
In 2015 we will end up only being able to barely afford 2000 levels of pay, perks and pensions for the insiders, and 1998 levels of social welfare, plus the interest on the €100 Billion, and we will still have the creaking, battered and obsolete 19th and 20th century infrastructure.
That's a lose:lose situation by any standard.
Fixing a problem of chronic overspending by racking up taxation levels didn't work in the 80s, and it isn't working now.I had a small bet that the marginal tax and social security rates would approach the levels of the 1980s before this crisis is through.
How long do we have wait before people wake up to this reality and make the changes that are urgently needed?