Rightsizing the Government

from Turbulence Ahead by Gerard O’Neill, 3rd March 2009

…The emerging consensus – at least among those not working in the private sector – is that taxes have to be increased in order to meet public sector expenditure commitments. Nobody is asking ‘why’? I find that disturbing: when an individual or a business lacks the income/revenues to continue spending at previous levels then they cut back on their spending. But not governments: instead we’re all asked to divvy up – regardless of the value of the spending we are now funding.

I get that some categories of spending will inevitably rise in a recession such as unemployment benefit expenditure. But do we need all the other spending? Do we need Fas (or want them, for that matter)? Or the defence forces (€1 billion and rising – mostly on salaries and pensions)?

We seen to have a situation in Ireland whereby government spending goes unquestioned in the boom times (e.g.: benchmarking – think of a number, then add a little of whatever you’re having yourself). And it goes unquestioned in the bad times (tax revenues are falling ergo we need to raise tax rates). And nobody seems to be asking: if it’s 9.5% of GDP this year then what will it be next year – and how will we plug that gap? We have a fiscal policy of make-it-up-as-you-go-along, with no strategic sense of where it is going or why (e.g.: the vat rate went up in the last budget, and vat revenues have subsequently plunged)…. Link to article