Budget2011: Where to now?

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A talk I gave after Ireland's 2011 budget.

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Budget2011: Where to now?

  1. Where to now?Stephen Kinsella | UL
  2. Tonight:
  3. Midwest-Budget-The 4 Year Plan-EU/IMF
  4. This day, last year, this room, I said:
  5. WE DID THIS TO OURSELVES BYTHINKING SHORT-TERM.
  6. #BUDGET10
  7. #BUDGET10Capital investmentslashed
  8. #BUDGET10Capital investmentslashed70 million for floodvictims
  9. #BUDGET10Capital investmentslashed70 million for floodvictimsTax breaks forstartups
  10. #BUDGET10Capital investmentslashed70 million for floodvictimsTax breaks forstartupsCredit review forbanks
  11. #BUDGET10Capital investment Mortgage defaultslashed moratorium~beware!70 million for floodvictimsTax breaks forstartupsCredit review forbanks
  12. #BUDGET10Capital investment Mortgage defaultslashed moratorium~beware!70 million for flood Carbon taxesvictimsTax breaks forstartupsCredit review forbanks
  13. #BUDGET10Capital investment Mortgage defaultslashed moratorium~beware!70 million for flood Carbon taxesvictims Pension reformTax breaks for mooted.startupsCredit review forbanks
  14. #BUDGET10Capital investment Mortgage defaultslashed moratorium~beware!70 million for flood Carbon taxesvictims Pension reformTax breaks for mooted.startups National RecoveryCredit review for Bondsbanks
  15. #BUDGET11
  16. #BUDGET11Capital investmentslashed, again
  17. #BUDGET11Capital investmentslashed, againCurrent expenditureleft alone largely
  18. #BUDGET11Capital investmentslashed, againCurrent expenditureleft alone largelyCapital expenditureslashed
  19. #BUDGET11Capital investmentslashed, againCurrent expenditureleft alone largelyCapital expenditureslashedTravel Tax
  20. #BUDGET11Capital investment Tax breaks forslashed, again startups, againCurrent expenditureleft alone largelyCapital expenditureslashedTravel Tax
  21. #BUDGET11Capital investment Tax breaks forslashed, again startups, againCurrent expenditure Carbon taxes~Noleft alone largelyCapital expenditureslashedTravel Tax
  22. #BUDGET11Capital investment Tax breaks forslashed, again startups, againCurrent expenditure Carbon taxes~Noleft alone largely Pension reform?Capital expenditure mooted.slashedTravel Tax
  23. #BUDGET11Capital investment Tax breaks forslashed, again startups, againCurrent expenditure Carbon taxes~Noleft alone largely Pension reform?Capital expenditure mooted.slashed Municipal bonds XTravel Tax
  24. THE MIDWEST
  25. REGIONAL DEVELOPMENT IN< 1950: agriculture CONTEXT1950-1960: Agriculture + Light industries (flour, meat, sweets)1970+: IDA policies with Shannon Airport deliver new largecompanies like Ferenka, Krups1978: Ferenka leaves, local economy devastated: 1400 let go1998 Krups leaves, local economy devastated: 800 let go1990s: UL, IDA, Shannon Development and Shannon Airportentice DELL, Vistakon, Analog, etc2009: Dell leaves: 1900+ let go
  26. A regional depression. 2007 2010http://www.ronanlyons.com/wp-content/uploads/2010/02/mu25-unemp.png
  27. Need investment, jobcreation, active labour market policies.
  28. Budget.
  29. Some Context.
  30. 1 billion = 1000 million.
  31. One more time:
  32. 1 billion = 1000 million.
  33. 1 billion months ago, these guyswere in charge.
  34. Think of grains of salt. a thousand: in a pinch a million: in a cup, a billion: in a bathtub.Total banking sector liabilities c.440bnThink 440 bathtubs of salt.That’s Thomond Park, filled withbathtubs.
  35. €85bn
  36. €85bn
  37. 4 year plan.
  38. uth not as good as they looked, as we see in Figure 5.3. The drama Figure 5.2: Irish Government Spending and Revenues 80,000 Revenues 70,000 Spending 60,000 € Million 50,000 40,000 30,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Yearurce: CSO, National Accounts Database. e: The 2009 figure is a forecasted annual figure.
  39. ace, which will overhang the market for many years. Governmentending relative to GNP was growing up to 2007, and even more so if theNP growth rates and hence tax buoyancy from, say, 2002 onwards were inuth not as good as they looked, as we see in Figure 5.3. The dramatic Figure 5.2: Irish Government Spending and Revenues 80,000 Revenues 70,000 Spending 60,000 € Million 50,000 40,000 30,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Year urce: CSO, National Accounts Database.ote: The 2009 figure is a forecasted annual figure. Irish Government Spending and Revenues. Source: CSO, National Accounts Database. Note: The 2009 figure is a forecasted annual figure. 108
  40. ace, which will overhang the market for many years. Governmentending relative to GNP was growing up to 2007, and even more so if theNP growth rates and hence tax buoyancy from, say, 2002 onwards were inuth not as good as they looked, as we see in Figure 5.3. The dramatic Figure 5.2: Irish Government Spending and Revenues 80,000 Revenues 70,000 Spending 60,000 € Million 50,000 40,000 30,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Year urce: CSO, National Accounts Database.ote: The 2009 figure is a forecasted annual figure. Irish Government Spending and Revenues. Source: CSO, National Accounts Database. Note: The 2009 figure is a forecasted annual figure. 108
  41. ace, which will overhang the market for many years. Governmentending relative to GNP was growing up to 2007, and even more so if theNP growth rates and hence tax buoyancy from, say, 2002 onwards were inuth not as good as they looked, as we see in Figure 5.3. The dramatic Borrowing Figure 5.2: Irish Government Spending and Revenues 80,000 Revenues 70,000 Spending 60,000 € Million 50,000 40,000 30,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Year urce: CSO, National Accounts Database.ote: The 2009 figure is a forecasted annual figure. Irish Government Spending and Revenues. Source: CSO, National Accounts Database. Note: The 2009 figure is a forecasted annual figure. 108
  42. ace, which will overhang the market for many years. Governmentending relative to GNP was growing up to 2007, and even more so if theNP growth rates and hence tax buoyancy from, say, 2002 onwards were inuth not as good as they looked, as we see in Figure 5.3. The dramatic Borrowing Figure 5.2: Irish Government Spending and Revenues 80,000 Revenues 70,000 Spending 60,000 € Million 50,000 40,000 30,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Year urce: CSO, National Accounts Database.ote: The 2009 figure is a forecasted annual figure. Irish Government Spending and Revenues. Source: CSO, National Accounts Database. Note: The 2009 figure is a forecasted annual figure. 108
  43. ace, which will overhang the market for many years. Governmentending relative to GNP was growing up to 2007, and even more so if theNP growth rates and hence tax buoyancy from, say, 2002 onwards were inuth not as good as they looked, as we see in Figure 5.3. The dramatic Borrowing Figure 5.2: Irish Government Spending and Revenues 80,000 Revenues 70,000 Spending 60,000 € Million 50,000 40,000 30,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2015 Year urce: CSO, National Accounts Database.ote: The 2009 figure is a forecasted annual figure. Irish Government Spending and Revenues. Source: CSO, National Accounts Database. Note: The 2009 figure is a forecasted annual figure. 108
  44. ace, which will overhang the market for many years. Governmentending relative to GNP was growing up to 2007, and even more so if theNP growth rates and hence tax buoyancy from, say, 2002 onwards were inuth not as good as they looked, as we see in Figure 5.3. The dramatic Borrowing Figure 5.2: Irish Government Spending and Revenues 80,000 Revenues 70,000 Spending 60,000 € Million 50,000 40,000 30,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2015 Year urce: CSO, National Accounts Database.ote: The 2009 figure is a forecasted annual figure. Irish Government Spending and Revenues. Source: CSO, National Accounts Database. Note: The 2009 figure is a forecasted annual figure. 108
  45. ace, which will overhang the market for many years. Governmentending relative to GNP was growing up to 2007, and even more so if theNP growth rates and hence tax buoyancy from, say, 2002 onwards were inuth not as good as they looked, as we see in Figure 5.3. The dramatic Borrowing Figure 5.2: Irish Government Spending and Revenues 80,000 Revenues 70,000 Spending 60,000 € Million 50,000 40,000 30,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2015 Year urce: CSO, National Accounts Database.ote: The 2009 figure is a forecasted annual figure. Irish Government Spending and Revenues. Source: CSO, National Accounts Database. Note: The 2009 figure is a forecasted annual figure. 108
  46. ace, which will overhang the market for many years. Governmentending relative to GNP was growing up to 2007, and even more so if theNP growth rates and hence tax buoyancy from, say, 2002 onwards were inuth not as good as they looked, as we see in Figure 5.3. The dramatic Borrowing Figure 5.2: Irish Government Spending and Revenues 80,000 Revenues 70,000 Spending 60,000 € Million 50,000 40,000 30,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2015 Year urce: CSO, National Accounts Database.ote: The 2009 figure is a forecasted annual figure. Irish Government Spending and Revenues. Source: CSO, National Accounts Database. Note: The 2009 figure is a forecasted annual figure. 108
  47. ace, which will overhang the market for many years. Governmentending relative to GNP was growing up to 2007, and even more so if theNP growth rates and hence tax buoyancy from, say, 2002 onwards were inuth not as good as they looked, as we see in Figure 5.3. The dramatic Borrowing Figure 5.2: Irish Government Spending and Revenues 80,000 Revenues 70,000 Spending 60,000 € Million 50,000 1/3 40,000 30,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2015 Year urce: CSO, National Accounts Database.ote: The 2009 figure is a forecasted annual figure. Irish Government Spending and Revenues. Source: CSO, National Accounts Database. Note: The 2009 figure is a forecasted annual figure. 108
  48. ace, which will overhang the market for many years. Governmentending relative to GNP was growing up to 2007, and even more so if theNP growth rates and hence tax buoyancy from, say, 2002 onwards were inuth not as good as they looked, as we see in Figure 5.3. The dramatic Borrowing Figure 5.2: Irish Government Spending and Revenues 80,000 70,000 Revenues Spending 2/3 60,000 € Million 50,000 1/3 40,000 30,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2015 Year urce: CSO, National Accounts Database.ote: The 2009 figure is a forecasted annual figure. Irish Government Spending and Revenues. Source: CSO, National Accounts Database. Note: The 2009 figure is a forecasted annual figure. 108
  49. -6 -5 -4 -3 -2 -1 0 Bu dg et 2 009 (Oc tob er 2 008 ) Feb 200 9P ay agr eem ent sSu pp lem ent ary Bu dg et (Ap ril 2 009 ) Bu dg et 2 010 (De cem ber 200 9) Bu dg et 2 001 1 (D ece mb er 2 010 )
  50. -6 -5 -4 -3 -2 -1 0 Bu dg et 2 009 (Oc -2.0 tob er 2 008 ) Feb 200 9P ay agr eem ent sSu pp lem ent ary Bu dg et (Ap ril 2 009 ) Bu dg et 2 010 (De cem ber 200 9) Bu dg et 2 001 1 (D ece mb er 2 010 )
  51. -6 -5 -4 -3 -2 -1 0 Bu dg et 2 009 (Oc -2.0 tob er 2 008 ) Feb 200 9P ay -2.1 agr eem ent sSu pp lem ent ary Bu dg et (Ap ril 2 009 ) Bu dg et 2 010 (De cem ber 200 9) Bu dg et 2 001 1 (D ece mb er 2 010 )
  52. -6 -5 -4 -3 -2 -1 0 Bu dg et 2 009 (Oc -2.0 tob er 2 008 ) Feb 200 9P ay -2.1 agr eem ent sSu pp lem ent ary Bu -5.4 dg et (Ap ril 2 009 ) Bu dg et 2 010 (De cem ber 200 9) Bu dg et 2 001 1 (D ece mb er 2 010 )
  53. -6 -5 -4 -3 -2 -1 0 Bu dg et 2 009 (Oc -2.0 tob er 2 008 ) Feb 200 9P ay -2.1 agr eem ent sSu pp lem ent ary Bu -5.4 dg et (Ap ril 2 009 ) Bu dg et 2 010 (De -4.1 cem ber 200 9) Bu dg et 2 001 1 (D ece mb er 2 010 )
  54. -6 -5 -4 -3 -2 -1 0 Bu dg et 2 009 (Oc -2.0 tob er 2 008 ) Feb 200 9P ay -2.1 agr eem ent sSu pp lem ent ary Bu -5.4 dg et (Ap ril 2 009 ) Bu dg et 2 010 (De -4.1 cem ber 200 9) Bu dg et 2 001 1 (D -6.0 ece mb er 2 010 )
  55. Budget.
  56. Not so bad.
  57. What’s not there?
  58. What’s next?
  59. Social WelfareHealthEducationJusticeAgricultureEnterpriseOther
  60. Social WelfareHealthEducationJusticeAgricultureEnterpriseOther 38%
  61. Social WelfareHealthEducationJusticeAgricultureEnterpriseOther 38% 27%
  62. Social WelfareHealthEducationJusticeAgricultureEnterpriseOther 38% 15% 27%
  63. Social WelfareHealthEducationJusticeAgricultureEnterprise 4%Other 38% 15% 27%
  64. Social WelfareHealthEducationJusticeAgriculture 3%Enterprise 4%Other 38% 15% 27%
  65. Social WelfareHealthEducationJusticeAgriculture 3% 3%Enterprise 4%Other 38% 15% 27%
  66. Social WelfareHealthEducationJustice 10%Agriculture 3% 3%Enterprise 4%Other 38% 15% 27%
  67. The Four year Plan.
  68. 2011 2012 2013 2014 Real GDP 1.75 3.25 3 2.75 Real GNP 1 2.5 2.5 2.5 DomesticConsumption Demand 0 1 1.5 1.75Government -3 -2 -2.25 -2 Investment -6 5.25 5 5.25 Exports 5 5 4.25 4 Imports 2.75 3 3.25 3BOP (%GNP) 0.25 1.5 2.5 3.5 HICP 0.75 1 1.75 1.75GDP Deflator 0.75 1 1.25 1.5
  69. % Change Investment2010 0-10-20-30 % Change Investment-40 2005 2006 2007 2008 2009 2010f 2011f 2012f 2013f 2014f
  70. % Change Investment2010 0-10-20-30 % Change Investment-40 2005 2006 2007 2008 2009 2010f 2011f 2012f 2013f 2014f
  71. 0 12.5 25.0 37.5 50.0 Fin lan d9 1No rw Anglo ay 9 1Sw ede n 91 Tur key 0 0 Jap an 9 7 Ko re a9 7Ma lay Fiscal Costs of Banking Crises, % GDP sia 91Th aila n d9 7Ur ugu ay 02 Ire lan d0 8
  72. 0 12.5 25.0 37.5 50.0 Fin lan d9 1No rw Anglo ay 9 1Sw ede n 91 Tur key 0 0 Jap an 9 7 Ko re a9 7Ma lay Fiscal Costs of Banking Crises, % GDP sia 91Th aila n d9 7Ur ugu ay 02 Ire lan d0 8
  73. Projected Assistance, Bank €bn Anglo 29.28 AIB 7.48 BOI 3.75Irish Nationwide 5.40 EBS 0.35 Total 46.26
  74. The IMF.
  75. €85bn EU/IMF
  76. €85bn€35bn EU/IMF
  77. €85bn€35bn EU/IMF€50bn
  78. The Four year Plan won’t work.
  79. MessageIreland’s GNP c. €130bn, Ireland’s GDP c.160bnDebt : GNP ratio c.140%Growth rates: 0-2% in next 4 yearsIreland’s banking system liabilities: €440bnDebt rates: 5.83% in next 4 yearsUnsustainable debt implies eventual default/restructuring
  80. Reform.
  81. Reform(s)www.politicalreform.ie
  82. Reform(s)Publish full political financial accounts online, greater powers forStandards Commission www.politicalreform.ie
  83. Reform(s)Publish full political financial accounts online, greater powers forStandards CommissionReform committee system, repeal Abbeylara decision and givecommittees renewed investigative powers. www.politicalreform.ie
  84. Reform(s)Publish full political financial accounts online, greater powers forStandards CommissionReform committee system, repeal Abbeylara decision and givecommittees renewed investigative powers.Rebalance relationship between executive and legislature as wasintended in Article 28 of Constitution www.politicalreform.ie
  85. Reform(s)Publish full political financial accounts online, greater powers forStandards CommissionReform committee system, repeal Abbeylara decision and givecommittees renewed investigative powers.Rebalance relationship between executive and legislature as wasintended in Article 28 of ConstitutionMeaningful open government with stronger FOI legislation, newwhistleblower and lobbying legislation and public appointmentsboard. www.politicalreform.ie
  86. Reform(s)www.politicalreform.ie
  87. Reform(s)Reform local government with revenue raising powers andreform planning powers www.politicalreform.ie
  88. Reform(s)Reform local government with revenue raising powers andreform planning powersDiverse representation in public life through a reformed Senandwhich would encompass island of Ireland and diaspora in publiclife www.politicalreform.ie
  89. Reform(s)Reform local government with revenue raising powers andreform planning powersDiverse representation in public life through a reformed Senandwhich would encompass island of Ireland and diaspora in publiclifeIntroduce gender quotas, lower voting age to 16, reformdecision making process www.politicalreform.ie
  90. Reform(s)Reform local government with revenue raising powers andreform planning powersDiverse representation in public life through a reformed Senandwhich would encompass island of Ireland and diaspora in publiclifeIntroduce gender quotas, lower voting age to 16, reformdecision making processChange the electoral system www.politicalreform.ie
  91. Reform(s)Reform local government with revenue raising powers andreform planning powersDiverse representation in public life through a reformed Senandwhich would encompass island of Ireland and diaspora in publiclifeIntroduce gender quotas, lower voting age to 16, reformdecision making processChange the electoral systemDefinition of Republic in constitution and statement of values www.politicalreform.ie
  92. Reform(s)Reform local government with revenue raising powers andreform planning powersDiverse representation in public life through a reformed Senandwhich would encompass island of Ireland and diaspora in publiclifeIntroduce gender quotas, lower voting age to 16, reformdecision making processChange the electoral systemDefinition of Republic in constitution and statement of valuesCitizens assembly to be implemented www.politicalreform.ie
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