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Wednesday, 22 July 2009

Toothless tiger

I forgot to pass comment on an article in HM Telegraph last Saturday by Ambrose Evans-Pritchard.

The article is here. It is all about the unwinding of the welfare state in Ireland due to a lack of money and here is a taster:

“Events have already forced Premier Brian Cowen to carry out the harshest assault yet seen on the public services of a modern Western state. He has passed two emergency budgets to stop the deficit soaring to 15pc of GDP. They have not been enough. The expert An Bord Snip report said last week that Dublin must cut deeper, or risk a disastrous debt compound trap.

A further 17,000 state jobs must go (equal to 1.25m in the US), though unemployment is already 12pc and heading for 16pc next year.

Education must be cut 8pc. Scores of rural schools must close, and 6,900 teachers must go. "The attacks outlined in this report would represent an education disaster and light a short fuse on a social timebomb", said the Teachers Union of Ireland.

Nobody is spared. Social welfare payments must be cut 5pc, child benefit by 20pc. The Garda (police), already smarting from a 7pc pay cut, may have to buy their own uniforms. Hospital visits could cost £107 a day, etc, etc.

Coming soon to an economy near you.

Smith Barney or maybe Paine Webber, or some other Wall Street firm used to have a marketing pitch that ran "We make money the old fashioned way. We earn it". Hokum, of course, but a good slogan and a good principle. It isn't possible to run an economy for ever based on consumer demand funded by increasing asset values, just as it isn't possible to drive an economy like that of Ireland just through tax breaks.

Nor is it possible to bribe the electors for ever with a generous helping of state provision of education, health and every other goodie imaginable plus generous pay for public sector workers when the whole operation runs at a staggering deficit.

We will end up bust like the Irish, in the old fashioned way.

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