Cowen's 10 Billion Blunder - Part II

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Cowen's 10 Billion Blunder - Bruton

Postby pfkf1 on Thu Mar 13, 2008 8:06 pm
The ESRI has warned that thanks to Brian Cowen's blunders the public finances will have deteriorated by €10 billion by the end of next year as the Fianna Fáil Government continues its spending spree with taxpayers' money, Fine Gael Deputy Leader & Finance Spokesman Richard Bruton TD has said.

Speaking following the publication of the latest ESRI Quarterly Economic Analysis, Deputy Bruton said: 'In the light of today's ESRI Report confirming the alarming deterioration of the public finances and the wider economy, it is now clear that finance Minister Brian Cowen has made a series of catastrophic blunders as Minister for Finance'.

o He used one-off bumper tax receipts from an unsustainable property boom to permanently expand day-to-day Government spending by amounts far in excess of the growth in the economy. As property-related tax revenues dwindle, and as day-to-day spending continues its relentless rise, the ESRI is now forecasting a €9.8 billion downturn in the Exchequer balance in the space of just 36 months - the biggest and most rapid deterioration in the health of the public finances in history.

o He has provided no fiscal room for manoeuvre if the economy gets any worse. According to the ESRI, the Government deficit will reach 2% of GDP next year - not far off the 3% deficit limit under EMU.

o He ignored repeated warnings that his expansionary Budgets in 2004-06 were fuelling an already overheating economy. Cowen's reckless spending splurges put relentless upward pressure on wages and costs across the economy. It destroyed the capacity of many exporters to hold on to their markets.

o He insisted on numerous occasions that the debt-fuelled property boom was based on "sound economic fundamentals" , when this was directly contradictory to the advice he was receiving from independent experts. Urged on by his construction industry supporters, he acted as chief cheerleader to the property boom in 2005-06, leaving up to 70,000 First Time Buyers who purchased their homes since the beginning of 2006 now facing the prospect of negative equity.

o He has achieved no significant improvements in value for money for taxpayers or in public sector productivity, with CSO figures showing that cost inflation in public spending under Minister Cowen has been twice that of the UK.

o He misled the electorate about the state of the economy in 2007, promising massive tax cuts and spending increases that he cannot deliver. On the basis of the ESRI report, tax revenues now look like they will be at least €7 billion lower than assumed in the Fianna Fáil election manifesto by 2012, ruling out all of their tax and spending promises without recourse to massive borrowing.

"Despite the mounting economic problems, Minister Cowen continues to display alarming complacency. Under his Budget for 2008, day-to-day spending continues to outstrip growth in the economy. No measures are being taken to reform the delivery of public services to get better value for money. None of the 250 new quangos which have mushroomed under the Fianna Fáil Government are being reined in.

"Instead the Minister for Finance is treating taxpayers like fools. He pretends that he is in control. He refuses to admit that a €500 million shortfall in just two months means his Budget is totally off course. He insists that he is pursuing a Programme for Government that simply cannot be achieved.

"Minister Cowen is admired as a powerful parliamentary debater. But it is his decisions as Minister for Finance that ultimately matter to the Irish people. No amount of rhetoric is going to get Ireland out of the economic mess that he has created.

"Mr Cowen must now rescue his reputation by demonstrating that he has the competence and leadership skills to take the hard decisions that are needed.

"First, he must avoid knee-jerk cutbacks in front-line services and vital infrastructure programmes vital for our long-term competitiveness.

"Second, he must move beyond the bland banalities of his Budget speech to spell out how he intends to confront Government waste and implement the structural reforms necessary to put the public finances back on a sustainable footing. He could start by tackling the back-office bureaucracy and duplication associated with the 250 new quangos created by Fianna Fáil since 1997.

"Finally, he and his Government must end the sense of drift and present a revised medium-term programme which reassesses tax and spending priorities against the background of the fragile state of the public finances."

On Wednesday Bruton suggested the following to help Ireland's economic situation -

- Bertie Ahern and his Ministers should reverse their decision to pay themselves and top bosses in the public sector major pay increases until real changes are delivered that yield more cost effective services;
- The Taoiseach's Government should now be finding real economies in the administration of public services, not sleepwalking its way into belated and forced cutbacks at the frontline or in infrastructure programmes;
- He should immediately push ahead with changes that will deliver a more competitive public sector - open up the competition in public transport which has been postponed for almost ten years, and separate fully the transmission network from the ESB generation industry so that the new Eirgrid can genuinely select the most competitive and environmentally-friendly generation options;
- Introduce an immediate audit of all agencies and quangos to identify opportunities for consolidation;
- Change the mandate of the Comptroller & Auditor General so that instead of just unearthing waste after the event, he can scrutinize the processes as they take shape;
- Revolutionise the scrutiny of major strategic initiatives being undertaken by the Government so that all of these programmes have a detailed road map with targets, benchmarks and identified costs, and clear lines of responsibility assigned to individuals involved.

Clowen is going down as the worst minister for finance in the history of the state, he is 60% off with his estimates, he can't add, he is doing the economy damage.

This was bloody prophetic. I was reading this last night and I couldn't believe it. It just struck me how arrogant this government is that they took no notice of ESRI or opposition warnings six months ago. Enough time to do something at least, instead of nothing.

The ESRI press release from last march (Quarterly statement)
http://www.esri.ie/news_events/latest_press_releases/quarterly_economic_commen_8/index.xml

Richard Brutons statement at the time:
http://www.finegael.ie/news/index.cfm/type/details/nkey/33789/pkey/653/

Both Brian Cowen and Brian Lenihan have repeatedly lied that the Irish deficit and recession - the first in Europe - was caused by outside events.

It wasn't.

http://www.reuters.com/article/GCA-inflation/idUSTRE48O5GV20080925

I think this could apply equally to some Irish politicians.

We had a property boom/problem of our own making, through which we all, yes that would be WE all, lived high on the hog. We paid shag all in direct taxes while at the same time, as a state, spent increasingly large amounts on public services and building our infrastructure, which WE demanded and felt we were entitled to, but shouldn’t have to pay for.
The only question was would the boom slow down or burst, left on it’s own we’ll never know because along came the US financial system led “credit crunch” and burst our leaky balloon for us.

We had a potential problem, our iceberg if you like, but it was the US financial system who decided that our bulkheads should not be built floor to ceiling and so problem turned to crisis.

Germany, Holland, or most of the rest of Europe hasn’t had a property boom and while they don’t have an immediate hole in their finances, that fact didn’t stop their banks getting into trouble nor will it help their large industry get the credit it needs to survive nor will it prevent the coming recession.

The sad fact is we’d be in a deep hole now whether we had a property boom or not.

Finally, tell me this boys & girls, when you find someone to blame….does it help?

tonys - you're dead right it was a feeding frenzy in the West and we got caught up in it big style. Now the whole Western world's financial architecture is creaking that it needs an overhaul. Who will it benefit when it does get that overhaul?

I'm convinced that, along with a set of classic asset bubbles, we are also lurching into territory that concerns dwindling resources and growing world population which was contributory to the crunch that's happening now. During the time of the bubble gone by we might have taken this into account - dwindling resources thus apply proper standards for buildings and even push for renewables included in builds. This didn't happen until the Greens got into power. This would have taken a bit of, ahem, heat, out of the market. This would have been putting money into the REAL BANK for the future. The real bank is about shoring up dwindling resources and creating infrastructure and systems for the future - as independent as possible from money. Even now I was disappointed that the renovation schemes in the budget were grants for 30% of the cost of the project. I thought a low-cost loan system would have been the way - 3% loans, maybe even less. Sinn Fein will get in next time and they'll implement this type of thing I hope.

And how can you make any excuses for the work of the Regulator who gets paid handsomly to do a job and didn't do it and because he didn't there are concerns or there should be public concerns that the Dept. of Finance didn't put on their overalls either.

Primary teachers are threatening major nationwide protests at the 'savage' budget cuts and John Carr is saying that young children should not be made to pay for the damage done by big business and bankers.

No strikes - but major protests involving parents who at this stage, have had enough.

J'ai aimé des gréves de proffesseurs.

tonys wrote:

The sad fact is we’d be in a deep hole now whether we had a property boom or not.

But not nearly as deep if the morons had taken heed of advice available to them instead of buying popularity.

tonys wrote:

Finally, tell me this boys & girls, when you find someone to blame….does it help?

Well I've been blaming them for years. And will continue to do so. Their modus operandus makes me vomit.

No, it doesn't help. What would help is if they got fucked out of government, never to return.

Bah, why am I even bothering tonys?

tonys wrote:

We had a property boom/problem of our own making, through which we all, yes that would be WE all, lived high on the hog. We paid shag all in direct taxes while at the same time, as a state, spent increasingly large amounts on public services and building our infrastructure, which WE demanded and felt we were entitled to, but shouldn’t have to pay for.
The only question was would the boom slow down or burst, left on it’s own we’ll never know because along came the US financial system led “credit crunch” and burst our leaky balloon for us.

We had a potential problem, our iceberg if you like, but it was the US financial system who decided that our bulkheads should not be built floor to ceiling and so problem turned to crisis.

Germany, Holland, or most of the rest of Europe hasn’t had a property boom and while they don’t have an immediate hole in their finances, that fact didn’t stop their banks getting into trouble nor will it help their large industry get the credit it needs to survive nor will it prevent the coming recession.

The sad fact is we’d be in a deep hole now whether we had a property boom or not.

Finally, tell me this boys & girls, when you find someone to blame….does it help?

There's a lot I like about your post Tonys, but imo the property boom is a diversion. Even in the short term the Irish economy was on the turn from 2000 - manufacturing and competitvity was in decline from then on in. Property was fuelled up beyond the point of supply-demand balance as a substitute for real productive action.

If we want to be serious about it, we'd admit that the thing was on the ropes in 1971 and that is why Bretton Woods collapsed. http://www.wsws.org/articles/2001/aug2001/bw-a16.shtml

Since then, a massive inflationary bubble has built up. The US has a 9 trillion dollar debt. A collapse of the dollar, providing they were able to come out of it functioning, might be the lesser evil for them, and if it left the euro region screwed, well so much the better for them.

It's kind of tragic that in Ireland it would have taken so little to have avoided the "home grown" end of this. But we are in the whirlpool now, and will have to deal with it. It is not a question of blame, its responsibility. There should be a full investigation of reckless trading (NOT a tribunal) and the unwarranted moneys extracted by bankers taxed/expropriated. The banks should be brought under proper controls with a majority public share, or go it alone. When it comes to the politicians, we have our votes, but there is no way we should have to wait another four years to use them.

Some of these things work, some of them do not.

It always seems to me that alot of these senior regulatory type people actually are not the most talented people but in essence there owing to longevity of service. I suppose it is the same with much of the public service.

johnfás wrote:

It always seems to me that alot of these senior regulatory type people actually are not the most talented people but in essence there owing to longevity of service. I suppose it is the same with much of the public service.

It's bizarre that we have these people in posts and they DON'T DO THEIR JOBS. They don't get culled, the lad on the bottom gets culled. And before he gets culled he's regularly told he wasn't doing his job properly.

It's Kafkafuckingesque.

Happens in all business. I know of a law firm where a junior staff member forgot to register a charge at the CRO - eventually led to a loss to a client of over a million. They lost their job, their manager didn't.

cactus flower wrote:

If we want to be serious about it, we'd admit that the thing was on the ropes in 1971 and that is why Bretton Woods collapsed. http://www.wsws.org/articles/2001/aug2001/bw-a16.shtml

Since then, a massive inflationary bubble has built up. The US has a 9 trillion dollar debt. A collapse of the dollar, providing they were able to come out of it functioning, might be the lesser evil for them, and if it left the euro region screwed, well so much the better for them.

An amazing idea - a fascinating thought.

Nice regulators Audi. Except for the crap one in the middle.