In the 1980s and 1990s, the Irish government adopted a series of pro-growth policies — slashing corporate tax rates, for example — that allowed the productive economy to rapidly expand. Ireland went through a period of fantastic growth that led to its description as a “Celtic Tiger.” In the early 1990s, however, the government embarked on a massive spending spree, fueled by the private-sector wealth creation, that eventually saw public expenditures increase by more than 600 percent.
Until about 2000, with the productive economy growing so fast, government spending as a percent of GDP was actually on a moderate decline, despite the enormous growth of the state. Then came the global economic crisis. Spending shot through the roof, and as a percent of GDP, government expenditures also soared. The central government made matters worse when it agreed to bailout the big banks, putting taxpayers on the hook for monstrous debts.
Irish government spending still makes up around half of GDP, but politicians have recently started to cut spending to deal with economic realities. The nation has also resisted calls for new and higher taxes, so it may yet emerge from the crisis. But it’s clear that statist policies — bank bailouts, skyrocketing spending, and interest-rate distortions — played a key role in Ireland’s woes.
The situation here is dicey; we have Obamunism (albeit it's also FDR-ism, LBJ-ism, Carter-ism, and BushII-ism--all initiated and supported by Congress-ism).It IS the spending.
Nah. They've done a shitty job of collecting revenues as costs escalate. Big difference.
ReplyDeleteNah, this is a really bad description of what happened in Ireland. The Irish weren't running massive budget deficits before the crisis. It was the collapse in GDP due to the real estate bubble and financial crisis as a result (and revenues) which caused the deficit to explode. It's all there if you look at the data.
ReplyDeleteStrupp, the source-article GRANTS that Ireland was doing fine until the finance-bomb dropped.
ReplyDeleteWhat was important, however, was the SPENDING SPREE of the early 1990's, (perpetual, of course.)
That didn't go well when revenues collapsed.
And part of it was greed. The Irish could borrow, easily, at rates under 1%. And almost everyone did. People who'd never had cars bought them. People gobbled up real estate. Development speculators put up housing estates that today sit empty. They'll never sell, and today, hundreds of these developments sit empty all over Ireland. The Irish call them the "new Famine" developments. The late 80s and 90s were heady times. Both the government and the people are paying for it dearly. Things are dire in Ireland right now. I hold dual (US and Irish) citizenship. I'm over there a couple times a year. As bad as things are here, they're far worse over there.
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