Tuesday, April 7, 2009

The Irish Economic - Little shelter from the wind and the rain blowing in

Global economic problems impact Ireland hard, because, like the island itself, there is little shelter when the wind and the rain blows in from across the Atlantic. Ireland gets it weather from across the Atlantic via the Gulf Stream: from the Gulf of Mexico, past Florida, up past New York and New England, and across to the wind-buffeted Irish West Coast. And Ireland's economic weather blows in from the same source. Property collapses in places like Florida, as well as cutbacks be employers like Dell in Texas, blow over the Atlantic to Ireland. Ireland's highly globalized economy takes the good with the bad, and right now it's mostly bad.

So the Irish Govt today released a new budget to deal with the global economic downturn. Interesting to read the details on the Irish Times site (link below). The Irish Govt is cutting back on costs in order to lower government spending, because of reduced tax income due to the decline in property sales and the global economic issues in general.

It is interesting to compare the Irish Govt response (cut back spending) with the US Govt response (increase spending). Of course, the circumstances are different - the US Govt can print money, whereas Ireland is similar in many ways to a US State which must not run a deficit (an EU country can run a deficit within certain bounds, but after that it runs into trouble with the EU).

Most people would naturally consider Ireland a high-tax country. But look at the story below. The Irish Government is considering bringing in property tax. That is something which would chafe with many people (especially in rural Ireland where I come from) as a government levy on private property ownership. But in the supposedly "low tax, small government" US it's taken for granted. Additionally, the Irish Government is cutting back on payments to parents sending their kids to pre-school, but such payments do not exist here in the US. Also, the child benefit payment, something which does not existing in the US, is now going to be means tested. But it still exists.

All in all, the supposedly "brutal" budget is not as brutal as I thought, and made me think about how much the US is actually the "Tax and Spend" country here, and Ireland is the puritan "rein in the costs, keep government small" country. Although, in times to come, Ireland will then benefit from the US economic upturn (as it benefits from good weather blowing in over the Gulf Stream from the US) and the poor US taxpayer (like me!) is left with the costs as the US debt grows and grows.


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