Paul Sweeney on Fiscal Alternatives

Paul Sweeney argues for an alternative fiscal strategy in this op-ed.

22 replies on “Paul Sweeney on Fiscal Alternatives”

Just finished reading it. Sorry stuff – poor analysis, worse conclusions and useless proposals. Its not PS (the person) he’s a regular sort. Its what he is writing (his ideas, opinions, views, beliefs, whatever), and by extension his very low traction with economic reality. Pity, but there it is. He’s not alone, unfortunately.

There are a few ‘terms of endearment’ which make me bristle (yes, I have had my Java!): competitivness (aka: skrew the low paid, lower); incentivize: (skrew taxpayer, again!); government intervention (skrew the aready skrewed taxpayer, again, again!). Here, go add your own.

“Now tell me this Paul, and tell me no more.” “Just making a gently inquiry, you understand.” How does a taxpayer (presumably a consumer cum demander) who is being right royally skrewed out of their income, become a right royally un-skrewed demander? They DO NOT! “Oh! they should use their credit card, right?” Terrific!

Paul, our Gov has less income that it expends. Its credit cards are maxed out and have been declined. Its the unpayable debt! The unpayable debt! The unpayable debt!

At least you got one thing correct though; dealing with the unpayable debt has to be a political decision. Pity is, our politicians are (with some notable exceptions) sychophantic cowards on this issue.

Paul, there is a critter of the same name who posts the odd piece on this site. I respectfully suggest that you not only read his stuff, but heed it. And incorporate it into your economic and political Models-in-Use, so that it becomes characteristic of your behaviour.

Just so as you do not think that I have it in for you – I do not. Jorry A was wittering on the other day – in much the same vein as yourself. His efforts were truely dismal. But then wittering is risk free.


I agree with the main point of the article that an infrastructure investment fund is badly needed. The plan to make very sharp cuts in capital spending over the next 3 years do not make economic sense. Rather these cuts are the politic easy option rather than make deeper cuts in current expenditure.

In fairness to the government, they have already set up such a fund on a relatively modest scale. Here is the NPRF’s press release on that. It lacks much information, but gives a basic outline:

What not go larger scale? Set the fund up as a traditional private equity style infrastructure fund with a 10 year term. The fund invests over the first 5 years and works out the investments over the next 5. It should run on commercial terms (with 2/20 fees if necessary – I wonder what fees AMP is earning off the current arrangement?).

The NPRF could put in €500 million with Irish pension funds required to invest a further €1 billion (around 1.3% of their assets). You could then seek outside investors to also contribute. Even if there are no outsiders – fundraising for such a fund would be tricky to say the least – you would have €1.5 billion in equity to which you could add 40% debt to give you a fund size of €2.1 billion. Double those numbers gets you above €4 billion.

The average Irish pension fund has a really poor asset allocation. Most DB schemes are still allocated along the lines of 70% equities, 25% bonds, 2% property, 3% cash. No alternatives to speak of. Thus forcing Irish pension funds to invest in a small allocation in a private equity style infrastructure vehicle would be no bad thing for the average fund provided it is done on a commercial basis.

Sorry about the typos there. Is there a way to preview posts here before you upload them? Or to edit them after they are up?

Hopefully my point comes across anyway despite the typographical errors.

Yeah poor, populist stuff.

1) “Clearly, decision-makers have not yet relaised that their economic orthodoxy is not working”

I can’t stand commentators who make Austerity sound like a choice, or even those who imply that the Government doesn’t know it harms growth.

2) “A lower interest rate must be secured”

On what? This is very vague, we have already recieved a rate cut on the main body of loans from the EFSF/EFSM and they are being provided pretty much at cost. They are hardly going to supply them to us at a loss.

If an interest rate cut on the Anglo promissory notes (or a refinancing) is meant then why can’t the author flesh this point out in some kind of detail?

3) The pension fund idea is interesting (progress seems incredibly slow from the Government on the issue since Budget 2011)

4) Tax the wealthy appears to be what the article boils down to.

Well, at least the article gives some basis for where such investment monies would come from unlike others.

In recent years we’ve had a number of national ‘ideas’ projects and while there was no shortage of proposals, nothing much came of any of them.

Paul doesn’t have any fresh ideas either and I wonder why battered private pension funds should be used for a ‘major’ infrastructure program?

We had one didn’t we?

Farmers took 23% of the roads budget and many others profited from gravy trains even though the projects themselves were on the slow boat to China.

There is a close resemblance between this proposal and the experience in Japan.

The world’s biggest economy has some of the worst infrastructure of the developed world and the third biggest has unquestionably the best following several spending programs to boost the economy following the bust in the early 1990s. MAny bridges to nowhere were built.

In Japan, borrowing as a percentage of GDP averaged 9.7% in the 1980s, 8.6% in the 1990s and 4.2% from 2000 to 2009.

Japan’s gross public debt rose from 51% of GDP in 1980 to 233% today.

Ireland like Japan did not respond to a crash with overdue reforms.

The National Competitiveness Council said today that bubble costs remain in the Irish cost structure.

TDs are paid almost 30% more than Swedish counterparts and that’s not accounting for the Irish expenses bonanza.

This is just an example from a system where many indicators are back to the late 1990s but the public sector with its 88 planning authorities etc remains effectively unchanged.

There are opportunities for reallocating funds including from the €2.5bn annual science budget but Keynes ‘solution of planting bottles around the country and setting up public works to find them, is not feasible as we are out of money.

Can’t understand why there is not more debate about this sorry document.

•Infrastructure and Capital Investment 2012-16 (published November 10th, 2011) (PDF)

First you identify the problem…………
We are the most extreme of market states with a huge import /export dependency that makes us one of thee most vulnerable of countries to outside shocks.
This disastrous export to afford imports strategy must stop.

We will spend 2.931 billion on roads and road maintenance over the next 5 years.
How much will the private rentier sector contribute ?

Also the economics of tolling is not mentioned !
Tolling only makes sense in central urban areas.
People taking the long way on the empty N8 Rathcormac Fermoy toll is a norm – how does this improve efficiency ?
The tolls serve no economic function other then extraction.
Tax should be directed towards making private transport more expensive – increasing VRT & Road tax by creating a new class A+ emission vehicle below 100gs at the existing 14% VRT , but pushing up VRT by 4% for all other vehicle classes.

We burn 2MToe of oil on private transport in this country – we need to go back to the 1MToe days (1990) when we walked and got the bus to school.

Rail freight has collapsed – with road freight exploding until it crashed in 08.
Any increase in activity will just explode energy imports again.
With not even tiny investments made (Foynes line) to reduce our import dependency.

A tiny 715 million will be invested in Public transport in the Greater Dublin Area during this period – unlike the 2.931 billion spent on roads this includes vehicle expenditure.

Why not depreciate the road network by not investing ?
Much like how post independence we ran down the narrow gauge rail network as Buses became more competitive.

We imported 1.593 billion of oil & oil products in 2003
We imported 4.258 billion of oil & oil products in 2010 despite burning much less of the stuff.

Net energy imports (all petroleum products)
2003 : 8431 KTOE
2005 (peak) : 9198 KTOE
2010 : 7464 KTOE
this is lower then 1998 imports : 7505 KTOE but import costs have gone up dramatically.
Over 5 years at 2010 consumption & price thats 21.29 billion of oil inputs !!

Our investment stratergy should be about cutting residential oil use dramatically via encouraging the purchase of wood & wood gas stoves (1.3ktoe) which is more cost effective then lagging when houses are built above the minimum standard as you get diminishing ROI under such circumstances.
Bringing back old Edwardian rail lines which feed into mainline rail stations in Limerick & Cork (Foynes & Youghal ?) using cheap DMUs – this would cost less then 200 million including vehicles & cause little disruption to urban areas.
Build one sugar & one ethanol plant in North Cork & East – both with rail access so that if price of one product declines they can switch easily.
(building redundencey into all systems must be a priority)

A very substantial investment on Corks south river – with a Heavy Tram going from Ballincollig to Crosshaven – this will link the city in one long main artery without need for car or multiple bus connections to access work , shopping & leisure.

Agree with what’s been reposted so far. With a 10% deficit, the country is in no position to invest. Most of the budget cuts have come in the from capital expenditure not current (thanks to the croke park agreement?)

The motorway infrastructure built during the Celtic Bubble, has shown to be loss making. The M1 motorway tolls largely subsidises the other roads. The NRA are looking to build new toll plazas on the current network, presumably to cover the infrastructure’s current costs. If current infrastructure is not viable, why would it be in the future?

No fund manager is going to invest THEIR money in this state. Hence our still high bond yields. They recognise that the state is misusing the resources currently available to it.

Sorry 1,300 ktoe to heat our houses with very expensive fuel oil – this sector has experienced massive growth over the years and is a huge drain on our resourses.

@MH-ff: “Farmers took 23% of the roads budget”

I wonder how this was achieved. And where did the ‘money’ go to? Add IFA to my taxpayer looter list.

@Dork: “Can’t understand why there is not more debate about this sorry document.”

Have to read it. Understand it (including the Spinola). Sieve out the turds. And have a stable mental framework to construct your responses. Opportunity costs are too high. And that’s all before they have to shell out the money cost of paper. Folk have more trivial things to do with their


I know of at least one sociology lecturer who perhaps studied economics as one of his college subjects and is now portraying himself, to the media at least, as an economist. (Almost as if sociology was something to hide.)

No idea about Paul Sweeney, since it’s not clear what he’s studied or perhaps taught. Modesty perhaps?

However I do think as he’s so clearly associated with ICTU, TASC etc. so it would help if his qualifications were more clearly highlighted (Chief economist for ICTU doesn’t tell us that much really).

In this country we have economists who are compromised because they depend on their incomes from one vested interest or another.
The Only ones capable of speaking their minds are the academics.

I think Sweeney’s point with regard to investment is right in general however the areas that would be best to invest in, are not the ones that would end up getting the investment due to the large number of powerful vested interests.

The glaring but expected ommision from his article include the need for public sector wage cuts.
The trade union movement are not acting in their members or the country’s best interests when they punt for 10% job reductions over on average 10% salary reductions. At a time when there are no jobs to replace those lost their strategy is so damaging. Even when they do agree to salary reductions they do little to protect the lower paid. They prefer across the board % cuts rather than asking those that earn more to take larger % reductions. Again a betrayal to the majority of those they represent.

The worst and most dangerous sentence is “And it can be delivered at no cost to the taxpayer”.
Memories of David McWilliams comments the morning after the Guarantee come to mind. “right now it wont cost a penny”
Paul Sweeney correctly now describes the Guarantee as lunatic.

Surely the author accepts that investment in this country right now, even in good investment opportunities, is risky? We should still do it but why lie to people?

For all the accusations of not being willing to engage Morgan Kelly is the only academic economist who has outlined any sort of alternative plan to the slow motion train crash we are witnessing.
Its time for academic economists to step up to the plate here.
Their complete unwillingness to poke their heads above the crowd makes sense from a short term personal financial perspective as they fumble in the greasy till.

Romantic Ireland’s dead and gone, Its with O’Leary in the Grave.
I have been calling on them for months now on this site to at least try to do more.

Why do people keep using the word austerity (and boom for that matter)?

How about calling things for what they are

Austerity > Living within available means

Boom > Bubble

Michael Hennigan US has bad infrastructure? I ll take their interstate system (build over 50 years ago!) over our joke of an incomplete motorway network any day

Some of his smaller points have merit but on the main one:

Austerity is in fact working…we had a bubble, with every sector of the economy ending up falsely inflated. Contraction is necessary.

Though these points:
1) It would be nice if global economy was booming, as could probably avoid a recession (but that’s merely nice)
2) Contraction is not smooth – so at least in hedonic terms, increased unemployement not good

and both those point to:

3) We still need nominal wage cuts, relative to other countries. Wages are sticky, and may not even be legal to cut. The answer is: the govt to put an x% levy on all earnings…and rebate the x% to employers. A de facto devaluation.

Rubbish, If there is one thing we got out o the Celtic tiger it was a great new motorway system. Obviously some roads were not done but all the major citys were linked
You cant expect a sparsely populated country to be able to afford a similar standard of motorway system to USA?

@ desmond Brennon
“3) We still need nominal wage cuts, relative to other countries. Wages are sticky, and may not even be legal to cut. The answer is: the govt to put an x% levy on all earnings…and rebate the x% to employers. A de facto devaluation”
And then we spend 25 hours a day 8 days a week on our hand and knees picking spuds and live in a Sean O Casey play.

Motorway = far too much input costs.

It needs a fully operational Imperium to extract at maximum rates from Sunny climes.
The energy costs are somewhat equal to 100s of slaves per person.

Investment now should be all about increasing redundency from a collapsing Empire experiencing overstretch & extreme corruption. , not increasing catastrophic risks via get rich quick decapitalisation schemes


Look at how New Orleans did when Katrina came. The US spent the last 30 years deregulating and steering money to get rich quick schemes instead of investing in infrastructure. The UK did the same.

Compare Heathrow or JFK to Schipol airport. Or either country’s train system to any continental train network.


According to the US Treasury Department, infrastructure spending in the US is about 2.4% of GDP – – half of what it was in 1960  — and compares poorly with China (9%) and Europe (5%). Most of the infrastructure dates from the years after the Second World War. The interstate system was mainly built in the period 1956-1972 and roads generally have a 50-year life span.

The OECD’s International Transport Forum, has said that the US spends considerably less than Europe on maintaining its roads network. In 2006 America spent more than twice as much per person as Britain on new construction; but Britain spent 23% more per person maintaining its roads.
One in every five US bridges is classified as “structurally deficient”, requiring significant maintenance, repair or replacement.

The number of miles travelled by cars and trucks has doubled in the past 25 years, but highway lane miles have increased by only 4.4%. Demand for electricity has jumped by about one-quarter but the construction of new transmission facilities has dropped by 30%. The US now ranks 23rd for overall infrastructure quality, according to a World Economic Forum study.

America’s dependence on its cars is reinforced by a shortage of alternative forms of transport. Europe’s large economies and Japan routinely spend more than America on rail investments, in absolute not just relative terms, despite much smaller populations and land areas.

Revenue from taxes on petrol and diesel is put into funds that are the primary source of federal money for roads and mass transit.

However, the petrol tax has not increased since 1993 while the real value of the tax has eroded, the cost of building and maintaining infrastructure has gone up.

Last summer workers at US airports had to be let go because Republicans refused to renew a travel tax which is used to fund some airport operations.


I composed and uploaded (at least I thought so) a longish reply to you – between 9 – 10 Thur evening last. Concerned the declining availability of Liquid Hydrocarbon Fuels [LHF]. Don’t see it. ???, nor your original query re “lights out” ???


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