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Economics Today 18th Edition by Roger LeRoy Miller
Edition 18ISBN: 978-0133882285Economics Today 18th Edition by Roger LeRoy Miller
Edition 18ISBN: 978-0133882285 Exercise 2
A Long Line of "Austerity" Budgets in Ireland
In 2006, Ireland's government operated with a slight annual budget sur-plus, and its net public debt was equal to just over 11 percent of the nation's gross domestic product. Today, following several straight years of substantial government deficit spending, the country's net public debt exceedS107 percent of the nation's GDP. Michael Noonan, the finance minister for the Irish government, has been working hard to halt the rapid growth of these deficit and debt numbers. Noonan has aimed to achieve these objectives through what have come to be known as "austerity" budgets for the government. These budgets have combined government spending reductions and tax increases that have totaled nearly $38 billion, or 17 percent of the nation's GDP.
As Noonan proposes the budget for the coming year, he quotes the famous Irish poet William Butler Yeats: "Too long a sacrifice can make a stone of the heart." Noonan is convinced that the government's budget deficit is finally low enough that the net public debt as a percentage of the country's GDP is shrinking. The Irish government, Noonan has decided, is near the end of its "sacrifice." It can now maintain its current flow of annual spending, albeit at a lower level than in years past, and stick with its current flow of taxation, though at a higher level than in past years. The government, Noonan concludes, can operate with less austerity.
Why do you suppose that Ireland's government required several straight years of "austerity" budgets to reduce the nation's net public debt?
In 2006, Ireland's government operated with a slight annual budget sur-plus, and its net public debt was equal to just over 11 percent of the nation's gross domestic product. Today, following several straight years of substantial government deficit spending, the country's net public debt exceedS107 percent of the nation's GDP. Michael Noonan, the finance minister for the Irish government, has been working hard to halt the rapid growth of these deficit and debt numbers. Noonan has aimed to achieve these objectives through what have come to be known as "austerity" budgets for the government. These budgets have combined government spending reductions and tax increases that have totaled nearly $38 billion, or 17 percent of the nation's GDP.
As Noonan proposes the budget for the coming year, he quotes the famous Irish poet William Butler Yeats: "Too long a sacrifice can make a stone of the heart." Noonan is convinced that the government's budget deficit is finally low enough that the net public debt as a percentage of the country's GDP is shrinking. The Irish government, Noonan has decided, is near the end of its "sacrifice." It can now maintain its current flow of annual spending, albeit at a lower level than in years past, and stick with its current flow of taxation, though at a higher level than in past years. The government, Noonan concludes, can operate with less austerity.
Why do you suppose that Ireland's government required several straight years of "austerity" budgets to reduce the nation's net public debt?
Explanation
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The austerity budget implies a rise in t...
Economics Today 18th Edition by Roger LeRoy Miller
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