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Politics : American Presidential Politics and foreign affairs
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To: DuckTapeSunroof who wrote (43297)5/18/2010 5:46:58 PM
From: TimF  Read Replies (1) of 71588
 
Liquidity in the Irish economy was also addressed in my post.

Its plausible (if far from certain) that the Irish budget cuts reduced economic activity i Ireland (at the very least they probably reduced the official measure of it, since every dollar (or euro, or whatever) of government spending gets considered as a dollar (or other currency unit) of GDP, whether its useful at doing anything or not); but suggesting the reduction of GDP is great enough to lower tax revenue more than the spending cut lowers spending, isn't very plausible.

Ireland's tax revenue in 2008 was 28.3% of GDP.

ekonomifakta.se

I'll round that to 1/3rd to make calculations easier (not this rounding up, works against my argument, I'm not rounding towards my conclusion).

OK so for every 3 dollars of GDP Ireland's government gets an extra dollar of revenue.

Now lets assume that in the context of the economic slowdown every euro of reduction in Ireland's government's spending reduces GDP by two euros (its unlikely that its that high, and over the longer run its would be negative not positive, but I deliberately avoiding estimating low to prop up my argument).

Then Ireland reduces its government spending by X euros. Spending goes down by X. Revenue goes down by X*2*(1/3) or 2/3 X. 2/3rds is less than 1.
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