Negative Income Tax and the Public Finances Crisis

Today I will look at how the Negative Income Tax can help to solve public finances crisis.

We've heard it all before, but it's nice to repeat the facts again. We are currently borrowing around €22bn to finance the huge public expenditure bill, which includes the €21bn of social welfare payments and €20bn of public service pay. I would like to look at the €21bn attributed to social welfare. This is exactly the area that NIT can help to reduce. (True some might argue that public sector pay should be looked at, and I agree as well, for the sake of this post and NIT I want to concentrate solemnly on social welfare expenses.)
Firstly let's look at what compromises the whole sector of Social Welfare. The Social Welfare is meant to be a help for the individuals and families that find themselves in financial difficulties due to various factors (the most frequent ones being the inability to find a job, the inability to work and being on pensions). However, currently under social welfare the state is sponsoring many more than just those that cannot find a job or cannot work. Currently when look at the various recipients of social welfare payments it includes the following:

• Disability and illness
• Carers
• Unemployed people
• Older and retired people
• Families and children
• Death related benefits
• Back to Education
• Farmers
• Extra social welfare benefits
  

While some of these (in fact most of these) can be justified, this long list of various recipients causes problems. It creates scope for 'double payment's and even welfare fraud where people abuse system and can, indeed gain, much more from social welfare than from working. This is a serious issue when it comes to public finances because not only does state have to pay for these people but the state also looses money from the taxing of the person's income.
Along with this long list the 'extra social welfare' category includes emergency benefits that the state pays to the individual such as diet and rent supplements, heating supplement, mortgage relief and urgent needs payments. You can see that with so many various schemes and various payments there is a very high chance of the abuse of the system and also of people living much higher about the minimum that they are entitled to.
The ideal solution to this would be creating a threshold that determines this minimum and makes sure every individual or family stays at the level of this minimum at the very least. I'm talking about a threshold that the NIT establishes. In fact, we have this threshold set in the scheme of Family Income Supplement, where the family receives money to bring it up to the threshold level, if the income is too low. The payment is calculated as 60% of the difference between the threshold and the income.
Having a system that is synchronized like this, for both families and the individuals will save up from €2bn to €5bn depending on the amount of the threshold. This is almost like the whole McCarthy report!

[All information was got from Irish Citizens Information website, calculations are my own estimates and may be flawed]

Our Economic Crisis

Today I am going to concentrate my attention at another of the main policies of Breakthrough, namely the Negative Income Tax(NIT). The system of taxation has been proposed by many economist in the USA in the 1960s. Milton Friedman is attributed with this concept, though there were many other economist before Friedman, such as Juliet Rhys Williams, who have proposed this concept. At the time the idea was revolutionary and stirred up great amount of discussion and arguments about its efficiency and its ability to truly help both the poor and to improve the fiscal situation in USA. In fact some of NIT has made its way into Richard Nixon's Family Assistance Plan, however the full implementation of NIT has never truly been truly been implemented.
Before I venture into the reason why there is a reason for NIT in Ireland, let me first try to explain what NIT is, as not many are quite familiar with the concept (in fact even I have heard about it just recently). NIT, like any other system, taxes the income of the citizens at certain levels, as agreed upon by the government. However, the NIT proposes a threshold to be established above which this taxation taxes place. Furthermore for people with income below this threshold the government pays back 'negative tax'. People whose earning match this threshold break even, ie they do not have to pay any tax and nor do they receive any tax in return. There are actually quite a few different proposed systems of NIT, and I will discuss them in later posts to establish which system does Breakthrough prefer.
Having established the standard definition of NIT, however, let us now look why would Ireland need such a radical change in our tax system. Right now Ireland is in the middle of the worst economic recession in decades. In fact, some argue, we have two recessions happening here in Ireland simultaneously; the local recession caused by the property bubble and resulting unsustainable growth of wages, and the international recession that started off in the USA. With these two recessions happening simultaneously we are now experiencing an increasing unemployment (currently at around 12%) and the fall of GDP this year of around 9%. The situation thus, looks very grave for us in Ireland.
Furthermore, though, we are experiencing a great crisis in the public finances and running a debt this year of around €22bn, which is unsustainable. It is this crisis of public finances that needs to be sorted first, before the government can even think of introducing a stimulus package to create jobs and help to kick-start the economy. The Keynesian policies of great government intervention simply cannot start here, with a debt of €22bn for one year alone. Thus it is clear we must solve this crisis first before we can even start thinking of tackling the other problems.
However not many people have much time for such a thinking. It is no easy thing to do, when you have been made redundant and suddenly you find yourself singing up for social welfare payments in order to survive. Therefore the government needs to come up with a solution that would both tackle the unemployment crisis and help to make the fiscal adjustment that is required.
And this is exactly what NIT offers. How? I shall do my utmost best to explain this in the next couple of posts, so please look forward to reading them.

Technocracy- Critique

Today I would like to deal with the very last point regarding Technocracy and then leave the issue until someone specifically requests that any point needs better explanation or a better discussion. This last point is dedicated to the raised concerns and critique:

Would the proposed Technocracy lead to the end of the PR system?
No. The system of parties trying to get majorities in the Dáil is ,I think, similar what is really happening right now. I would hope that the system I am proposing would ensure that the TDs would do more work in Dáil to work for their electorate, as right now we hear the excuse of 'Unfortunately it wasn't the government's policy' or 'I was busy trying to get the government out of the office'.
I suppose this would lead to a model of the EP with regards to independents being voted in and then forming a political group together in the Dáil, however don't take this suggestion seriously as it is simply my own personal opinion or forecast.

Who exactly defines "expert"?
That is a very good question and the answer is very simple- the people we vote in. The TDs that are directly elected by the electorate must nominate a Taoiseach and give his/her cabinet a mandate. This means that the definition of an 'expert' would be decided pretty much by the Dáil majority. However, to ensure this isn't mishandled, I would envisage the definition of an 'expert' I've already included in the post about the Taoiseach, would be put into the legislation.

Will the experts be truly apolitical?
Its a fair point to say that they will be not be truly political, true. I think the point of this is to have people who know what they're doing as the cabinet, as opposed to people who, during one term are minister for foreign affairs, then in the next term they switch to finance and in the next to say agriculture and that's all because they really don't know much about these fields. The reason why they would be apolitical is when they introduce a bill that might not necessary be supported by the coalition that elected them in. this would mean the ministers would have to try and persuade the Dáil to support his/her views, giver arguments, facts, and this would open up a debate. also the government would only be bound to the coalition in the Dáil by its program, so it could introduce a bill that will be, in its opinion, beneficial to Ireland, but not supported by the coalition that got them in power but still not in conflict with its program. yet again this would offer greater room for debate and could make the governance of the country not one-sided, as would be the case if politicians would be in the cabinet, I think.

That concludes the series of post about Technocracy. I will now hide away and read through tons of material to support my point and come back after the weekend to start a series of posts about another of Breakthrough's policies.

Technocracy- Extra Points

As I have promised all those days ago, to conclude the series of posts about technocracy, I would like to add a few extra points.

Reducing TD numbers:
There's a lot of talk nowadays about reducing the number of TDs in Ireland. This is usually the main issue when it comes down to talking about a reform of the political system in Ireland. That is why the reform of technocracy has to, I believe, include this topic too. To be honest, I personally am fully for reducing the number of TDs in Ireland. We are a state of the population of somewhere around 4 million and have 166 TDs, while the European Parliament has 736 MEPs and governs over something of 500 million citizens. Furthermore a lot of the decision making and legislation has been passed onto to the EU and thus there is no need for the number of the TDs to stand the way it is. However, as for technocracy itself, it doesn't need a reduction of TD numbers to function. Some might even suggest that the number of the TDs should increase under technocracy to help to control the cabinet of experts. Therefore, Breakthrough would be open to discussion on this topic, and would consider the reduction of TD numbers as a minor issue.

Abolition of the Seanad:
Yet again this is a point that comes up frequently while talking about a political reform in Ireland, however it doesn't affect technocracy to a large degree. However, Breakthrough would like to see the institution of Seanad to be fully reformed with greater powers and more transparency or abolished completely because the current model is simply only taking away taxpayers money. If you would like to know how this reform would look, please write to me and I will make it my priority to write this up. However, if none such request will be made I will concentrate on other important issues for the movement and then come back to the Seanad later, as it doesn't affect the reform of technocracy directly.

Correction of my statements regarding the President's role:
After I have written the post about the President's role under technocracy I detected certain about of scepticism of having a politically involved President. I would like to express myself more clearly here, when I say that yes the President would have to take a more active role in the political life of the country but must stay above the politics. This might sound like a contradiction, however what I mean by it is that the President must stay above the party politics while keeping in my the citizen's of the country he/she is fully responsible for and protect their best interest. Thus the increase of powers as advocated in the previous post.

Sorry everyone!

Hey everyone!

Sorry for not writing anything for more than a week. It can be attributed to many reasons, starting from me being sick, then being not able to access the internet to being a bit lazy for a day or two. However, before I am writing this, I did go and set up a Facebook group for Breakthrough and if anyone wants to join here's the link:
http://www.facebook.com/notifications.php#/group.php?gid=129430631662

we can all discuss all the ideas there. Tomorrow I promise I will add the extra points about technocracy and the criticism of it, and after that it is time to move on to other issues such as Negative Income Tax, School System Reform and EUnifying Europe.
Once again sorry for not posting for so long.

Technocracy and the President

The last piece of the jigsaw regarding the cabinet of experts and its implementation in the current Irish system is the role of the President. I have hinted upon a few changes to this role in the previous posts and here I shall fully explain them.
Firstly one must realized that with an apolitical Taoiseach the president's role must expand. The President would be no longer apolitical, but rather seen as the last line of defense for the citizens, should the cabinet of experts fail on an issue. Thus the President must take a much more proactive role in the politics, and be allowed to fully criticize the government, should he/she feel that the cabinet is abusing its powers, for example. This proactive role means that the President is no longer apolitical, but an active member of the political scene and requires indeed for the constitution to be changed, as right now the President must ask for the approval of the government to make a statement to the public about the political situation in the country.
Secondly the requirement of the Council of State to meet when the President is considering vetoing a law should be abolished. The President must be a person that must know the laws of the country and calling for the Council of State to present its opinions on a proposed bill does not already alter the President's opinion. Furthermore, the President should also act as the last defence for the citizens, so even if a proposed bill should be in accordance with the constitution but the President sees it is against the interest of citizens he/she should act accordingly. This is a second mechanism of control for the apolitical government, should they abuse their powers.
(this second point, however, is purely my own wish and the technocratic government can be work without it)
When the President does reject a bill, it comes back to the Dáil, where it is debated again. To prohibit the bill to be simply passed again there is a requirement that the bill must win 2/3 majority. This is considerably higher than the usual 50% and makes sure that some amendments and changes were made to the bill. This also allows for control of the President, even. With the 2/3 majority, it is clear that the Dáil supports the proposed bill and, assuming the TDs represent the interest of the people, the bill is not against the citizens either. This bill, approved of by the 2/3 majority, would have to be signed by the President then, as the President's veto has been 'overvoted'.
Of course the President has a vital role when appointing the Taoiseach, as proposed by the Dáil majority. If there are doubts about the nominee, it is the duty of the President to refuse appointing the nominee for the office of the Taoiseach, even if approved of by the Dáil.

That concludes the series of posts regarding the Technocracy and the difference it makes to the institutions that already exist. I the next few days I will bring forward a few extra points regarding Technocracy that simply didn't fit into any other post and after that I shall try to answer any criticism of Technocracy.

Technocracy and the TDs

From the very start of this series of post on technocracy I made sure I did not talk much about the TDs and their powers. This is because this issue needs to be addressed in a post on its own, where I will talk about the powers of the TDs and their role in technocracy, which is indirectly increased under this system.
First off lets look at the start of each TD's political life- the elections. Under the technocracy system proposed, the PR system would still be retained. The PR system has many advantages, mainly that it allows for local parties to enter the Dáil as well as that no votes are 'worthless' as each attributes to a candidate. Another advantage is that the system allows for a TD to be tied to his constituents and work for the area. Many times, however, the TD does not exactly always work for his constitutions. Here we find a problem, that the system of technocracy, indirectly, tries to resolve.
Under the model of technocracy the TDs are not an a part of the government. In fact there are no ruling parties, because the Dáil majority only applies to the appointment of the cabinet and its program. Besides that the TDs are pretty much free to vote and do as they will. This opens doors for the TDs to open topics and issues in the Dáil that interest their constituents. There can be no longer any excuse for not being proactive in the Dáil such as the usual 'It wasn't a government agenda' or 'we dedicated all out time correcting the government'.
This proactive role of the TDs could only be achieved if their powers remain the same, and that's exactly what technocracy guarantees. The TDs can vote on any issue put forward by fellow TDs or government and are seen as a balancing body to the cabinet of experts. Furthermore their legislative powers are also being kept, allows them to draft up legislation and defend it in front of the Dáil. These powers being kept ensure that the TDs take an active role in the Dáil as the usual excuses can no longer work under technocracy.
Having explained the roles of the Taoiseach, the cabinet and TDs there is only one more function that we must look at and that is the role of the President. I will be addressing this issue in tomorrow's post and after that I will try to answer some criticism on technocracy to prove there is no need to fret. Please look forward to the conclusion of these series on technocracy.