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With Alan Ruddock of the Sunday Independent, I made the following points on last night's show
- First, the government has to be careful who far it digs down into the income distribution looking for increased taxation revenue, because the lower one drills down, the more likely you are to create poverty traps, where it is less profitable to work than to stay on benefits.
- Second, the government is sure to increase VAT and Excise duties on cigarettes, petrol, and other consumables. Combined with a rising unemployment rate, and a decrease in disposable income as a result of increased taxe rate and widened tax bands, domestic demand will get hammered on 3 fronts, which will cause yet more unemployment as businesses see demand for their products and services slide further.
As Michael Taft correctly observes, no government ever deflated its way out of a recession. The changes we will have to make are on the public expenditure side, but also, I would now argue, on the monetary side. Ireland is a member of the European Union.
Here's the interview, let me know your thoughts on this issue.
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