The fiscal landscape in the US and Ireland has changed dramatically over the past decade.

Ten years ago budget deficit reduction dominated economic debate in both countries and there was a large degree of pessimism about the prospects for success. Today, after a prolonged period of strong economic growth in both jurisdictions, the fiscal positions have changed dramatically and the debate has switched to how best to utilise the surpluses.

There is a lot of similarity about the proposed solutions to the problem, perhaps reflecting the prevailing political ideology of the ruling parties in both countries. By and large, the preferred option is to return the surpluses to the taxpayers via tax cuts rather than through increased government spending.

In the US particularly, there is a belief that where possible, government involvement in the economy should be kept to a minimum and surpluses should not be placed in the control of the spending authorities. For any Irish government this is a nice problem to be faced with, but the decisions taken today will have a major bearing on how the State develops over the coming years.

The debate in the US is particularly interesting. Official projections suggest that the budget surplus will continue to grow for the next decade at least, assuming of course that economic growth will continue unabated.

The projections suggest that federal debt could be paid off by the end of the decade, at which stage a choice has to be made between allowing the government to accumulate private assets or giving the money back to the people of America through tax cuts.

The Republican view as espoused in the past by people like Ronald Reagan, and more recently by Alan Greenspan, the chairman of the US central bank, and George W. Bush, is that it would be very dangerous to allow the government to accumulate assets.

Reagan believed that money should not be given to Congress as it would just spend it unwisely, and he famously argued that Congress should be treated like children - if you want to stop them spending, you cut their allowance.

Alan Greenspan recently testified to the US Senate that federal government should not be allowed accumulate private assets because it would be very difficult to insulate government spending decisions from political pressures. He believes this would undermine economic efficiency and hinder future improvements in the standard of living. Mr Greenspan has now come down very firmly on the side of tax cuts, but of course this suits the short-term desires of Mr Bush and Mr Greenspan, as the legacies of both men are now under threat from the rapidly slowing economy.

That is the choice of the US administration, and the result is a country where it is not advisable to get sick and where health insurance is one of the biggest costs that its citizens face.

In Ireland, a similar debate is ongoing. The current government is ideologically driven by a desire to cut taxes, regardless of whether the economy needs lower taxes or not. The European Commission, in my view correctly, pointed out in recent weeks that fiscal policy here is inappropriate, but not everybody agrees.

Proponents of tax cuts argue that easing the tax burden will increase labour force participation. This may be true, but not for the reasons posited. The tax burden is no longer a disincentive to work.

Cutting taxes is now merely fuelling demand in the economy and it is the impact of excessive demand on house prices and mortgage repayments that is forcing stay-at-home spouses back into the labour force by necessity, where they typically become the lowest paid workers in the system. We as a nation now have to decide how to utilise future budget surpluses. It is possible to continue cutting taxes thereby fuelling demand in the economy and accentuating the problems of congestion and non-traded sector inflation. The other choice is to use the surpluses to improve the quality of health, education, public transport and the roads.

It was quite amazing in recent weeks to hear people in Ireland argue that the EU reprimand was motivated by jealousy. It is utterly ridiculous to believe that a citizen of France or Germany could possibly be jealous of the Irish health service or Irish roads.

Of course, simply throwing money at these areas is not a guarantee of success. In the health service in particular, it seems that in recent years there has been an inverse relationship between the quality of health service and spending in the area. The money needs to be spent in a focused manner to guarantee maximum return. France has the best healthcare system in the world; we could do worse than look closely at how it operates.

One could be branded leftwing for making such arguments, but such ideological tags are no longer appropriate. A decade ago environmentalists were derided as left-wing fanatics, but now we are discovering the environmental costs of past excesses.

Likewise, we need to ensure today that the correct choices are made in relation to the future development of the economy. Quality of life has to become the overriding concern. Cutting taxes in an inappropriate manner may offer obvious short-term benefits, but it would be much more desirable to have good roads and public transport, and quality education and health.

I have a friend who will be £10 per week better off as a result of last December's budget, but who has to wait four months for a bed in a public hospital. It is simply a question of priorities and we don't appear to be getting it right at the moment.