The Luck of the Irish Runs Out 809
theodp writes "Looks like threatening to take their ball and leave paid off for US tech firms. The Irish government announced plans this week to tap the welfare state and working class for much of the $20B in savings they've pledged to find over the next four years, but the austerity measures will not touch large businesses like Microsoft, Intel, Google, HP, Facebook, LinkedIn, and Pfizer, which created jobs and fueled exports in Ireland after being lured by low corporate tax rates. More than 100,000 Dubliners took to the streets to protest the bailout plan, calling for the Irish government to default on the country's debts, and demanding an immediate election. 'We should default,' said a retired union worker, 'the idea that the workers of this country should pay for the gambling of the billionaires is disgusting.'"
Re:Defaulting is worse! (Score:5, Informative)
Going default will be a short-lived remedy. The country will go back to 1990 in terms of market appeal and productivity. And yes, if the big tech companies leave, the hope of reacquiring a high-tech knowledge industry will go away as well.
Paul Krugman's latest column [nytimes.com] addresses this. The main point is that Iceland let the banks default, while Ireland took the banks debts as public debts and guaranteed it. In the end, Iceland has recovered while Ireland's people have to bear the burden due to austerity measures.
Re:Default? Really? (Score:5, Informative)
Who would ever lend Ireland money ever again?
Good, then maybe it will force their politicians to actually make do a balanced budget rather than keep running a deficit, spending money they do not have, effectively using the country's future income to secure their own positions in elections.
Well, one can hope.
Re:Why it won't affect the companies.. (Score:5, Informative)
The rich aren't paying 40% tax! The top tax rate is 41% but this is only paid on income over €36K (single) or €45K (married) or €73K (married both working).
But when you factor in people's tax credits and various tax reliefs, the statistical data for workers in Ireland shows that income tax peaks at about 20% of income. Those with a *lot* of income who would in theory be affected more significantly by the 41% tax rate actually pay tax advisors and use various schemes so that at the top end, the income tax proportion drops below 20% again!
Most workers pay almost no income tax - as you pay none at all up to something like €17K (when you factor in tax credits). Median income is about 20K, and ordinary workers would pay a max of about 10% effective tax rate. On an above-average income, I pay about 12% total in tax.
10% is the tax rate some countries charge the low paid! (as opposed to 0% here!)
We do have many other taxes, but that's to make up for low income tax.
Of course all this is only valid until the budget on 7th December.
50,000, not 100,000 (Score:2, Informative)
The Irish Times [irishtimes.com] and The Irish Independent [independent.ie] both claim 50,000.
Re:Defaulting is worse! (Score:5, Informative)
The debts involved are massive, too.
From this article [nytimes.com] (though note it was written back in September):
"Under the current program, we estimate that each Irish family of four will be liable for 200,000 euros in public debt by 2015."
Ouch.
Re:Defaulting is worse! (Score:5, Informative)
Each American family of four is liable for about $200,000 in public debt.
Re:Why are they broke in the first place? (Score:5, Informative)
No, they are broke because the government decided to cover the private bank's debt to the tune of a hundred or so billion euros.
Re:Defaulting is worse! (Score:1, Informative)
Of course, if you haven't noticed, I seriously doubt any western (or eastern) economy had any intention of paying back it's debt since, oh, WWII. Except maybe the US up to 1980 or-so, but then the US followed other countries in the "who gives a fuck ! Money now" direction.
Re:Defaulting is worse! (Score:3, Informative)
During the Clinton years, the U.S. was actually repaying its debts.
Re:Defaulting is worse! (Score:4, Informative)
"You really think the European HQ of companies are getting moved to shangai... ?"
No, they'll move to Luxembourg, like Ebay, Paypal, Amazon, iTunes already did.
Re:Defaulting is worse! (Score:2, Informative)
Right you lot, your options are to work through the night or fuck off back to the paddy fields and wade about in shit.
Problem solved.
Re:It's OK To Raise Taxes On Rich Corps. (Score:3, Informative)
Nothing bad will happen if corporate tax rates are raised in Ireland! That's just fear-mongering by the poor-hating conservatives!
The US has been doing that, *and* heaping on all kinds of other taxes, *plus* tons of regulation on manufacturing and business, along with increasingly-heavy emphasis on unionization with incredible pension and healthcare costs for ages now, and our economy, trade balances, and employment levels are just...oh, wait.
Never mind. Carry on.
Strat
Ireland has been the European experiment in being extremely 'conservative' and corporation friendly, extremely low taxes, friendly regulation, etc. Look where it got them. Then take a look at fx Scandinavia.
It "got them" all those corporations into their country and employing people, bringing in cash, and generally improving things for most of the people.
The fault is with idiotic and greedy politicians that can't run a capitalist economy effectively, combined with the impact of the domino-like economic failures caused by the collapse of socialistic governments in Greece, Portugal, etc.
By "Scandinavia", I assume you mean Sweden? Sweden isn't quite the paradise that most think. It suffered mightily in the '90s. Sweden has also started from a great advantage post-WW2 in that it didn't suffer the costs of WW2 in fighting, and also benefited in that it didn't need to rebuild much of it's economy, military, and manufacturing after the war as many countries did.
http://en.wikipedia.org/wiki/Economy_of_Sweden [wikipedia.org]
Sweden is unique in it's economy, society, and place on the world stage as a result of it's history, it's location, it's society, and it's size. The Swedish governmental/economic model only works in Sweden with it's particular history, location, size, & society. It would not and could not work elsewhere. One size does not fit all.
Strat
Re:Corporations are Assholes. (Score:3, Informative)
The OP used infrastructure in the literal, not social sense (as I read it). Way too often large corportations used roads, electrical gris, government serviecs (like police, fire, and public works) to establihs a business, but fail to pay any taxes into the local government. Sure, the people have a job and they pay taxes, but there is still a greater impact on the local or regional area and it is that impact being effected without dues pay. Microsoft pays not a whit of taxes in Seattle for the simpel fact of paper filing in Las Vegas. Do we applaud them as great executives, or freeloaders on a local infrstrture.
"Regulation is another net negative for business (especially the rules on how to conduct business such as hiring and firing workers),"
So lets drop regulation and return to Jim Crow laws, rampant discrimination, unsafe working conditions and the concept of indentured servitude. No thanks. What out checks the few can and will abusive any system, human, environmental, political in the pursuit of greed. Regulation makes it safer for me to fly, not only because the parts and design have to be right, but that the people making the plane (hopefully) are happy at what they do thus care about what they do. I get the feeling y7ou'd been happy back in merry ol' Egypt holding the whip on the backs of the slaves building edifices to Ego.
Re:Defaulting is worse! (Score:3, Informative)
Lowest inflation in 50 years
"Lowest", except for inflation in the cost to eat (food), stay warm and move around (fuel).
Those luxuries are now ignored when computing the official inflation rate because (drum roll please) they were inflating too fast.
No "inflation" figure that excludes the costs of eating and staying warm can be taken seriously.
Re:Defaulting is worse! (Score:3, Informative)
These are two distinct problems.
The one you refer to is international corporations moving to places with low taxes (hello Google). Lets call this #1.
The other one (#2 and IMHO worse) is politicians being scared into propping up banks that have mis-speculated. Which is the main probem of the Irish:
The government has foolishly guaranteed for the banks' debts.
Only now, when the massive impact from #2 becomes obvious, Ireland briefly considered changing #1.
Re:Why it won't affect the companies.. (Score:5, Informative)
We've about 900.000 people on Medical Disability in NL, that's roughly 6% of the population and 12% of our labour force. You can stop wondering why our unemployment is so low, because it isn't. Start wondering instead why our taxes are so high....
Re:Why it won't affect the companies.. (Score:2, Informative)
Re:It's not the country's debts. (Score:1, Informative)
I'm afraid not, the 2008 guarantee was a solo run by Ireland, it wasn't due to external pressure but pressure from wealthy people and senior bankers in Ireland attempting to protect their investments. The rest of the EU was pissed of with Ireland because it threatened a mini-run across Europe and forced EU goverments to respond with their own much more limited guarantees.
The financial and political sectors in Ireland are extremely incestuous, the big financial backers of the government party also had large investments in the Irish banking sector, this was imploding so the government reacted to protect their financial backers. I am from Ireland.
Individual Insured bank deposits a big part (Score:2, Informative)
In retrospect it is obvious that the state should not be insuring bank deposits when the amounts become so large relative to GDP, and maybe the Irish state should not have honored that pledge, but it's not stupid or corrupt of them to do so.
Also you can't blame this on free markets, insured deposits are extremely mainstream but have nothing to do with free markets. The problem with the regulators was that they were asleep or caught up in the exhilaration of the housing bubble.
Re:Why it won't affect the companies.. (Score:2, Informative)
Not quite. That 12% double-counts partial disability, which is also counted as labour force. The official numbers from the CBS make it around 8%.
Mart
Re:Defaulting is worse! (Score:3, Informative)
That was during a perfect storm of an exploding US technology-driven expansion: we didn't start any wars so could downsize the military, we had a new conservative congress that was eager to show it was thrifty (for a few years at least), and a president who was shrewd enough (or too embedded in scandal to go against it) to roll with the semi-mandate that that new congress had.
With the retiring baby boomers, increasing global competition, and a generally stupid voting population; we're probably not going to see a perfect storm again soon.
The only people even talking about reducing the debt these days are some of the Tea Party folks. Between their eccentric individuals and the media's seeming zeal of taking them down, I don't have much hope that the good part of their message will go far.
Re:Defaulting is worse! (Score:1, Informative)
Ireland cannot and could not have done the same, even if they wanted to. They are tied into the Euro. Being in the Eurozone [wikipedia.org] brings a whole bunch of complications. Heck, even the UK, who are not in the eurozone, have real problems if the Irish economy goes down the toilet.
Re:Defaulting is worse! (Score:3, Informative)
You are correct but that post is a bit misleading.
My understanding is that the Treasury orders the production of coins and bills, but they are not money at that time (i.e. the treasury is not permitted to just use the new coins and bills). Instead the Federal Reserve purchases the bills at production cost from the treasury, and then it is money.
My understanding is that it is also responsible for introducing and removing coins, although these it purchases at face value from the treasury. Never the less, doing so still adds currency to circulation, as where there was only $100 in paper money in the Fed, there is now $100 in paper money in the Treasury, and $100 of coins in the fed, for a total of $200 of currency in circulation.
The Federal Reserve can remove money from circulation, and add new money at will. Thus if it has old bills in its "vault" it can have them destroyed, and it need not immediately get replacement bills.
However, actually getting the bills into circulation is not particularly easy. While for example new bills can e sent to banks when they make a withdrawal, that is not increasing the money since they previously deposited old money.
About the only way new money can be introduced in his fashion is by using it to buy Government securities, which it never redeems, and thus has inserted new currency into circulation. Unfortunately though, that technically means that introducing new money requires governmental debt, although I don't believe those bonds are normally considered part of the national debt.
Of course, all of that above is based on my cobbled together understanding, and i could be very wrong in several spots. If I am, I would be interested in knowing the true story.
Re:Defaulting is worse! (Score:5, Informative)
That is why I figure the USA will default in 5 years, 10 tops.
This keeps getting repeated and it keeps being wrong. The US CAN'T default on it's debt. Our debt is denominated in US dollars, which means the US government can always make payments, either through raising taxes or inflating the currency.
The only thing really keeping us afloat is the Fed printing money as fast as the presses will run and using it to buy our debt, basically making the money worthless.
So then, there must be rampant inflation then correct? According to economic indicators our currency has been strengthening recently, and inflation has been low to non-existent. In fact it has been too low which has worried some that we would enter a deflationary period.
Then figure in the retiring boomers...
Yeah, who will be taking their SS money and dumping it back into the economy. Sure it will stress the SS program but that money isn't evaporating into thin air. It will be re-entering the system.
huge masses of working poor that are only kept afloat by social programs
Mainly because we don't have a real education system in place for people to gain new skill sets. There's a reason why we rank far below other developed nations in education.
and the cost of two endless wars?
No argument there. The money that was spent on those two conflicts alone could have done much more good here in the US.
Yeah I give it a decade tops. Enjoy it while you can folks, because from the looks of it another worldwide great depression will soon be upon us.
You're a little late to the party on that one. So far it has mainly been a recession. The US is in a recovery, albeit a slow one.
The only question is whether we will learn from our mistakes and put heavy regulations on the banks like we did during the last one, or if those that believe in the free market fairy will win out. Without control free markets quickly end up corrupted when too much ends up in the hands of too few, just as we have now.
People like to think a free market is like nature, where survival of the fittest would yield the best companies. However this is naive. Companies will influence the market much like humans influencing their environment. Humans alter their environment, wipe out all competitors for resources, and any possible predators. Companies in a pure free market would act in the same regard. Eventually you would end up with one or a handful of companies that would completely dominate the market.
You will always need to control greed.
Re:Defaulting is worse! (Score:3, Informative)
Fascism has _always_ been a flavor of socialism.
There are three indisputable examples of fascism in history (Italy, Spain and Germany).
In every case it was the government taking over the corporations, not the other way around.
Your teachers lied to you.
Re:Germany is not paying Europe's bills (Score:1, Informative)
Erm, those "bailouts" are for debt the Irish have created and spent.
Ireland had a massive housing bubble.
Most of that money was spent by the Irish and it financed their stellar "free market" "Celtic Tiger" growth for a decade. Now that they have to pay it back in a downturn and there's a hangover - and the 'free market' is now their enemy: it is speculating against them, in the tens of billions.
Ireland, instead of following free market fundamentalists blindly, should have saved some more in the good times, to prepare for the bad times.
Instead they allowed corporations run away with the extra profitsin the "Double Irish" tax evasion loophole [wikipedia.org]:
Just in case you have ever wondered why Microsoft pays less than 1% of an income tax in the US, and has done so for the past 20 years, evading up to 100 billion dollars in US corporate taxes.
Re:Germany is not paying Europe's bills (Score:3, Informative)
Yeah but you're ignoring the fact that most of their problems right now are from backstopping the Irish banks. Banks that owe a lot of money to foreign banks, with hundreds of billions of dollars in foreign exposure to Ireland.