Jed Lewison's front page story this morning about Paul Ryan's comment that the "Cayman Islands "is the place you hide your money" caught my eye for a different reason. Rep. Ryan didn't just single out the Cayman Islands, but also Ireland.
Why Ireland?
I was fortunate enough to pursue an MBA between 2008 and 2010 - a profound time in world history to study the mechanics of capitalism. In virtually any class on economics or corporate finance, the Irish tax system was mentioned as a model for the United States.
So again, why Ireland?
The corporate tax rate in Ireland is 12.5%. This is among the lowest in the industrialized world. Naturally, conservatives (including business school faculty) love this and promote it every chance they get.
What I found is a marked difference in the frequency with which Ireland's tax system was mentioned at the beginning of business school versus at the end of business school.
Why?
Turns out that when Mitt Romney says the U.S. economy’s 35 percent corporate tax rate is among the highest in the industrial world, reducing the ability of our nation’s businesses to compete in the global economy and to invest and create jobs at home. By limiting investment and growth, the high rate of corporate tax also hurts U.S. wages isn't quite how the world actually works.
Bloomberg News, November 28, 2010
European governments sought to quell the market turmoil menacing the euro, handing Ireland an 85 billion-euro ($113 billion) aid package and diluting proposals to force bondholders to bear some cost of future bailouts...
“I don’t believe there were any other real options,” Irish Prime Minister Brian Cowen told reporters in Dublin.
A day after more than 50,000 protesters marched through Dublin to denounce Cowen’s budget cuts to stave off financial ruin, the EU gave Ireland an extra year, until 2015, to get its budget deficit to the euro limit of 3 percent of gross domestic product.
Including the bill for propping up Irish banks, the deficit is set to reach 32 percent of GDP this year, the highest in the euro’s 12-year history.
Cowen has overseen the collapse of Ireland’s banking system and public finances, leading to recession and unemployment near 14 percent.
As well all know, Ireland implemented strict austerity measures (promoted by conservatives on both sides of the Atlantic). Surely the austerity measures, combined with such low tax rates, addressed the debt and unemployment problem immediately and completely.
Wall Street Journal, September 20, 2012
The Irish economy avoided slipping into recession by the narrowest possible margin in the second quarter, but shrinking domestic demand canceled out a rise in exports, raising new questions about whether the country can meet its budget targets for next year.
The Central Statistics Office, or CSO, said Thursday that gross domestic product in the three months to the end of June was unchanged from the first quarter, when it fell by 0.7%, according to revised figures. The economy was 1.1% smaller in the second quarter of this year than in the same period of 2011...Ireland's quarterly growth numbers are notoriously volatile, but Thursday's government data won't reassure Ireland's creditors. The government is striving to prove that it can fund itself entirely from the international bond markets in 2014, after its bailout loans from the European Union and International Monetary Fund expire.
The new figures show that Ireland's recovery from its worst-ever debt crisis remains fragile and could decrease the tax revenue the government hopes to raise through 2013, analysts say.
Lovely. At least conservatives can legitimately claim they built this. I bet they won't. How long do we have to deal with these people? I'm not sure Democrats and liberals and progressives have all the right answers. In fact, I'm sure we don't. But it seems clear at this point that conservatives most certainly do not have any of the answers.