A Political Glimpse from Ireland

Many politicians, pundits and critics could not have predicted the fallout from the Irish rejection of the Lisbon Treaty on June 12th . After the results were announced, there were literally moments of silence where the entire of Europe sat still in confusion about what to do next. The next EU President Nicolas Sarkozy is forced to pick up the pieces however who is to blame is the silent question on many people’s minds.

I personally blame the Irish Government for the lack of money put into an effort to inform the citizenry about the crux of the treaty and what it meant for all the people of Ireland, just not the people in Dublin. I wrote about the scene  before the proposed referendum on June 11th and true to my prediction, the people of Ireland voted no.  If the Government and the EU had poured enough money into informing every single person in Ireland, I would safely take the bet that the majority of the people would have voted yes.

Part of the problem was the state-funded media channel RTE was ambiguous as ever about explaining what the Lisbon Treaty meant for Ireland. We have the folks over at the Wise Up Journal contending that RTE was trying to sell the treaty to the people of Ireland:

For an organisation that promotes itself as fair, balanced and owned by the Irish People, a question we must ask is, are RTE really fair and balanced, or is that just a marketing campaign designed to hide the fact that most of the coverage is distorted and one sided?

Then we have the Fine Gael MEP Mr. Mitchell stating that the RTE coverage was unfair and even called for an investigation into the role of the State broadcaster in its coverage of the Lisbon Treaty. I believe RTE fell into the typical media role of trying to provide both sides of the story but in doing so, it confused a lot of the people that were trying to figure out what the treaty was about. RTE should not be blamed for this but having watched RTE on a few occasions, I believe they lack transparency in terms of which side of the political divide they lean towards.

I still support the Lisbon Treaty but I feel a little sorry for President Sarkozy who is going to have a very hard time at the helm of the EU and France in trying to figure out what to do next, certainly blaming Ireland isn’t going to work but hopefully he won’t stress out too much…

The Bush Administration will continue to push for a lifting on the ban of offshore drilling today which will likely only sate the American appetite for oil for 2.5 years at the most. The problem is that the President has only proposed a short-term measure with no thoughts about what is going to happen after we exhaust those oil supplies? I am not against lifting the ban however it should be lifted with intention to keep the price of oil stable while the Government invests greater resources into alternative energy sources. For the moment I would like to draw your attention to two sites that I found during my research on gas prices. The first is gasbuddy.com where you can put in your relevant location data and they will tell you where the cheapest price of gas is in your local area. The second site is pumps.ie which operates similarly to gasbuddy.com with the exception that Ireland is not that big hence there are relatively few choices to choose from:

GasBuddy.com

Pumps.ie

The Renewable Energy and Job Creation act of 2008 was recently rejected in the Senate this week with 50 yeas and 44 nays. The vote embodies the typical democrat and republican divide with republicans wanting to preserve the benefits of business while democrats want to redistribute those benefits to the people through the form of taxation. The nays were exclusively Republican while there were 3 Republican Senators who voted yes. What are the Republicans fighting for? Do companies provide tangible benefits through the tax breaks and incentives they receive? The U.S does not have the lowest tax rate in the world yet 5 of the world’s biggest 10 companies are based here.

The very word ‘incentive’ implies that it is optional; a company is not required to execute an operation upon the receipt of the incentive therefore the logical conclusion leads me to believe that the Republican segment of the Senate is out of touch with the average citizen. This is where “change” arrives; politics has always run as described in the first paragraph but how about introducing legislation that taxes positively? Why can the Republicans not realize that giving company’s free reign is not good while Democrats realize that redistributing income is just going to make companies move to the Moon.

People assume that the reason a company chooses a location is because of the lowest tax rate however that may be a large factor, there are also smaller factors like the labor pool, environment, education system, political system etc… A low tax rate does not guarantee economic success as demonstrated by Ireland whose GDP dropped by 2.9% from 2007 to 2008. There is also the problem of many American companies moving production off shore yet unsurprisingly, the Republicans are going to wait for the Democrats to create incentives for companies to keep jobs in America:

At issue is the U.S. tax code’s treatment of profits earned by foreign subsidiaries of American corporations. Profits earned in the United States are subject to the 35% corporate tax. But multinational corporations can defer paying U.S. taxes on their overseas profits until they return them to the USA - transfers that often don’t happen for years. General Electric, for example, has $62 billion in “undistributed earnings” parked offshore, according to recent Securities and Exchange Commission filings. Drug giant Pfizer boasts $60 billion. ExxonMobil has $56 billion.

The U.S currently taxes companies on profits earned in-country and overseas which provides significant income for the treasury. My suggestion (slightly different to the bill) is that we should raise the tax rates at home for companies with over $1 Billion dollars in assets located overseas encouraging companies to shift these assets to the United States to keep their tax liability low. Taxation can be a positive aspect in any economy as long as it is utilized as a gentle push rather than a shove. The Republican Senate prefers we not push at all which has only increased the number of corporate scandals in the last 8 years while big companies continue to expand their operations overseas at the expense of the American market.

I recently found this video on YouTube when I was searching for stories related to Corporate Tax Breaks, I found the presenter quite entertaining given the seriousness of this issue:

Most of my readers are probably not aware that a momentous occasion in Irish history is occurring tomorrow, as voters head to the polls to vote on whether to ratify the Lisbon Treaty. I still don’t quite understand what is in the Lisbon treaty but many pro-Lisbon organizations seem to be throwing around the phrase “…it will make the EU more efficient…” On the other hand many anti-Lisbon organizations are criticizing the loss of power to the Republic of Ireland. I was in the city centre today and I was amazed at how outnumbered the “yes” campaigners were, for every one person who had on a “yes to Lisbon” t-shirt, there were at least three separate people handing out “no to Lisbon” flyers. It was simply amazing but I fear it might be a little too late to inform the public as many of my Irish friends will not vote or will vote no because the Irish government failed to adequately inform the public about this important issue. I predict that the majority of the people of Ireland will vote “No” tomorrow in an event that is likely not going to make the government and the businesses in Ireland very happy. What their next step will be, I am uncertain, but I hope that I am wrong because Ireland needs this treaty to keep economic growth strong in an increasingly competitive global marketplace. Two Flyers portraying the different viewpoints:

The price of oil increased significantly on Friday, climbing to $138.54 a barrel with the possibility of the price reaching $150 a barrel in July according to analysts at Morgan Stanley. This is not surprising given that summer is peak driving time for many Americans, but what happens after summer, will the price stabilize or should we expect further increases?

I was thinking about driving today and the difference between your typical Irish and American commute. When I lived in Worcester, MA, it would take between 45 minutes and 1.5 hours to drive the necessary 42 miles into Boston. Now that I live in Lucan, Ireland, it takes me about the same period of time to drive the 6.84 miles into Dublin. Given the vast discrepancies in distance, what is the actual cost in terms of gasoline?

1. It costs $3.93 per gallon of gas at a station in Worcester, MA.
2. For the same gallon of gas in Ireland, I would be paying $7.88 on average.

Yes, that is no exaggeration, but I used the current data available to come up with this unique figure:

1. There are 3.8541178 liters in 1 Gallon.
2. It costs someone in Ireland on average €1.32 per liter of gasoline.
3. Therefore for 1 Gallon of gasoline you would pay €4.99 in Ireland.
4. Using the current euro-dollar exchange rate, the typical Irish driver pays $7.88 per gallon for Gasoline.
5. That is 49.8% more than the typical American driver.

There are a few caveats with this math of course:

1. The euro-dollar exchange rate is not directly correlated to the price of gasoline therefore its inclusion does distort the real cost when comparing Ireland and America
2. I rounded of all figures to two decimal places with the exception of the Gallon-liter conversion.
3. The entire width of Ireland is a mere 138+- miles which his not anything significant compared to the size of the United States.

The point of all these figures and numbers is to illustrate how dependant society has become on every person owning a vehicle despite their detrimental effects to the environment. Ireland and America are both wealthy countries yet some people reading this must ask why it takes 45 min to drive a mere 6.84 miles into the city. The simple answer is traffic. People often joke around here, that Ireland is “Europe’s largest parking lot.” That may sound a bit nasty but there is significant truth to those four words, Ireland has been steadily increasing in wealth over the past 10 years with double digit GDP gains at some points. All this wealth has translated into more cars on a highway that was never meant to hold that many vehicles in any engineer’s imagination.

The government has been talking about instituting a city congestion charge for some time with no implementation to date however they have radically changed the vehicle registration tax. Basically you pay lower tax if your vehicle has lower emissions. I think that is quite fair, don’t you? It will certainly help to encourage consumers to drive vehicles that are more environmentally friendly.

No matter how environmentally friendly cars are, the fundamental problem of traditional gasoline exists and the only way to overcome that is through a significant investment in new and alternative energy sources. Billionaire Boone Pickens of BP Capital sums up the current situation simply and concisely:

“There’s nothing to it to start with,” Pickens said in interview at an American Wind Energy Association conference in Houston. “That’s not what’s happened. You have 85 million barrels a day of oil available in the global energy market and 86.4 million barrels a day of demand. So the price of oil is going to go up until you can kill demand.”

Mr. Pickens goes on further to reinforce his statement later in the interview:

“We’re using 400,000 barrels of oil less today than we did a year ago, but the Chinese are now using 500,000 barrels greater than they did last year,” Pickens said. “So whatever we kill in the way of demand, they pick up in their demand. You’re going to bid for the oil, and the highest bidder’s going to get the oil until you finally kill demand with price.”

In the West we are trying to find more oil, or different ways to more efficiently use what we already have but the problem is never going to go away. Oil is never going to go below the sub-$100 level because demand is going to perpetually increase. Nations like India and China are going to use more oil as their populations grow in wealth and prosperity and it is up to the West to find alternative methodologies to power our transportation systems to ensure a strong and stable macro-environment for future generations. I am not too sure on what technology to use, given the current food crisis, I am going to stay away from ethanol but perhaps hydrogen: