Apple was criticized in a Senate hearing Tuesday for using a complex accounting to minimize the corporate taxes it pays. One key piece of the company's tax strategy: It funnels lots of its profits through subsidiaries in Ireland.
Offering low corporate tax rates has been a fundamental part of Ireland's economic strategy for decades — a way to get foreign companies to set up operations in the country.
In yesterday's Senate hearing, Apple CEO Tim Cook mentioned that Apple has had a subsidiary in Ireland since 1980, when the country was recruiting international tech companies and offering tax deals.
As it happens, the idea of using taxes to lure foreign companies goes back even further than tha, according to Frank Barry, an Irish economist who's studied the country's tax history.
After the war, the Irish government used rebuilding funds provided by the U.S. government to, among other things, hire U.S. consultants, Barry says. The consultants produced a 100-page report that was a broad look at the Irish economy. (First line: "In the Irish economy, cattle is king.")
On one page, the report noted that Puerto Rico — another small island economy — had done well by lowering its corporate tax rate, which attracted multinational corporations.
"The U.S. consultants downplayed it," Barry says. "But our bureaucrats here spotted it and said, 'This has the makings of a very good idea.'"
U.S. Secretary of State John Kerry heads back to Israel and the West Bank Thursday for more talks on restarting peace negotiations between Israelis and Palestinians. When he was there last month, he walked away with at least one agreement - to improve the West Bank economy. Here's how he put it as he left Israel:
"We agreed among us - President Abbas, Prime Minister Netanyahu, and ourselves - that we are going to engage in new efforts, very specific efforts, to promote economic development and to remove some of the bottlenecks and barriers that exist with respect to commerce in the West Bank, to move very rapidly towards increased business expansion and private sector investment in the West Bank."
This wasn't designed to replace the political track, Kerry emphasized, but complement it.
No more details have been publicized. But if Kerry really can succeed in removing "bottlenecks and barriers," some businesspeople in the West Bank say that might go further than cash.
Take stone-cutting. So-called Jerusalem stone is famous around the world. Both Israeli and Palestinian companies extract and export it. But West Bank quarries are in an area where Israel, as agreed in the Olso Accords, controls permits for any activity on the land.
Ahmed Thwabta, who owns a stone factory in Beit Fajar, close to Jerusalem, says sometimes Israeli soldiers confiscate his workers' tools. Sometimes they deny access to the mine.
"We work according to the Israeli mood," he says. "If the political situation is good, then we are OK. If the political situation is bad, then they come and pick on us and fine us."
That unpredictability hampers all kinds of businesses. Farmers wanting to sell their produce in Jerusalem can't always be sure a crossing will be open in time to keep strawberries, for example, from spoiling. Shoemakers can't guarantee shipments. Even the small-but-growing IT sector faces obstacles.
"For example, Palestine cannot have 3G or 4G because the Israeli authorities are preventing them from accessing these frequencies," says Saed Nashef, a Palestinian-American venture capitalist running a fund with nearly $30 million to invest in Palestinian tech companies.
He also says Israel could make it much easier for people from abroad to come work here.
"It's difficult to bring an expert or senior-level manager to hire in a startup," he said.
Israel emphasizes any obstacles it puts in place are for security.
"I know that the crossing point are an obstacle," says Col. Grisha Yakubovich, the head of the Civil Coordination Department of COGAT - the Coordination of Government Activities in the Territories.
COGAT oversees a lot - including mining permits, commercial crossings, and travel permits for Palestinian workers seeking employment in Israel or in Israeli settlements in the West Bank.
Yakubovich repeats two points frequently: First, that Israel puts security first. He mentions a 2004 attack on an Israeli port after two suicide bombers hid in a commercial container to leave the West Bank. Second, that COGAT is working to support the Palestinian Authority. Yakubovich says Israel can't find takers to fill the all the permits allowed for Palestinians to work in Israel.
Given logistical obstacles, high unemployment and no clear light at the end of the political tunnel, the International Monetary Fund is predicting that growth in Palestinian areas will drop by half over the next three years. The head of the IMF office here, Udo Kock, says another major problem is that the Palestinian Authority depends on international donors for a quarter of its budget. Recently, that money has been irregular, which means the PA can't pay its bills.
"There are three main elements that are needed to get the private sector going," Kock says. "One is a relaxation of restrictions - broad based, all sectors. This is very important. Second is for donors to continue to provide assistance, and to do it in a predictable way. And there is a responsibility on the Palestinian side of course. The PA has to start working on reforms."
Rami El-Zogheir says all he needs are assurances that the political situation will at least stay the same, if not improve. His company makes high-end shoes by hand and business has been booming; during the past three years of relative calm here Golf & Horse Footwear has tripled the number of pairs it makes.
"I would like to invest more money," Zogheir says. "And I have a good chance to expand into other Arab market. But I can't guarantee the situation here."
It's exactly the sort of futuristic thinking you'd expect from Google and NASA: Late last week, the organizations announced a partnership to build a Quantum Artificial Intelligence Lab at NASA's Ames Research Center.
But questions surround the new type of computer at the lab's core. D-Wave systems, the company that makes the machine, says it is a quantum computer — a machine that runs on the strange laws of quantum mechanics. But although the computer can solve a certain type of problem much faster than conventional computers, critics say that the company's claims are not supported by scientific evidence.
"It's not exactly science, what they're doing," says Christopher Monroe, a physicist with the Joint Quantum Institute at the University of Maryland. "It's high-level engineering, and I think it's high-level salesmanship, too."
The quantum computer is a giant black box, or more precisely, a black cube approximately 10 feet on a side. Inside is a refrigeration system that chills the guts to near absolute zero, and shields the workings to protect them from external radiation.
In this rarefied environment, the laws of quantum mechanics can come into effect. These quantum rules are pretty strange. Particles can be in two opposite states at once, and they can be intrinsically tied together through a process known as "entanglement." For example, two quantum coins could be in a state of heads and tails simultaneously, as though they were flipping through the air. If the two coins were entangled, reading "heads" on one after the flip would instantly tell you that the other was heads — even if it were on the other side of the galaxy.
The D-Wave Two computer has 512 quantum "bits," or units of information, in its supercooled central processor that can be entangled together, according to the company. The entanglement allows the computer to do things that a conventional computer can't. In particular, it's good at choosing between many different solutions to a problem, according to Geordie Rose, D-Wave's chief technology officer.
Here's (roughly) how it works: Just like quantum coins, the quantum bits exist in two states at once, and because they are entangled, that means the entire chip is simultaneously in many different configurations of "heads and tails." The quantum computer, in a sense, simultaneously tries every answer imaginable before settling on an efficient one. Running the computer just a few times will give a subset of highly efficient solutions. By contrast, a conventional computer would have to individually test millions or billions of solutions to find the right answer.
Rose says that the new machine won't always be better than a regular computer, but for machine learning and searching — activities both Google and NASA are interested in — the D-wave's computer could be far more effective.
"The best answer, or the highest or the lowest or the smallest or the meatiest ... no matter what," Rose says. "If it's got an '-iest' at the end and you can write down a mathematical equation for what you mean about that, then you can attack it with one of our machines."
But proving exactly what D-Wave's computer does is tricky. Quantum states are highly sensitive to outside intrusion. The very act of trying to measure entanglement can easily destroy it.
There is solid evidence that the D-Wave machine is unusual. New research by computer scientist Catherine McGeoch at Amherst College suggests it can solve one particular kind of problem thousands of times faster than a regular computer. But McGeoch adds that the D-Wave Two was not measurably faster at solving two other types of problems tested.
And work from the lab of John Martinis, a researcher at the University of California, Santa Barbara, also seems to hint at quantum processes at work inside D-Wave's previous generation of quantum chip, the D-Wave One.
But Monroe remains skeptical. He believes that the D-Wave team has never demonstrated that entanglement is happening on the chips in its machine. He believes that D-Wave's supposedly quantum bits are actually working instead as tiny electromagnets. Those magnets, Monroe believes, could be interacting in ways to solve a certain problem very quickly without quantum mechanics. "There's no evidence that what they're doing has anything to do with quantum mechanics," he says. If he's right, then D-Wave's machine may be far more narrow in its abilities than the company believes.
D-Wave's Geordie Rose acknowledges the criticism, but says he believes that D-Wave's machine ultimately will also prove faster than conventional computers at solving the problems facing companies like Google, NASA and aerospace giant Lockheed Martin (which has also purchased a machine).
"What we do is build computers," Rose says, "and if we can build the fastest computers the world has ever known, you can call them whatever you like, and I'll be happy."
If you have a savings account you probably already know this: Your money there is losing value to inflation. Yields are so low that returns are not even keeping up with the cost of living.
I've been watching some of my own savings dwindle. And that prompted me to take up a challenge: I'm taking $5,000 from personal savings and putting it to work. I'm not a financial whiz, pundit or any kind of guru.
In the coming weeks, I'll be reporting on the various investments I decide to pursue. Along the way, I hope to provide some useful information about avoiding high fees in mutual funds, bulk buying at discount stores as a hedge against inflation and staking a claim in real estate for just a few hundred dollars. We'll keep a scorecard of my investments and track how they perform over time.
But back to those paltry returns from savings. Jacob Kirkegaard of the Peterson Institute for International Economics says it's an "absolutely miserable" time to be a saver and has been ever since the financial crisis began.
It's a freakish situation last experienced during the Great Depression. "We haven't seen a sustained period where interest rates have been this negative for this long. This is a truly unprecedented situation," Kirkegaard says.
When Kirkegaard says "this negative," here's what he means: The average yield, or interest rate, on a savings account at a major bank is 0.1 percent, according to Bankrate.com. Inflation is running at 1.7 percent. Do the math there. It's a lousy deal for savers.
For more than four years, the Federal Reserve has tried to revive the economy by getting credit flowing more energetically. In pursuit of that goal, the Fed has kept interest rates at nearly zero percent.
That's why yields are so skimpy on savings accounts. "So you can say that savers and the return that savers earn on their money is kind of a collateral damage in the crisis management conducted by the Federal Reserve and other central banks," Kirkegaard says.
My wife and I have a kid in college and a mortgage, I put money into my retirement plan and anything left over goes into family savings. And, yes, it's kind of frustrating to see that money chipped away by inflation. It's far worse for someone on a fixed income who pays for food, rent and medical expenses out of savings.
So how about that $5,000? I stopped in to see Nessa Feddis, a senior vice president at the American Bankers Association. I asked her to make the best case for the savings account. "Bank accounts are FDIC insured," she says. "That means that no matter what happens to the institution if the bank fails, no matter what happens to the economy, the customer's money is safe, up to $250,000."
"There's a convenience to having a savings account in the same institution where the customer's checking account is," Feddis says.
Convenience and FDIC guarantees are fine. But with the Fed expected to keep record low rates for a while longer, there's not much hope those savings will grow. So I'm setting that cash loose into the world of risk and reward. The investments could lose value. But they could also come out ahead, which is something that can't be said — for now — for the money I have parked in savings.
Today more than 1 in every 3 baby boomers — that huge glut of people born between 1948 and 1964 — is unmarried. And those unmarried boomers are disproportionately women. As this vast generation rushes into retirement, there's a growing concern among experts on aging: Who will take care of all these people when they're too old to care for themselves?
It's a question many of the experts take personally. "That is what scares me, says Sara Rix, who works for the AARP Public Policy Institute, studying the economic prospects of women in the workforce. "Because I am one of those people," she says, "and I do think about it."
"Oh, I've got wonderful nieces and nephews," Rix says, noting that's what a lot of her boomer peers claim, too. "Well, in fact, they've got their families. They've got their in-laws. They've got their parents. And I don't think it's reasonable to expect much out of them."
Kathleen Kelly, who runs the Family Caregiver Alliance and the National Center on Caregiving in San Francisco, says she's seeing the same sort of concern in her social circle. "I'm in my 50s, and my friends are all talking about, 'Could we all move in together? Could we buy an apartment building and all live together?' There are all sorts of permutations of this conversation," Kelly says. "But it really is something that people are thinking about, particularly women."
And, because boomers are boomers, some are doing more than just thinking about it. Already, there's a small but apparently growing movement of boomer women forming group houses with their single peers.
One of those homes belongs to Bonnie Moore. She's a pert, 60-something divorcee who lives in a well-kept, five-bedroom house in Bowie, Md., a cozy suburb of Washington, D.C.
In order to stay in her house after her divorce, Moore needed financial help. But she wanted to do more than just add boarders who would help pay the bills, she says. The home she's organized instead is "a little bit like family, a little bit like roommates, a little bit like a sorority house," she says from the sofa of her softly lit living room. "It just evolves."
Moore, an attorney and CPA, isn't actually childless. She has a grown son who lives in Utah and has been urging Moore to move there to be closer to him and his family. "He's just sort of saying, 'Well, Mom you're old now; we have to take care of you,' " Moore says. "And I'm saying, 'I'm not old. I've got 20 years out there in my yard, thank you very much,' " she says with a laugh.
Moore has been careful about selecting as housemates women who get along, but who also have a sense of independence. "All of us, we have our own separate lives," she says. "We do our own separate things, but we'll meet up in the kitchen and chitchat. And then we'll all go our different ways, which makes it nice. None of us are joined at the hip, and yet we all live together and do our own thing and live in the same house."
Lorene Solivan is one of Moore's three current roommates — "the youngest," Solivan says proudly, having just turned 60.
Solivan, an event manager for a food company, had been living in an apartment in Northern Virginia. But she was having financial troubles of her own and was looking to downsize.
"And then I saw the ad on Craigslist: GOLDEN GIRLS HOUSE. I said, 'Oh, that looks like fun,' " she says.
Solivan, who does much of the group's cooking, says it's been a nice transition for her. To live with a built-in social group of people your own age is "a big plus," she says, "whether you're 20, 40, or 60 — whatever the case may be."
That's why Bonnie Moore is trying to take her concept and expand it. She already has a website and is working on a guide to help other single boomer women set up houses like hers. "I think it'll be fun," she says. "And I'd like to be part of various seminars and workshops for women [about] the whole idea of living communally and learning to get along in this kind of environment."
Still, there are a lot of obstacles. One big one is that most boomers don't realize they might need help getting or paying for long-term care if their health falters.
"I call it the 70-70-70 conundrum," says Bruce Chernof, president and CEO of The SCAN Foundation, which focuses on long-term health care issues. "Seventy percent of people over the age of 65 will need some form of long-term care supports as they age," he says. But when you look at polling, "roughly 70 percent of Americans don't actually think they're likely to need it, and roughly 70 percent think Medicare will probably cover it when they get there."
The problem, of course, he adds, is that "those last two 70 percents are not true."
Then there's the numbers problem. "We know that ... about a third of baby boomers are single," says Kathleen Kelly. "But we also know that there's a large percentage of those that are in their 50s and 60s [who] are getting divorced, and so we're going to have more single individuals in the future. We just haven't seen this before."
At the same time, most boomers have had fewer children than previous generations did, and many boomers have no children.
"So there's less adult children to take the place of the caregiving cohort that currently is providing ... caregiving to their parents," she says. And today, family caregiving provides an estimated $450 billion a year worth of unpaid care.
Sara Rix of AARP says a big problem for single boomer women is that they're not financially prepared to hire the caregivers they might need if they don't have family members to volunteer the time. "[These single women] are still likely to be concentrated in what we've traditionally called the 'pink collar' jobs," she says, which are "the lower wage, low benefit occupations. So when they reach old age, they often reach old age without pension coverage."
Most of these women will have Social Security, Rix says — assuming that they are eligible, and that the rules don't change between now and when they retire. But for many older women, that will be all, or nearly all the money they have to live on, she says, "and it's not going to pay for a lot of care — formal care. So it's a frightening future for a lot of women."
There are things women can do to make that future a little less frightening, says Kelly. Some suggestions are pretty obvious, like maintaining a healthy, active lifestyle.
But another bit of advice may be less intuitive, Kelly says, "and that is to invest in social relationships and networks." She doesn't mean the sort of social networks people create on the Internet, but rather, "a community of individuals [living with or near you, so] that you may be able to share tasks and responsibilities as you grow older."
That brings us back to Bonnie Moore, who says that deciding to form a group house was about more than just financial necessity. "I think women naturally are more community oriented," Moore says. "It's just part of the woman's nature."
And besides, she adds, "to come home and have someone say, 'Hi, how was your day?' ... That's really nice sometimes."
So if you're a boomer and you liked that group house you shared in college or just after, good for you. The United States is one of the few developed nations that has no organized public policy for providing long-term care — so group living may be in your future as well as your past.