Tuesday, August 19, 2014

A Nerdy President Everybody Could Trust

Two or three weeks ago I saw on Facebook one of those irritating little “Quotes in a Box” attributed to USA President Calvin Coolidge. I realized I know very little about him but figured that, if he rates a Facebook Box Quote, whether accurate and correctly attributed or not, I should probably learn a bit more. A quick search revealed that his autobiography, personally written and highly personal, is available on Kindle for $1.99, and that is my main source. The Calvin Coolidge Wikipedia article seems to be a pretty good source of less personal information, none of it inconsistent with the autobiography.

Coolidge was our thirtieth president, stepping up from Vice President upon the 1923 death of Warren Harding and then being re-elected in 1924. He chose not to run for re-election in 1928 because, “I felt it was not best for the country that I should succeed myself.”  A more extensive explanation of his decision is included in the book, but rest assured it was not because of failures on his part, of poor prospects of winning, or of a desire to enter private life and make some real money.  

Coolidge was a quiet, unassuming, humble, intelligent, well educated, solidly middle-class Republican lawyer of modest means, both before and after his presidency, with ambition only for service. His demeanor earned him the nickname, “Silent Cal.”   Not everybody agreed, of course, with his conservative small government and personal responsibility themes, but since there were no obvious disturbing and trust destroying inconsistencies between his philosophies and his personal or political behaviors and actions, he was generally assumed to be both trustworthy and admirable.  He entered office, enjoying popularity and without wealth, and left the same way, moving to a modest rented Northampton, MA, home to write his autobiography. He died suddenly in 1933, after what would have been the end of his second full term. We can only wonder what his response to the 1929 stock market crash would have been.

Here are some of my favorite quotes from the autobiography:

When we come into the world the gate of gifts is closed behind us…So far as each individual is concerned all he can do is to take the abilities he has and make the most of them.”

The study of it (U.S Constitution) which I then (in high school) began has never ceased, and the more I study it the more I have come to admire it, realizing that no other document devised by the hand of man ever brought so much progress and happiness to humanity.”

It is much better not to press a candidacy (for governor of Massachusetts) too much, but to let it develop on its own merits without artificial stimulation. If the people want a man, they will nominate him. If they do not want him, he had best let the nomination go to another.”  - In the 21st century, I believe it is personal ambition and expensive “artificial stimulation” that rule.

There is no dignity quite so impressive, and no independence quite so important, as living within your means. In our country a small income is usually less embarrassing than the possession of a large one.” (Well, we have seen some deterioration of that principle.)

(On his duty as Vice President of presiding over the Senate) - “If the Senate is anything it is a great deliberative body and if it is to remain a safeguard of liberty it must remain a deliberative body.”  Oops!

 (On becoming President) “While I felt qualified to serve, I was also well aware that there were many others who were better qualified. It would be my province to get the benefit of their opinions and advice.”

The words of the President have an enormous weight and ought not to be used indiscriminately. It would be exceedingly easy to…foment hatreds and jealousies which…would help nobody and harm everybody.”

On his campaign for President: “…I did not attend any partisan meetings or make any purely political speeches during the campaign.” What?

The description of his education which “began with a set of blocks which had on them the Roman numerals and the letters of the alphabet” and “…is not yet finished” could well be used to establish a “Common Core” for the 21st century public schools.

What a shame that a man with such attributes and principles, such ability and confidence combined with self-effacing humility, could never be elected president today. Now we are all looking for a savior who will fight for US. Read the book. Whatever your political philosophy, you will enjoy it. 

Friday, July 25, 2014

Acting Patriotically

My first real discomfort with President Obama was five years ago, the summer of 2009, when he commented on what should have been a strictly local issue by saying that the Cambridge, MA, police had “acted stupidly” in their handling of an issue involving a Black Harvard professor mistakenly arrested. Whether they acted stupidly or not was far less important, in my opinion, than the fact that President Obama felt compelled to comment on such a local race-related issue. Just a few weeks after that, the “Cash for Clunkers” effort, an example in my view of government acting stupidly, launched my blogging hobby, and I borrowed the president's phrase for the title, “Government Acting Stupidly.” My opinion has not changed, but I did soon abandon that early blog title for the more positive, “Permanent Fixes.”

Now we have a case of the president accusing corporate managements and boards of acting, not stupidly, but unpatriotically by merging their corporations with overseas companies in a way that allows them to declare a non-US location as their tax headquarters, thereby reducing their total tax liability. He suggests that such companies should opt out of that completely legal opportunity and continue to pay higher taxes and asks Congress to immediately close the “loophole” retroactively. “Loophole,” by the way, is just another word for a law passed by Congress and signed by a president.

The issue made me wonder if President Obama is taking advantage of any “loopholes” to reduce his personal tax liability or is simply declaring all his income and reading the tax payable out of the simple table provided by the IRS. The president’s 2013 income tax return is posted online, so I took a look at it. The “Adjusted Gross Income” from Line 37 is $481,098. Using the IRS tax table for “Married Filing Jointly” indicates a tax due on that income of $138,161, an “effective” tax rate of 28.7%.

Of course none of us take that approach if we have options for reducing our tax bill, and neither did the president. He reported $147,769 in itemized deductions, including state and local taxes, contributions, and mortgage interest, and was able to reduce his tax bill to $100,462, a saving of almost $38,000 and an “effective” tax rate of 20.9%. It is exactly what I would have done and is both legal and patriotic, totally compliant with the unbelievably convoluted and intrusive tax code that has been imposed on us by our government for its own benefit. Because of that tax code, the tax return the president had to file to justify that lower bill totaled 42 pages plus certainly a much larger pile of paper his accountant must keep on hand to justify the 42 pages in case the president is targeted by the IRS under some future administration. A side benefit, or issue, is that it kept him from having to pay his “fair share” relative to single people who cannot file jointly and people who choose not to give their money to organizations granting tax deductions or those who avoid big home mortgages by supporting their local landlord. 

The whole thing makes me wonder if it wouldn’t be fairer, simpler, more transparent, less time consuming, less threatening, and less tempting, to eliminate the current tax code and simply tax incomes at a flat 20%. That is about what the president ended up paying anyway after all the calisthenics on what would certainly rank in the top 1% of US incomes. Of course such a simplified system would be far better in every way.  

But back to the current issue, corporate leaders acting unpatriotically. Companies likely to try that tax saving move, referred to as “inversions,” are those that are in global businesses with operations and sales around the world. They are in competitive environments and have a fiduciary responsibility to their employees, shareholders, and lenders to do the best they can against their competition. Success is not guaranteed, and when failure occurs, there is much suffering, mostly by employees. As a few glaring examples of recent corporate failures, take a look at Eastman Kodak, Lehman Brothers, and the president’s favorite solar company, Solyndra, which couldn't be kept alive even with federal favoritism.

Here is the big problem we face.  The United States has lagged economically beginning with the first big oil crunch in 1974 and the almost simultaneous onset of globalization, automation, and major post-war advances of economies of Japan and Germany and, later, China, India, and Latin America. We are in competition with all those economies, and our losses have, in a large part, been their gains. I suppose that was only fair, but now it is time for us to notch up our efforts a bit by making the United States of America once again the number one business and manufacturing site in the world. A really good way to do that is to eliminate our shamefully complex and mysterious corporate tax code and replace it with a simple flat tax of 15% on all corporate earnings as reported to the public with ZERO exclusions, exemptions, deductions, credits, or other adjustments. Just read the annual report and find the “Net Income before Taxes" line, multiply that by 0.15, and mail a check to the government. We would find companies flocking to the United States as a low cost tax haven with tremendous resources, joyful freedom, and a large workforce continuously boosted and replenished from south of the border.  

Congress could begin acting patriotically, focusing on something besides picking and choosing winners and losers and granting favors for votes and contributions, infrastructure perhaps. Patriotism would expand, rapidly replacing our current shame of the stuff going on in Washington DC. Both business activity and tax revenues would soar.  And we could get back to work and quit complaining.

Monday, June 16, 2014

Eating Well, Sleeping Well

I just read "Don't Blame Fat" in the June 23, 2014, issue of Time Magazine. It is comical, yet tragic, that we are so easily manipulated by a mishmash of government advice, diet gurus and fads, and food industry advertising when each of is is perfectly capable of conducting our own experiments and developing appropriate and heathy eating habits. All it takes is regular consultation of a bathroom scale, careful observation of how well we sleep and how we feel when awake, the kind and frequency of waste products we are generating (sorry), and an annual visit to our physicians for some data.

Probably the key point in the Time Magazine article  is in a paragraph about two thirds of the way through the article: "In 1992, the USDA recommended up to 11 servings a day of grains, compared with just two to three servings of meat, eggs, nuts, beans, and fish combined." The article goes on to provide evidence that that advice from only 22 years ago was pure baloney and that the current opinion is that we are getting too much sugar and not enough fat in our collective diet. OK, everybody, about face!

The current post on FDA Voice Blog, found at the FDA website, is comical and self condemning. It notes that ten years ago FDA "advised pregnant and breastfeeding women, and women who might become pregnant, to limit their consumption of fish to no more than 12 ounces a week" and then laments the fact that many women seem to have taken that advice too far, some even completely avoiding fish. Who can blame them for thinking that "no more than 12 ounces" would include zero ounces. The title of the current post is, "Why We Want Pregnant Women and Children to Eat More Fish." I would have written "Children and Pregnant Women" to avoid the possibility of somebody thinking I was concerned about pregnant children, but, that concern about grammar is overshadowed by irritation with the patronizing attitude demonstrated by such statements.

I just checked out the FDA website and see that the banner across the top proclaims, "Protecting and Promoting Your Health." I'm going to go out on a limb here and suggest that is inappropriate overreach for the FDA, maybe better suited for HHS, and that a more reasonable and achievable and less expensive FDA target would be, "Working to Assure Food and Drug Safety." I suspect that if all the effort that has gone into development and publicity of advice on diet over the last few decades, including development and advertising of such as the Food Pyramid and My Plate,
had instead gone into inspection of domestic and imported meats, seafood, and vegetables, we would have far fewer cases of indigestion, food poisoning, and recalls. We are perfectly capable of making our own food choices in a free market environment, but most of us don't have ready access to labs for checking the possibility of e coli contamination. For that, we reasonably depend on the government agencies.

So, here is my advice. Eat a wide variety of meats, fruits, breads, and vegetables in low quantities and do regular table pushaways to avoid Dunlap's Disease. Get at least an hour a day of hard physical work or other exercise. Experiment with foods and quantities and frequency of eating to get waste generation to a Goldilocks level, not too much and not too little but just right. (This is based on my education as a chemical engineer and experience in chemical manufacturing. The human body is, after all, a very complex chemical plant.) And don't depend on the government or the diet gurus or the food industry, not even the locavores, for guidance. They all have vested interests that completely override concerns about our health.

And finally, sleep well!

Friday, June 13, 2014

Facebook Debates and Discussions

Since I use Facebook as one tool for sharing posts on this and my other blog, I've been thinking about the issue of Facebook discussions of politics, religion, and economics and the possibility of avoiding the outcomes in the joke currently making the rounds about use of such a powerful tool only for "arguing with strangers and looking at pictures of cats." I think Facebook offers tremendous advantages as a medium for learning about and exploring important issues but needs all participants to have completed a course in proper etiquette for such. The following guidelines are suggested:

  1. There is no need for an immediate response, or even any response at all, to something that has been posted on Facebook.  A face to face encounter tends to demand we say something or suffer some blow to our egos, and, in my case at least, that sometimes leads to foot-in-mouth disease. With a written post, there for anyone to see and targeted at no particular person, there is no such challenge.
  2. A well phrased Facebook post encourages us to hesitate and think before responding, to read and research the issue at hand and maybe even learn something rather than just declare an unsupported personal opinion.
  3. Unsupported personal opinions are worthless, except perhaps at the ballot box.  Every post should include some data or rational explanation or reference link or personal experience on which any opinions expressed are based.  We should keep unsupported declarations to ourselves.
  4. Anytime a post begins with or contains the words "you" or "yours," or gets personal in some other way, delete it and start over.  Facebook is not the place for personal one to one conversations on any subject and especially not on politics, religion, or economics.  That is why the "Message" option is offered.  Even the pronoun "I" is suspect and likely to inflame.  
  5. Anytime a post includes name calling such as "idiots" or "fools" or "left wingers" or "tea baggers" or "wing nuts" or "commies," etc., delete it and start over.  Facebook is not the place for insults or judgements about participants or about innocent or even guilty third parties.

So, the bottom line is that to have a reasonable discussion on Facebook about controversial issues, the participants need to be standing side-by-side, looking at available data and history, listening to what the experts are saying, providing sound bases for anything written, keeping the discussion impersonal, and focusing only on the issue and not on other participants.

Good luck!

Saturday, June 7, 2014

Size of Government Update

Size of government, defined as total federal, state, and local government spending as a percent of GDP, is a constant and continuing concern of fiscally conservative citizens. The first chart shows that trend from 1965, the year President Johnson declared war on poverty, through 2013, the last full year for which data are available. All the data are taken from the BEA NIPA tables. Just for reference, the dotted line shows federal spending only. It seems to me that focusing only on the federal line misses the total story since some of the federal spending is just transfers to state and local governments and since federal programs and regulations impact state and local spending. The top line total cancels out all transfers of funds between governments and shows only the net total spending.

It would be hard to argue from these data that total government spending is wildly out of control, but the truth is that it has advanced, irregularly over the 48 years, from 30.8% of GDP in 1965 to 37.4% in 2013. (Earlier error corrected in previous sentence.) The only relief we have had from that upward march was during the Clinton administration when a booming dot com economy, pressure from a conservative congress, and a common man kind of president, distracted but willing to listen to reason, combined to result in a stated intent to "end welfare as we know it" and resulted in a balanced budget for about three years at the end of the last century.   

Deeper digging in search of the source of the increases reveals serious cause for concern, or perhaps for celebration depending on ones political philosophy, because, despite the Clinton years, the increase is all in social benefits paid to persons, up from 4+% of GDP in 1965 to 14+% of GDP in 2013. That increase has pressured and crowded out ordinary government consumption spending and investment. Consumption expenditures are only down about a percentage point of GDP, but government investment fell by almost half from 6.4% to 3.6% of GDP. And we wonder about crumbling infrastructure! The pressure from increasing social benefit spending will continue for a few decades just due to aging of the population.  

In addition to the spending problems, the people and their congress have shown a lack of willingness to pay the bills for government largess resulting in accumulated debt approximately equal to GDP. Even now, in the fifth or sixth year of recovery from the last big bust, we are borrowing more than a billion (Oops, I mean a trillion) dollars a year just to pay the bills. And, we are in for a true shock on interest expense for our excessive debt when interest rates return to a more normal six percent or so.

We will never know what kind of nation the United States of America would be today had social benefit spending stayed around 5% or so of GDP, government consumption spending and investment had remained steady, and national debt had remained low, but here is my guess:
  1. A stronger dollar and lower prices as a result of lower inflation.
  2. Fewer economic booms, busts, and bailouts because of less artificial stimulation of segments.
  3. Less difference between the rich and the poor (commonly referred to as "inequality")
  4. About the same poverty rate of around 15%
  5. Higher absolute employment with lower wages but with more purchasing power
  6. Better infrastructure including environmental controls, transportation, and education
  7. Greater sense of personal responsibility and less focus on entitlement
  8. Fewer poor single moms and fewer children born outside of marriage and with absent dads
  9. Much stronger global image with quieter rhetoric, a much bigger stick, and fewer wars
  10. A more knowledgeable and harder working Congress with less focus on fund raising
  11. Less racism (because we would all be busier and more productive)
  12. Fewer selfies, (un)reality shows, Kardashians, and Biebers and little time for Facebook.
It would be nice to have run that experiment, but it is too late now. For those who think we have followed the right path but not far enough and want to double down on borrowing and social benefits, I have to ask, how much will be enough, and when will we pay the bills? Selections from the BEA NIPA Table 3.1 are below.

I have already written several times on the debt issue, summary here, and a time or two on inequality, item 3 above.


Monday, June 2, 2014

Feeling Manipulated?

With apologies to those who are paying high tax rates and don’t or can’t take advantage of any of the tax-reducing favors that have been granted: I hope they don't mind helping with my contributions.

As chief complainer about the plethora of tax deductions, credits, exemptions, and exclusions infecting our federal and state, personal and corporate taxes, forcing higher compensatory tax rates and requiring us all to use professional tax preparers or Turbo Tax even while providing senators and representatives corrupting power to grant favors, pick winners and losers, and buy votes and campaign contributions, I am a bit conflicted by an appeal received from the Bishop of Charleston to participate in the "School Choice" proviso passed by the South Carolina Legislature in June of 2013.  

School choice, the category in which this legislation has been placed, is a hot issue in South Carolina with many arguing that all parents should be able to get vouchers from the state to pay private school tuition and fees for their children, to give them a choice. They say parents who opt out of the public schools should not have to pay taxes to fund them. I'm not sure what they are thinking about older folks like me who haven't had any children in public schools in a couple of decades or about the many adult taxpayers who don't have and don't plan to have children but still have to pay taxes to fund the schools. Of course there is the idea that the purpose of school choice is not to help parents but to help the poor kids who are locked into substandard schools in bad neighborhoods and truly have no choice. It seems reasonable, but I have no idea where they are going to go with those vouchers or how they are going to get there or why the state can’t bring those public schools up to standard.

But, back to the current dilemma. I support our Catholic schools and this new proviso offers the opportunity to redirect up to 60% of my SC income tax obligation for 2014 to any non-profit that will use the money exclusively as scholarships for students with special needs to attend the school of their choice. This is a credit rather than a deduction so, if my SC income tax bill is $5,000, I can donate $3,000 to the newly formed St. Thomas Aquinas Scholarship Funding Organization and owe the SC Department of Revenue only $2,000. Somebody at the State House realized that this redirection of funds away from state coffers could get out of hand and managed to cap it at $8M total for the year.  The deadline for applying is June 30.
After considerable thought, weighing the pros and cons, I strolled up to the Post Office and mailed my check to the Diocese of Charleston and came back home and sent the application for the credit to the South Carolina Department of Revenue. How can I justify that participation when I object so strongly to the complicated tax system we have? 

Here is the thing: If our legislators are going to insist on playing these silly and expensive counterproductive games with the tax code, we citizens really have no choice but to do our part and play along with them. Otherwise, we are just making voluntary donations to the government, paying taxes at a much higher rate than the law requires, having no idea what the additional money will be used for. I would much rather pay just the required taxes and carefully choose the recipients of any voluntary donations. 

(I sometimes wonder whether these special deductions, credits, exemptions, and exclusions are designed to get us to do things that otherwise wouldn't make good financial sense or are just put in place to bail us out after we have already done those foolish things on our own.) 

So I will continue playing the game, as I always have with deductions for contributions and mortgage interest and state taxes, etc. But we would all, corporations, businesses, and individuals, and The United States of America, be better off paying much lower and fairer tax rates without all the concessions and making our spending and investing and donating decisions for sound financial reasons rather than for tax savings. And our elected representatives could find far more productive things to do than being entertained by lobbyists seeking and offering favors. And the IRS could downsize substantially.

Could we just set the federal corporate tax rate at 15% of earnings reported to the public, payable in cash as earned, with no exclusions, exemptions, deductions, or credits, whether earned inside or outside of the US? (More here

Could we just cap the marginal federal income tax rate at 25% max with no exclusions, deductions, exemptions, or credits? (More here

Could we just cut the marginal SC state income tax rate from 7% to 4% and eliminate the exclusions, deductions, exemptions, and credits? (More here

Could we just cut the SC sales tax to 3% and tax all retail sales fully with no exemptions? Well, I suppose we could keep that one silly little exemption that reduces the sales tax on food by one percentage point for folks 85 and older. (The signs announcing it all say that it is a 1% reduction in sales tax for those folks which would mean the tax is reduced from 6% to 5.94%.  I can hardly wait.)  (More here

By the way, if my application for the tax credit doesn't make it in before the $8M cap is reached, that is OK. The Diocese of Charleston can still keep the scholarship money and I will just treat it as a deduction rather than a credit. And I won't have to ask for as much help from fellow taxpayers to fund South Carolina State Government spending.

Sunday, May 25, 2014

"The Stupidity Epidemic"

The title of this post is in quotes because it is the title of an essay, published in book form, by Dr. Joel Best, Professor of Sociology and Criminal Justice at the University of Delaware.  This particular book and Dr. Best’s work in general were recommended to me in a couple of Facebook conversations, most recently one on the subject of education in America.  I ordered the book here and read it over breakfast this morning. 

The Stupidity Epidemic is an enjoyable and informative short read which begins by making the case that belief that our schools are failing is nothing new and has been a consistent theme over the decades for about 150 years.  Dr. Best makes a pretty good case that education has, however, made steady, if slow, progress in many important measures including the proportions of the population completing high school and college, in IQ, in test results, etc.  He ends by concluding that, while there are problems, often social and class related, there is no “Stupidity Epidemic” and that railing about such does nothing to make needed improvements in education.  He argues, quite logically, that “thinking about educational issues requires that we locate students and schools in their broader social context,” and “that we need to appreciate the complexities of educational issues.”  Who can argue with that?  Unpacking of those ideas will require a lot more than the 44 pages in this little volume. 

I found his most important point to be an explanation of the difference between stupidity and ignorance which leads to the conclusion that no well educated people today would argue that we have a stupidity epidemic, that people are becoming denser and less intelligent, but would probably mostly agree that we have an epidemic of ignorance, a large and growing gap between what we know and what we don’t know about the world we live in, how it works, the cultures of the people who occupy it, the history of it, and how to make a living meeting the needs of it.  It made me wonder why he didn't title his book “The Ignorance Epidemic,” a more accurate title which would have been somewhat educational. Of course the primary reason for that epidemic of ignorance is the exponentially expanding inventory of available information.  A secondary reason is failure of our education system to find ways to facilitate some fundamental, high level, understanding of the scope and content of that inventory and means of accessing it efficiently and effectively.  Of course nobody can remember all that stuff in order to pass standardized tests.

Compelling evidence of that growing ignorance epidemic is the example Dr. Best gives of how our grandfathers and great grandfathers a hundred years ago were fully qualified, after completing an eighth grade education, to enter the workforce and become productive citizens.  Today, there is widespread general belief, even if somewhat misguided, that college is essential for all, even if unbearable debt must be accumulated during the pursuit of it and even if it does not lead to productive employment.  The world is simply much more complicated, and education, it seems to me, has failed to keep pace. 

Thanks to Dr. Best for helping clarify the problem, an important step in the diagnostic journey. I recommend his book.

Saturday, April 26, 2014

Clamoring for Concessions - Higher Ed

In the April 17, 2014, issue of Time Magazine, Haley Sweetland Edwards makes the perfect case for drastic reductions in federal government funding of higher education but never draws the appropriate conclusion. The article is about a new college grading system being imposed by President Obama and almost unanimously opposed by his big supporters, college presidents.  Nobody likes being graded. According to the article, the administration hopes to address these issues with the new system:

1. Much federal funding fails to result in graduation and jobs and leaves students stranded and burdened with high debt.

2. Cost of undergraduate degrees has increased 33% in the last ten years.

3. Student debt has more than doubled in the last ten years.

4. Colleges and universities employ 1500 lobbyists and spend hundreds of millions on lobbying in Washington to keep the federal dollars flowing in their direction.  (It has been a good investment for them, if not for the country.)

5. Members of congress aggressively do whatever they can to keep federal higher education dollars flowing into their districts, the median for congressional districts in 2012 being $167M.  (It is a big help to incumbents seeking reelection.)

The White House Domestic Policy Council Director is quoted in the article, displaying an amazing naivety, saying, "It's not OK that we keep pouring in federal money to keep up with colleges' raising prices."  Is it possible she doesn't realize that it is the federal money that enables the steady price increases and promotes the ridiculous student debt burdens?  Without it, colleges would be forced to control costs and prices and compete for students at prices they could afford to pay.  Spartan dorms, eighteen hour course loads, and Saturday classes might even come back into style.  

And author Edwards displays similar naivety, repeating the ridiculous claim that a college degree is responsible for increased earnings of $17,500 a year over those with only high school diplomas, a classic case of correlation with limited cause and effect.  Is it possible she doesn't realize that the intelligence and drive and family support and other positive factors that have traditionally enabled a person to successfully complete college are the same factors that have made that person a valuable employee with good earnings? Granted, the college degree opens doors to employment, but it is usually, with the exception of technical degrees, due at least as much to the evidence provided by its attainment as to the knowledge gained as a result of its pursuit.  

Already the federal government is pumping about $150B a year into higher education according to Edwards. There are approximately 12 million full time higher education students, so that is about $12,500 per year per full-time student, not including state funding.  We can expect new federal rules that will result in colleges making adjustments to increase graduation rates and meet other new administration imposed targets, continued competition for increases in federal funding, and annual cost increases.  Until the bubble bursts.

How about less money and more freedom, competition, and responsibility as a package of options?  That would really give the college presidents something to oppose.


Saturday, March 15, 2014

More Observations on the Affordable Care Act

The worthy and inspiring promises of the Patient Protection and Affordable Care Act, "Obamacare,"  were reductions in health care spending to either reduce the national debt, of great interest to fiscal conservatives, or to free resources for other things, of great interest to fiscal liberals, even while increasing life expectancy, increasing personal well being of the citizens, and making sure nobody dies prematurely for lack of access to good health care, all benefits of great interest to most everybody. That is a nice package of promises, or at least of expectations, something for every constituency.

It seems to me that the judgments of and opinions about the ACA, now that it has been law for several years, are all about "me." My premiums went up so the ACA is BAD. My policy was cancelled so the ACA is BAD. My new insurance doesn't cover my old doctor so the ACA is BAD. Or, I have insurance now so the ACA is GOOD. My premiums went down so the ACA is GOOD. I'm getting "free" stuff now so the ACA is GOOD.  And both sides, proponents and opponents alike, play up this appeal to unpatriotic selfishness, barraging us with stories of people with such testimonies. 

And, I am not seeing any interest in or discussion of health care funds being freed up for other uses or in increased life expectancy, nor am I seeing any headlines about how many fewer than the disconcerting uninsured 30 million or so of 2008 are now uninsured.  I have heard of about 7 million signing up on the exchanges, but it is unclear how many have actually paid premiums, and I can't help wondering how many of the 7 million signing up are the same people who lost their insurance due to ACA requirements. After all, those are the people who have already demonstrated an intent to be insured and would be expected to waste no time replacing the lost insurance.

And, in all the discussion about there ACA, there seems to be little if any recognition that there is not necessarily any connection between health care insurance and the availability and quality of actual health care, a service than can be provided only by qualified providers, trained and educated doctors and nurses for the most part.

Given all that, my prediction is that health care spending will continue to increase, the debt will continue to increase, life expectancy will stay about the same, about as many people will be happier as will be unhappier, and about the same number of citizens will remain uninsured at any given time as before the ACA.  And the government will control a larger percent of the GDP through their new agencies, the health insurance companies, and through our new taxes disguised as health insurance premiums and penalties.  

I posted earlier on the same subject here.

Friday, March 7, 2014

Tax Return Woes, South Carolina Version

I always find absurdities in the tax forms conquerable only with the help of TurboTax or a qualified and expensive tax accountant.  And, It is not just the federal tax code that is ridiculously complex and unfair. Here is the list of tax credits available to South Carolina Income Tax payers. Don't feel lonely if you live in South Carolina and don't find anything here that applies to you. I didn't qualify for any of them either, but these are the reasons tax rates have to be as high as they are. Venison for charity credit? SC Quality Forum Credit? Mercury Switch Disposal Credit? Give us a break!

Lawmakers, tear down this tax code,  lower the rates, and give up your unjustified power to reward and punish and manipulate and buy votes via the tax code! Then you can get to work on things that matter.

Thursday, February 27, 2014

A Million Dollars! Not What it Used to Be

My financial objectives during thirty four working years at Eastman Chemical and Eastman Kodak were to meet family and personal obligations, stay out of debt, avoid credit card interest, and save and invest enough to be able eventually to “retire” and live comfortably on the income from same.  Age 60 seemed a long way off and a reasonable target.  I understood that there were two essentials for meeting those objectives, reasonable income and limited spending, and I was a pretty strong believer in avoiding unnecessary spending, a serious practitioner of so called “delayed gratification.”

I well remember during my early days at Eastman cashing a $20 check each week and expecting that to cover all my miscellaneous expenses, lunches, gas, fried pies, etc., for the week.  First apartment was $95 a month.  First house was less than $16,000. There was no color TV or new car or component stereo, a big thing in those days, until well into my mid thirties.  I hope my sons and my wife don’t think they suffered too much from my frugality.  I’m not sure what I thought about the concepts of retirement and not working, but was certain that I wanted more flexibility than would be possible as long as I had to follow somebody else’s schedule of work hours.  I wanted discretionary time.

Above is an artifact that might help make my point about frugality.  It is my very first payroll deposit slip from Eastman Chemical in September, 1965.  Rate of pay was $770 a month, and that $100 to the Credit Union was my first deposit in a brand new savings account. How about that twenty five cent Credit Union Entrance Fee?

Having been raised Southern Baptist, I was somewhat legalistic about tithing, and clearly remember the $77 check I wrote. It seemed like a lot of money.  Most months in those early years, I wrote my church check first thing and then sat on it till the next deposit to make sure the combination of that and the savings didn't cause me to default. That approach to budgeting may seem strange in 2014, but I had lots of frugal company in those days.  

Now, back to the issue of “retirement” and the funding of same.  I was in Rochester, NY, working at Kodak at age 50 and with 25 years of service, during Kodak’s declining years and was shocked, at a time much earlier than I had expected, to find they were willing to pay me and thousands of others quite a bit of money to just leave.  What an insult!

Kodak’s defined benefit retirement program provided full retirement benefits once age plus length of service totaled 85, and a person could retire with 50% of the defined benefit amount once that total was 75.  The year was 1991, and as of September, I had 75 “points.”  The early retirement incentive being offered stipulated that anybody with as many as 75 points would receive benefits calculated on the basis of 85 points.  I would qualify for a lump sum approaching a million dollars.

That was sobering.  I was pretty sure it didn't make sense for me, even though both our sons were already through college and we were debt free, but just to confirm that, I made an appointment with a local financial adviser familiar with Kodak benefit programs and listened carefully to his explanation of the benefits and the impact of taxes on them and how I was still fifteen years away from Social Security and Medicare, and various other complications and considerations.  If I was planning to take the offer, he suggested, I had better have another job in my hip pocket.  It just wasn't going to be enough, and finding a well-paying job at my age was not going to be a simple matter, at least in Rochester.

That was twenty three years ago.  A million dollars wasn't worth nearly as much as it had been in the days of my youth when a popular TV series featured wealthy benefactor John Beresford Tipton  giving a million dollars to a selected beneficiary each week, thereby enabling them to live in luxury forever after.  And since 1991, the value of a dollar has diminished such that in 2014 it would take $1.7M to buy as much as could be bought with $1M in 1991.  Adding insult to injury, with interest rates as they are today, the idea of safe income from savings and investments is only a dream…or a nightmare. A safe and guaranteed investment of a million dollars will generate income of about $15,000 a year, roughly matching a full time job at minimum wage.

I turned down the offer, worked another eight years, continuing in relative frugality, and retired at the turn of the century.  I fiddled around with golf and fishing for two or three years and then decided work was better.  I got a degree at a Lutheran Seminary which was a LOT of work, and since then have become increasingly involved in volunteer effort of various kinds, very fulfilling and somewhat demanding, but not clock controlled, and made possible only by those years of frugal saving and investing. And I enjoy contributing money along with the volunteer efforts.  I am thankful.

In light of my own philosophy and experience, it is sobering to read of the financial irresponsibility of so many Americans today.  About half have little or no savings and no retirement plan.  Another big group is saving far too little to maintain their accustomed standard of living in retirement. Tens of millions are living on the edge, beyond their means, enjoying the latest technologies and expensive coffees and “foodie” restaurant meals, paying big interest bills on credit cards or payday loans, and will be heavily dependent on Social Security and Medicare or whatever government programs are in place when they retire.

That may be OK if a person has simple tastes and little responsibility for family or anybody else, but it will be a saddening shock to many.  To top it off, even generously salaried working folks are at the mercy of their employers, and the paternalism I enjoyed at Kodak and Eastman Chemical, with pension and health care promises plus company sponsored savings and investment plans is dead.  It’s a jungle out there.  Shape up, America!

A penny saved is a penny earned.” – Not from Benjamin Franklin, but true nevertheless.

"He who does not economize will have to agonize." --Confucius

"The thrift that does not make a man charitable sours into avarice." - M. W. Harrison

I found some quotes condemning, but none promoting extravagance.

I never needed Dave Ramsey’s course.  I could have written it.  But for anybody needing an intervention, that is a good place to start.  

Wednesday, February 19, 2014

Plugged Ears, Downcast Eyes, Don't Know

I never think of myself as an environmentalist or nature lover, but maybe I qualify.  When I am out walking or biking, I am always looking and listening and paying attention to what is around me.  Sometimes it is traffic which is a danger to life and demands careful attention, but, on the Columbia Canal Trail, for example, it is flowing water, sometimes low and sometimes high, sometimes clear and sometimes muddy, rustling and falling and blowing leaves, plants and creatures of various kinds, all providing interesting sights and sounds, differing through the seasons and even from day to day.  And other humans are interesting to observe as well, all shapes and colors and sizes, moving at different speeds and in various manners, some gracefully and some clumsily. Contrary to popular thought, humans also are part of nature.

A disturbing thing to me is the number of those humans who are completely tuned out of their surroundings, ears plugged and eyes downcast, all attention focused on some little hand-held device, sometimes moving slowly and exercising their thumbs more than their legs.  On the Canal Trail, they often occupy the middle, probably reducing their chance of stumbling into the river or canal, but making it very difficult for cyclists to get around them.  And they have trouble hearing my bicycle bell or even my final desperate shout before a last minute decision about whether to try passing on one side or the other or just grind to a halt.  I have a problem with my recumbent bike:  when it grinds to a halt, my feet locked in the pedals, it tends to tip over and macerate my elbows and hips.  Maybe I should switch to a recumbent trike.

Those tuned out folks seem completely oblivious to their surroundings, and, unless they are reading news and commentary on their hand-held devices, I suspect they may be oblivious also to much of what is going on beyond their immediate presence, in the city, state, nation, and world.  Sometimes I see such folks on TV being interrupted by "man in the street" interviewers and being asked and failing to correctly answer such questions as, "Who is the Vice President of the United States?"  I fear some may be continuously connected via. Facebook or other social media to people who share and reinforce their own opinions, and that their habit extends to times when they are not out walking.   I love the joke (which I read on Facebook) about trying to explain, to someone who died in the 1950's, the most amazing thing about the technology of the early 2000's.  The proposed explanation consists of holding up a smart phone and saying, "I have in my hand a device that gives me quick and easy access to much of the knowledge in the world, and I use it to argue with strangers and look at pictures of cats."

I was a big fan of the TV series, Friday Night Lights, and in particular of Coach Eric Taylor of the Dillon Panthers football team.  Before games, Coach Taylor always reminded the team of their motto: "Clear Eyes, Full Heart, Can't Lose."  Now there seems to be a growing cult, the motto of which might be: "Plugged Ears, Downcast Eyes, Don't Know."

Maybe this fad will end up being as short lived as the driver distracting CB Radio fad (in which I participated) of the 1970's.  At least the illegality of texting while driving, if not while walking, is expanding rapidly.