"The most significant threat to our national security is our debt," Admiral Michael Mullen, Chairman, Joint Chiefs of Staff, August 27, 2010

Thursday, February 25, 2010

Tax Increases, Rationalization and Bankruptcy

Today we discuss the alternative routes available for insolvent public entities. Think of this as a road trip and  the alternatives as "use toll roads" or "avoid toll roads" or "the scenic route."  The philosophers might call these routes “Pick your poison" or “Chickens coming home to roost.” Pragmatists would just say, “It’s about time!”

The tax increase route has one very sound, intellectual foundation for being chosen. It is necessary to pay for what you get. That is a fundamental. There is no free ride. There is no free lunch. So, whatever you are getting from government must be paid for. Raise taxes to the level needed to pay for government. Public employee unions are really big supporters of this alternative. If you are not a government employee, you have two alternatives. One, settle for less or two, get what you want/need from others sources for less. Otherwise, pay up. Someone has to pay for those union wages, benefits and generous retirement programs and payments and, of course, all the fancy entitlement programs.

Rationalization. This term is a fancy word which when applied to a business situation refers to reduction in employees, employee benefits and pensions and other business costs. The rationalization route usually occurs under dire circumstances but can also be enacted as part of an ongoing evaluation and productivity producing activity. Can rationalization work? Absolutely. There are many successful business examples where cost cutting, employee reductions, changing retirement plans from defined benefit plans to defined contribution plans all helped build a strong foundation for future economic growth and increased competitiveness in the marketplace. Unfortunately, there are few examples of where rationalization has been enacted successfully with public entities such as state and local governments. Why is that you ask? Mostly the answer lies in the overused and over abused word – “POLITICS.” What do we mean? In business the vote lies with the consumer; the purchaser; the end user. If consumers don’t buy; the business fails. In government there is no consumer because consumer implies choice. So, the market force of consumer choice is replaced with politics. The politician wants to be elected or reelected. He/she plays to several audiences including many entrenched government employees. She/he wants a compromise. A resolution. He/she wants to move on. Not engage in lengthy fights over wages and benefits and pensions. Doesn’t want or have the spine to cut back on programs and activities. She/he also knows that prolonged fights with government employees and strikes and shutdowns will cost them some voter support. So he/she gives in. She/he doesn’t fight because they survive by not fighting; the exact opposite of the business person who must fight to survive.

There are two other back road routes of rationalization in the public sector. One is to privatize services. Seek bids from private suppliers/vendors to provide services and goods. Usually a great idea. Introduces competition which is usually the best form of maintaining both quality and value. Also, gives the public entity the ability to provide certain services/goods without making a permanent investment in personnel and equipment. Privatization should be an ongoing part of any good government agency; not something to turn to when the money runs out. A second route is asset sales. There is an old expression, “don’t eat or sell the seed corn.” Well politicians don’t quite think the same way most farmers think. A number of municipalities and states have either sold assets or are contemplating a sale of assets. Chicago wants to sell its airports. It already sold a toll road. And it irritated almost every one by a bad deal in selling its parking meters. Greece has become adept at mortgaging its infrastructure in this manner.  Selling earning assets to pay current expenses is a sure sign of a failing entity. TheFundamentals advises against purchasing the debt of any entity which is now taking this route.

Now there are some more learned voices out there proposing a combination of the above alternatives. Raise taxes, cut spending and all will be cured. For the aforementioned reasons, TheFundamentals sees no likelihood of sustainability in either choice. As our readers know, TheFundamentals has addressed the benefits of the bankruptcy route (see: TheFundamentals, February 9, 2010.) There are many candidates in America for bankruptcy. There are many public entities that should embrace bankruptcy. Bankruptcy is to the financially promiscuous as redemption (or the Tiger Woods clinic) is to the sexually promiscuous. We support bankruptcy for several notable reasons: financial insolvency is best dealt with now and not postponed; bankruptcy brings finality to financial problems; bankruptcy is the only route to eliminating unpayable known and contingent liabilities with finality; bankruptcy processes and resolutions are well accepted in the US; bankruptcy is the only route to eliminating contractual obligations with employees and vendors that are a massive economic burden on the taxpayers of these insolvent entities. Bankruptcy is the preferred route for these reasons and we encourage all insolvent entities to immediately examine its applicability to their situation. No one wants to be first on this scenic route but you sure don’t want to be last.

Tuesday, February 23, 2010


Exports are those goods and services that one country produces and is able to sell to other countries. Exports are good. Particularly if a country likes to buy (imports) goods from other countries. What caught our eye recently about exports was reading that China had just become the largest exporter of goods in the world. We thought that they were number one. We also thought that the US was number two. We were wrong on both counts. Who was number one and now is number two? Japan would come to mind. But no, Japan was number four after the US. The former number one is Germany.

That got us to thinking. China is now number one but they have over a billion people. Germany is a relatively smaller country in terms of population. Maybe we should do a quick analysis of exports per capita and see the result. So, we did exactly that. Here are the results (ranked by dollar volume of exports) and there are some surprises.

First, there is only one ground rule. We are only going to analyze the top 10 exporters so we will not try to find a small country out there that exports diamonds or gold and can therefore produce a real high dollar amount per capita. These are just raw numbers presented in tabular form. Some comments from TheFundamentals follow:

                                   Exports                                                             Exports
Country                 (Billions of $$$)                   Population                 Per Capita

China                            $ 1,194                     1,339,000,000               $    892

Germany                          1,187                          82,000,000                14,476

United States                      995                        307,000,000                  3,240

Japan                                 516                         124,000,000                  4,065

France                                457                          64,000,000                  7,138

Netherlands                        398                          17,000,000                 23,388

Italy                                   369                          58,000,000                   6,362

South Korea                       355                           49,000,000                  7,247

United Kingdom                  351                           61,000,000                  5,759

Hong Kong                         327                             7,000,000                46,700

Source: The World Factbook

This is an eye-opening chart. How many of us knew that Germany was the largest exporter in the world until this recent move by China? Bigger than the US; bigger than Japan. How do the Germans do it? Perhaps even more eye-opening is the terrific performance of the Netherlands. What on earth are the Dutch producing to give them a per capita performance almost double the Germans? We are going to pass on Hong Kong because we are thinking that their numbers may be skewed by products that are China produced but recorded as a Hong Kong export. We just don’t know. But look at the per capita numbers. In the above chart the US is second to the last; only exceeded by lower exports per capita by the Chinese who are relative newcomers on the export scene; still have a largely agriculture dominated economy and have four times the population of the United States. And we can reasonably predict that it is only a matter of time that the China per capita number passes the United States just as all the other more productive countries already do. Kudos to South Korea. They are way ahead of many countries that have much longer tenure as manufacturing and exporting economies.

We are flabbergasted at the results of this brief analysis. In awe of the countries that perform and disdained at the poor performance of the United States. The business of the United States is no longer business. Or, perhaps, people just buy from other countries because of price and quality? Countries that still believe in competitiveness.

Politicians talk about jobs and economic growth as if they knew of what they speak. Unfortunately, they are not engaged in either process – jobs or economic growth. All they do is place burdens on the economy. Here is a question to ask them. Are you willing to bet your paycheck on increasing the per capita exports of the United States? It is time for the United States to forget about bringing democracy to the world, lecturing others on their societal values and trends and policing the terrorists and other bad people of the world? It is time for the United States to tend to its export business? Simply put, it is time for the United States to tend to business? The French sell more than twice per citizen than the US; Italians double; Brits 75% more. Wow. You’d think we’d be focused on exports? No wonder we have so many unemployed.
Today, the Washington gang is going to get an opportunity to interview the head of one of the world's most successful companies.   A huge exporter.  TheFundamenals wonders if they are ready to learn about what makes a company a successful exporter?  We sure hope so.  Let's see what they ask Mr. Toyoda.  We think he could help them understand two key economic fundamentals - price and quality.  Do you think they will seize this opportunity to learn about competitiveness?

Thursday, February 18, 2010

Coming Events

TheFundamentals has inside sources in the entertainment world. We are committed to bringing early information on these coming TV shows, specials and lecture tours planned by celebrities and politicoes. Here are some of the events:

  • Former Vice President Richard Cheney is releasing his memoirs entitled, Shooting Straight. He has planned several television interviews focused on two important book chapters: The Benefits of Prompt Debt Repayment and Developing Lasting Friendships in the Islamic Community. 
  • Bill Clinton, Jesse Jackson and Al Sharpton advise corporations about finding real value in corporate giving programs and avoiding scams from foundations and 501(c)(3) front organizations which extort donations. 
  • Madonna gives advice on raising children to be modest and low key. She will also address the proper place for humility on the stage.  Ticket prices start at $500.00 for balcony seats; matinee shows.
  • Johnny Edwards gives advice on how to combine personal injury legal work, running for office and being there for your family members in their time of need.  John will also address the techniques he has developed for building strong, loyal and open relationships with staff members.
  • George W. Bush explains the value of prudent personal financial responsibility with an emphasis on living within your income.  Location to be announced.
  • Oprah initiates an advice column on taking off the pounds and keeping them off. Oprah will also circulate a petition on her website seeking your signature and support of substantial revisions to the national government guidelines for determining obesity. Click on http://www.bodymassindahood.com/     
  • Jenny Sanford and Elizabeth Edwards explain how best to find your soul mate and how best to keep the passion flames burning.   Both will speak about the importance of privacy in relationships and keeping things "in the family" for the well being of the children.
  • Alan Greenspan and Ben Bernanke will do a one hour PBS special in which they describe, in layman terms, their successful policies for fullfilling the stated missions of the Federal Reserve System which include a strong financial system, regulatory ovesight of banks and a stable US dollar.  Greenspan will also share his secrets on "avoiding undue political influence" in setting sensible monetary policy.
  • Mark Sanford and John Edwards team up to provide a dynamic lecture on the power of honesty in marriage and how a life of truthfulness can make you a better public servant.
  • Tiger Woods describes the details of keeping the proper balance between a busy schedule; prioritizing your family obligations; fulfilling sponsor requirements for high personal ethics; securing your personal communications and meeting fans needs for autographs and personal connection. Time permitting; he will also talk about the importance of quiet, quality time with the family during the holidays.  This press conference may be as early as tomorrow.
  • Barack Obama requests one full hour of prime time TV to explain his tried and tested techniques for building a business, setting measurable goals, evaluating goal accomplishment and managing a growing labor force for effective, competitive output.
  • Michael Jackson’s father, Joe Johnson, will pilot a new TV reality show called, Raising Your Children for Pure Entertainment Value. This show will also be a feeder to a second reality show called, Youthful Performances within the Law.
  • Barry Bonds and Mark McGwire will team up for their new TV reality show: Winning Fair. Winning Fair is going to follow the career of young athletes as they avoid prescription drugs and other enhancement compounds but find legal ways to thwart the progress of their competitors.
  • Newt Gingrich joins Bill Clinton, Mark Sanford and Johnny Edwards in a special onetime only lecture about avoiding the honey pot traps that befall hardworking politicians on the campaign trail and discouraging overtures from overanxious interns. Mr. Sanford will also present his slides on "Flora of the Appalachian Trail."
  • Nancy Pelosi will go on the Home Buying Network to share her beauty secrets on the simple, girl next door look without cosmetics, injections and invasive surgical techniques. 
  • Barney Frank will talk about the value of his commitment to a disciplined diet and strict adherence to a regular workout program. Newt Gingrich intends to join him, schedule permitting.
  • John McCain will share candid thoughts about his commitment to the issue of term limits and the value of not staying too long in any one position with an emphasis on the benefits of early retirement. He will be joined by Robert Byrd of West Virginia who will relate personal anecdotes supporting McCain’s observations.
  • Rahm Emanuel will speak to undergraduate students about political terminology and the proper use of measured language in legislative forums and building consensus. Emanuel has recently added a new section to this lecture focusing on disciplined speech so that one never has to say their sorry for a misspoken word.
  • Bill O’Reilly and Keith Olbermann are teaming up for a four city tour about mutual respect for commentators sharing a different political position from your own. Individually, Keith and Bill tend to share examples of how they developed tolerance in their broadcasting delivery; patience with interviewees and a modest self deprecating approach to their interviewing techniques.
  • The Anheuser Busch Brewing Company will present a symposium of the need for truth in advertising and the value of promoting the features of your product versus silly, mind-numbing caricatures, animal tricks, busty blonds and noisy displays emphasizing brand recall and recognition.

 Watch your entertainment schedule for final details.

Tuesday, February 16, 2010

Reader Contributions to TheFundamentals

The following three items were brought to our attention by TheFundamentals readers. We are fortunate and thankful for these involved and informed readers.

1. Greece Public Employees Strike. A reader notified us that on February 10, the public union employee unions in Greece made sure their members did not go to their jobs. Who were these Greek employees? Air Traffic Controllers, Teachers, Doctors, Custom and Tax officials. Why did they strike? Government salary freezes and reductions in pension benefits are deemed unfair to these workers who do not wish to see their generous pay and benefits affected by a government belt tightening. Why government belt tightening? The government is broke. What are the consequences? Surprise; surprise; surprise. These are the people who claim to be working for the people. Nonsense. They work for themselves. They describe themselves as public servants. These people will not give up a penny of their swag; their loot to do their part to rein in spending and start repaying the debt. Today it may be Greece. Can California, New York, New Jersey, Pennsylvania and Illinois be far behind? If anyone is listening, there is a common sense need across the land – city, state and federal, to eliminate public sector unions for all government employees. Outlaw them. Anything short of that remedy will never solve this problem. There is not one politician in this country who has the cojones (or whatever the female version is) to take this position.

2. Crony Capitalism? Call it what it is. Just plain corruption. Please click on this link before reading further - http://www.youtube.com/watch?v=TvCZBKxP4TY&feature=player_embedded_  Some people are critical of TheFundamentals for getting its ire up. For being too negative. For complaining too much about Chicago politics and the way these hacks do business. Others say that stimulus payments and special government programs are the only thing between us and oblivion. And there are those who are doing a good imitation of breaking their arms patting themselves on the back for the heroic spending efforts they have taken to avoid a terrible depression. What is the one constant running through all these activities? It’s your money that is funding it. Someday, some taxpayers will have government confiscate their earnings to pay the interest and principal payments due on the borrowed money for all this nonsense. Something to keep in mind come November 2, 2010. This is an encore reader contribution to TheFundamentals.

3. Court stands by attorneys rights over the will of the people. Please click on this link before reading further - http://www.nytimes.com/2010/02/05/us/05malpractice.html   On February 4, 2010, the Supreme Court of Illinois, in what may be one of the most misguided governmental creations ever, did the unthinkable. They overturned a law limiting pain and suffering medical malpractice claims (TheFundamentals refers to this entire category of claims as noneconomic damages) to $500,000.00. This misguided self imposed group of tyrants, all four of them, used as their justification that only judges and juries could set damage limits. In effect, this court is saying we are the law. We don’t care what the people say through their elected legislators. We are the law. Four people overturn the will of millions. Four people who are in the hip pocket of the trial lawyers. This is the stuff that comes straight out of stories with titles such as “1984” and “Animal Farm” and “Lord of the Flies.” This folks is Illinois politics. Remind us, mainstream media, where did Mr. Obama develop his political beliefs (?) and tactics?  Thank you mainstream media for scrutinizing (NOT) the politics and behavior of Mr. Obama’s training ground. We are grateful for this important reader contribution to TheFundamentals.

Thank you for participating in these efforts to bring common sense and fiscal sanity back to our nation.

Thursday, February 11, 2010

What Would Br'er Rabbit Say?

Br’er Rabbit likes to quote historic figures. “Never interrupt your enemy when he is making a mistake.” Napoleon Bonaparte (1769-1821)

Br’er Obama has made a number of mistakes.

Here are four of them: Jarrett, Gibbs, Emanuel and Axelrod. Amateur hour at 1600 Pennsylvania Avenue.

Can he get rid of them? Probably not; but there will be growing pressure on him to do so as time passes. Can you imagine the political ads that you can make in a few months with this cast of characters? This is not the group of key white house aides you want to bring to Nebraska, Iowa, Ohio, Pennsylvania, the Dakotas and Arkansas.

Here are four more: Pelosi, Rangel, Waxman and BFrank. Wow. How’d you’d like to run for reelection with these clowns and their record as your pitch?

Can he get rid of them? Unlikely. They are in their jobs because they have no serious challenge in their secure congressional districts. They have attained positions way beyond their capability because of our wonderful concept of “representative government” without term limits. So they wail about the super majority in the senate which is probably the only thing between them and total electoral collapse.

And four more: Durbin, Schumer, Reid and Conrad.

Can he get rid of them? Reid yes, others no.

There is an old story with some fundamental truths in it. In this story, Br’er’s Fox and Bear make a doll out of tar and place it to attract the attention of Br’er Rabbit. Br’er Rabbit tries to engage the doll in conversation and gets upset at the lack of responsiveness and punches it; thereby getting stuck in the tar. Fortunately, for the rabbit, he outfoxes Br’er Fox by getting tossed in a thicket bush where he is able to escape.

The lesson is avoiding “tar babies” which are sticky situations. Combine that advice with Ruler Bonaparte’s advice and the Party Out of Power (POOP) is best advised to leave Mr. Obama and his above 12 named tar babies alone to their own devices. The combination of these 13 people is best described as amateurish and more realistically described as “unbelievably out of touch”. This gang has hired failed academics, unemployed politicians, lazy bureaucrats and countless out of work lawyers and turned their mandate (?) into a political and rapidly developing electoral disaster. This gang thought that their resounding victory (53 to 46) was a clarion call to double down on the exact government crap that the voters were so fed up with from the prior group of wastrels. So, they did. They completely misread the election. Duh. Is this a really big revelation? These guys are Chicago politicians. The liberal senators and representatives saw a once in a lifetime opportunity. Move fast. Pass all the stuff we’ve been dreaming about. Do it quick before they kick us out.

Mr. Obama is bouncing around without any principles or philosophy that will carry him into the November congressional elections. He rode health care reform (was never reform; was always a plan to add 30 million people to the public dole in the form of free or subsidized health insurance paid for by new taxes and reduced Medicare reimbursements for people who had prepaid for those benefits) for one full year and now that it has failed, he wants the minority party to bail him out. Good luck spinning that into an electoral win. On the other hand, POOP players are not exactly the sharpest knives in the drawer. They just might punch the health care reform tar baby. We’ll see.

Next Obama launched undisciplined spending under the guise of creating new jobs. Never an ounce of truth in that approach. Just a huge payoff to his base; principally unionized government employees across the land. Try spinning that move into an electoral win when hard working taxpayers in private sector jobs are being laid off and those who still have jobs are earning substantially less than the unionized government workers are making. Plus everyone is fed up with the special benefits and outrageously generous and expensive retirement programs available to these same people. When have you heard anyone of the above thirteen “leaders” suggest even a cap much less a reduction in the out of control government employment numbers, out of control government wage levels and out of control benefit and pension programs available to these people? TheFundamentals is unaware of any mention. Please advise with specifics if you can find any mention of such a move. Try spinning this failure into an electoral win.

Lawyers. Always an easy target but not undeservedly so. Find any move on the part of any of the above to rein in the litigation and lawyering that now enters every minute aspect of US commerce, US culture and US society. Has one of them suggested that an attorney who files a lawsuit and loses that lawsuit must pay for the costs of the party (ies) forced to defend against the allegations in the lawsuit? What is so drastic about that reasonable position? What if the same discipline were applied to all government legal actions? What is wrong with the simple concept that loser pays? What is so wrong with the simple concept that non economic damages be limited? It may be nice to be a Hollywood movie producer who funds a tear jerker about someone screwed by a nasty corporation or nasty government agency and gets a big multimillion dollar settlement at the end with the music rising and feel good stuff flowing. But what has that got to do with justice? What has that got to do with recompensation for damages? It’s just Hollywood crap and it sells. But it does not promote economic growth. It does not make American products and services more competitive in world markets. It does not help create jobs. It does the opposite.

Next on the agenda – global warming. The new gang thinks they can do something about global warming.  (Aside:  They deal with global snowing by staying home and still getting paid.)  Their solution -- Tax Americans and tax American businesses. That is just what an economy with 18% real unemployment needs. Where do they find these wonderful ideas? Community organizations. Ask anyone. They will always tell you that if you want to cure the ills of the world just ask a community organizer. Who was the only community organizer that people really liked? Hint: he wore tights and hung out in Sherwood Forest. He also stole from the government and distributed it to the poor and regular folk. His victims were court members and lords and other fancy folk who deserved a good mugging. Robin Hood did not run around trying to increase taxes!

What would Br’er Rabbit say?

The gang in the white house has reaped the whirlwind of their mistakes and their bad reading of the public mood. Let ‘em swing in the wind. Leave this tar baby alone! POOP, take a pass on their suggestions for “shared governing.” Don’t bother showing up for their quickly organized TV open meetings. It’s not going to be an “open meeting.” They are looking for cover. Let the new gang with their big majorities do their thing. Stand back. Just observe. No need to get involved. This group is going to set a self destructive record. Leave this tar baby alone. What Br’er Rabbit would ask is, “POOP, where are your plans to reduce spending and pay down the debt?” America wants to know, now.  Hello.  POOP?  Do you have any plans?

Tuesday, February 9, 2010

The Benefits of Bankruptcy

We’re all sinners. Sinners embrace redemption. It gives them a second chance. A new slate. An opportunity to move on; put the past in the past; attain forgiveness; remove burdens, real and imagined, and move on.

And so it is with bankruptcy. Think of bankruptcy as redemption for fiscal sinners. Redemption for the financially promiscuous. Or just unlucky. Those with a checkered past. Bad credit. Too much debt. No assets. There is historic foundation for bankruptcy laws in the religious concepts of forgiveness and redemption.

Just as the sinner embraces spiritual redemption so should the bankrupt person or entity embrace the redemption offered by the federal bankruptcy courts? Bankruptcy is one of the enumerated powers given the national government by the people and the states in the constitution. See Article 1, Section 8. Learn your constitution. It is a wonderful document. It is our document. It does not belong to the congress. It tells the congress what they can (very few things) and can’t (lots of things) do. It does not belong to the president. It tells the president what he/she can and cannot do. It does not belong to the courts. It kind of tells them what they can and cannot do.

So there are two principal forms of bankruptcy. Bankruptcy commenced by the creditors, those to whom the entity owes funds and has contractually abrogated. Or, the debtor can preempt the process and file for protection from the creditors.

Now this posting is not a promo for bankruptcy. It is not to suggest that the bankruptcy option be chosen frivolously or without due and aggressive pursuit of all other financial options including restructuring debt and longer term work out possibilities. But, having said that, bankruptcy is a viable way to deal with current problems and create a possible solution for a new start from a rebuilt and stronger foundation. It also brings an end to the problem. Oprah likes to call that “closure.”

Propping up a failed concern doesn’t work. Propping up a failed concern misses an opportunity to possibly give it or a replacement a chance. So, the current regime, the one with no participants with any real life experience, has missed the opportunity to give large automobile companies and large insurance companies and large residential mortgage companies and large commercial and investment banks, with the sole exception of Lehman, and large public mortgage companies the opportunity to work on their structural problems; get rid of bad assets and losing operations; tear up bad business and labor contracts and cut deeply into the ranks of bloated management and non productive bureaucracies. All missed opportunities. Instead this inexperienced government has literally poured hundreds of billions of dollars into propping up failed businesses. Businesses that should be gone. Businesses that crowd out new entrants that will provide the very competition that will create the new jobs that will provide the good foundation for future economic growth. Why did they do this? They were afraid to accept responsibility and deal with the consequences of direct action.

It is not too late to force these bankrupt concerns into bankruptcy. Bankruptcy will also become a more frequently addressed alternative for government entities that have engaged in fiscally promiscuous behavior. (Click on the link in the left margin under the caption “Within Our Means” about the state of Pennsylvania.) For all these entities, it is not too late to make the correct choice. It is also not too late for a major but simple change to take place with the too big to fail concerns and new replacement entities. We have posted this simple solution before. A simple piece of legislation that requires all debt, all securities, all notes and claims, all liabilities issued by any entity, person, corporation or government agency/authority to carry, on every page of every document, at the very top and the very bottom, in bold face type at least twice the size of any font used elsewhere on the page, the following sentence, “This obligation is not and will not be guaranteed by the United States of America.” Caveat Emptor. Buyer beware. It is one of TheFundamentals.

Thursday, February 4, 2010

A Very Personal Look at Social Security

1937 was the first year anyone paid social security taxes. They paid 1% and their employer paid 1%, total of 2% on the first $3,000 of wages. So it cost the employee a maximum of $30.00; ditto for the employer. Stayed that way until 1950. Rate went up to 1.5%. By 1960 the rate was 3%, or 6% in total – employee and employer. The rate was then applied to $4,800 of wages. So, 23 years into the program, rate had tripled and the base increased by 60%.

The base wages have moved up a lot since then. By 1970 the base was $7,800; 1975 - $14,100; 1980 - $25,900; 1985 - $42,000; 1990 - $51,300; 1995 - $61,200; 2000 - $76,200 and 2010 - $106,800.

By 1966, the rate had increased to 3.85% and the government added in Medicare for another .35% - total 4.20%. And, remember, the employer is paying another 4.20%. Also, there was no cap on wage levels for the Medicare rate portion.

The rate keeps moving up a fast pace. By 1970 the combined rate (social security and Medicare) increased to 4.80%; 1980 – 6.13%; 1990 – 7.65% where it is today.

So, this plan that cost a worker $30.00 in 1937 can now cost an average worker making $42,000.00 a year, $3,213.00 right off the top of his/her check and, of course, the employer pays another $3,213.00. Grand total for average worker - $6,426.00 per year. Let’s assume you work for 40 years and make the average pay during that time. Now let’s say that you were to invest $6,246.00 per year for 40 years. And let’s assume a fairly low interest rate such as the current 30 year Treasury bond rate which is about 4.70%. How much money would you have after 40 years of making a $6,246.00 annual payment into a tax free retirement account? Guesses, anyone. It would have to be at least 40 x $6,246.00 or $249,840.00. So, guess. $300,000? $500,000? How about a cool (drum roll please) -------


And that would be your money. You could spend it; give it away; leave it to your kids or the local charity of your choice. You could buy an annuity to pay you a very nice retirement income and have more than enough to buy health insurance. Sometimes it pays to consider alternatives to government programs. Each and every government program has winners and losers. The winners are the people who don’t pay in but still get the benefits and the people the government employs to manage the programs paperwork. The losers are all the rest of us. By the way, if you and your spouse both worked and earned average paychecks, you would have almost $1.5 million for your retirement!   Savings and compounding are not scams; they are very real.  They are one of TheFundamentals.

For our readers who want to have some fun, go to http://www.moneychimp.com/  and click on the calculator link and enter your own specific statistics – earnings, time period, interest rate and so on. Vary the amounts. Many people can and will earn a lot more than the average. We offer this caution however. Doing this financial exercise may raise your blood pressure. We suggest you do it in a calm environment. We also suggest that you do it on November 1, 2010; several times.

Tuesday, February 2, 2010

$1.56 Trillion. Idiocy? Lunacy? Obamacy!

Last year the new kid; the community organizer from Chicago by way of Indonesia, Hawaii and Kenya spent a modest $1.413 trillion more than he took in. He blamed Bush but it was a record for any country for anytime, anywhere in the history of the Solar System. He just topped it - $1.56 trillion this year.

This kid is not just kidding when he said he wanted to spread the wealth around. Holy smokes. That’s three trillion dollars more than we took in. There are 135 million working Americans today; another 15 million not working. Total 150 million which includes 22 million hard working government employees. If you divide the 150 million into 3 trillion you get $20,000.00 per working or wanting to work American. $10,000.00 per year. By the way, the total budget per worker for 2010 is $25,500.00. That’s just the federal budget. Does not include your local property taxes, your state and local sales taxes and all the other taxes for gasoline, telephone, cable TV, beer/wine and so on. Borrowed. We don’t have it. This is what community organizing is all about. Go to this website: http://www.gamiliel.org/ and see what they have to say. Your president worked there. It’s a community organization. Here is a brief vision statement from this outfit:

We have a vision for our country that is based on radical hope, inclusive community, and shared abundance for all. We believe that we are called to participate in the democratic process, in shaping a future that works for all of us. The transformation of the soul of our country, our democracy, is both a political project and a spiritual project. It requires a body of people willing to live, to act, and to project a new way of being. Our faith is a path to a new way of being: spiritually and politically.

More from the kid: “6% increase in spending for the education department. Make college more affordable. Investments we must make. We pay for these investments. Freeze for three years on spending but not apply to Medicare, social security or military expenditures and benefits.”

“Been through the whole budget line by line. $17 billion last year; this year $20 billion. Cuts are painful because goals are worthy. Earned income tax credit in advance and then they didn’t qualify. More bang for our buck. Make government more efficient.” The kid is on his game.

“Bi partisan deficit reduction commission. Restore pay as you go. Spend a dime; cut a dime. Restore fiscal discipline in Washington. Bottom line is this. Can’t act as if deficits don’t have consequences anymore. Stop with the grandstanding.”

Now that’s a set of cojones! Back to back largest deficits in the history of the Solar System and he says we can’t do it; that others must stop grandstanding. If this isn’t a calling, what is it? This is spiritual stuff.

Either this is lunacy or it is idiocy or something way beyond the modest scope of words we used to use to describe the behavior of lunatics and idiots. We are actually seeing, experiencing the creation of an entirely new noun for destructive, fiscally promiscuous behavior – obamacy: Complete disregard for all fundamental values. The complete and total replacement of concepts of sacrifice and frugality with shared abundance for all regardless of consequence. A new way of being. Spiritual. Soul transformation.  Hallelujah.

America. He sold you “change.” You bought it. You own it. It’s yours. Now you know what to call your purchase. It’s not idiocy. It’s not lunacy. It’s so much more. You bought obamacy! Pray for yourselves.  Next time learn about your candidate.