Social Security - Tax, Investment, Safety Net, Annuity, or Wealth Transfer Scheme?

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Is Social Security a Tax, an Investment, Safety Net, Annuity, or a Wealth-Transfer Scheme?  It is a little of each.
A reader recently took me to task for my analysis on Social Security.  I cranked the numbers, based on my income over the years, and came to the conclusion that what I will get out will be about what I paid in, plus 4% interest.

The reader pointed out, correctly, that Social Security is non-linear.  For middle-class people making a median income (about $51,000 a year) they might get back what they pay in, plus a modest interest rate of return.  For those who paid in the minimum, however, the amount paid out might far exceed that ever paid in.  And for those making at or above the maximum taxable amount (about $108,000 as of this writing), they might get out less than they paid in.

And the reader, who fell into the latter category, felt this was a total rip-off.  And not surprisingly, many folks in his situation think that they would be better off "investing" that money and thus favor things like "privatizing" Social Security.

But that point of view is assuming that Social Security is an investment, which it is not.  In a way, Social Security is like the story of the three blind men and the elephant.  One feels the tail and proclaims it to be a snake.  One feels the flank, and assumes it is a stone wall.  The other feels the trunk and, well, I don't remember what he thought it was.  The point is, what you think you see in Social Security has a lot to do with your perspective.

Social Security is, in a way, like a Life Annuity.   You pay into it over time, and when you retire, you get a fixed amount (with adjustments for inflation) until you die.   And like any Annuity, if you live only for a year into retirement, you get very little for what you paid in.   Annuities are "unfair" this way, of course, but the flip side is that if you live until 110, you still get paid.  And that is the point of an Annuity - and Social Security - that the amount you get out is going to depend on how long you live.  Like an insurance policy, we pool the risk of living too long, among a large number of people.  We all pay in, and spread the risk.

Social Security is also a Safety Net, in that no matter how much money you end up with when you retire, the Social Security is there for you, if you should lose it all.  My intrepid reader assumes that when he retires, he will be wealthy - and would be wealthier, if not for all that Social Security tax money he had to pay.   But he fails to realize that between now and retirement, he could literally "lose it all" - to poor investment decisions, personal problems (divorce, drug use, etc.), lawsuits, or any one of a number of scenarios.   And I've seen this happen to people here on retirement island, more often than not.  Once they were high-flying $150,000-a-year "consultants" and now they are destitute and living on Social Security.  That "safety net" is all that have left, and they are lucky to have it.

Social Security is also a Tax.  Yes, anytime the government takes money from you, it is a tax.  The idea that there is a Scrooge McDuck Money Vault with "your" Social Security money in it, is a fantasy.   There is no money "set aside" for you by the Social Security Administration.  The money comes in, is replaced by an I.O.U. from the Treasury, and then goes right back out again into the general revenue fund of the U.S. Government.  Current benefits to Social Security recipients are paid out from the general fund, basically.    Thus, the idea that Social Security will "run out of money" are idiotic, as there is no fund of money to "run out of".

When Social Security faces a shortfall, which it does every decade or so, they raise the upper limit cutoff for taxation.  A decade ago, it was about $88,000.  Today, it is about $108,000.  Why this is not automatically indexed for inflation is beyond me.  However, by leaving it at fixed numbers, the GOP can allow Social Security to periodically "starve" and then claim it is "in crises".  The Democrats then raise the cutoff, which is what should have been done, anyway, and the GOP can accuse them of creating the "biggest tax increase ever!"  It is a stupid game, but that is what Washington, D.C. is all about.  And the biggest punchline is that the folks making $50,000 a year, who are largely unaffected by all of this, are lead to believe that their taxes have been raised.

Social Security is not really an Investment, however.  Unfortunately, the Social Security Administration now sends out these little portfolios every year, showing how much money you will get when you retire.   This is an implied promise of a benefit, and even with disclaimers, it is hard not to use Social Security numbers in your retirement planning.   The portfolio they send out makes Social Security look like an investment - that you paid in, over the years, and you will get paid back, when you retire.   But it is not that.

And many on the right have argued that it should be an investment.  George Bush argued that Social Security should be "Privatized" and people allowed to invest "their money".  The problem with privatization is that some folks will invest poorly, or the market will tank when they want to retire (timing issues) and some will do well, while others suffer, through no fault of their own (or due to their own poor handling of money).

At that point, those folks would starve - and we cannot allow that to happen in this country (literally, we cannot and would not).  So a safety net for the safety net would be needed - and more people would end up on SSI - Supplement Income, which is like welfare for the elderly.

Social Security is a bit of a Wealth-Transfer Scheme, however.  As my reader pointed out, many people on the bottom end of the scale get back a lot more than they paid in.  However, we are talking the bottom of the scale - the amount paid out by Social Security is so paltry that they would be living far below the poverty line.  And without Social Security, they would starve, as they saved little or nothing in their lives, either through choice or circumstance.

Those at the top of the pile pay in, but get back less, in proportion to their income (this is assuming that both rich and poor live equal-length lives, but this, of course, is not true.  The poor die off far sooner than the wealthier).

But there are other scenarios where Social Security transfers money from one person to another, not based on money paid in.  For example, if you are disabled, you can collect Social Security disability, which, while based somewhat on what you paid in, usually will pay out far more.    And yes, there is fraud and abuse in this area.  I know a number of people who claim disability under Social Security for various ailments that seem somewhat specious.   They are not missing limbs or eyes or anything, and seem to enjoy vigorous activities in their lives.  For some reason, however, these activities don't include work.
 
And then there are just weird scenarios where people get money for no apparent reason.  A wealthy friend of mine got $200 a month checks because his Father was retired while he was still a minor.   Another friend got a check because he was a minor when his Mother died.  Neither "needed" the money - it was an entitlement handed to them.  And maybe this - and disability - are where we can tighten the belt somewhat.   But as with our tax laws, for every incremental dollar you spend policing the system, you recover less and less in terms of money saved.  So there reaches a point where you accept a certain level of cheating as inevitable - and that makes a lot of people understandably mad.

Does Social Security need "fixing"?  Is it in "Crises"?  These are political hot-button topics, and buzzwords used to get people upset, using baiting techniques.   Perhaps I am a bit jaded, but since the day I was born, over a half-century ago, people have been saying that Social Security is in "crises" and needs an "overhaul".  And yet, every time around, the system seems to get fixed, mostly by raising the cutoff rate on the Social Security tax, or by cutting benefits slightly (such as by making them taxable, which was done, as I recall, in the 1980's).

Some on the Right have suggested, oddly enough, putting a "needs test" or "means test" on Social Security, so that if you are super-rich, you don't collect benefits.   This is very odd, as if a "needs test" was put on Social Security, this would make it more of a wealth-transfer scheme and less of an investment.   And yet many Republicans are arguing that this will "fix" Social Security.

But, like with anything else, I have long given up trying to make sense of Republicans.  The party of smaller government ends up expanding government.  The party of fiscal responsibility ends up the party of big spending and huge deficits.  The party of rugged individualism and personal freedom ends up as the party wanting to snoop into your bedroom.  And with "means testing" the GOP now proposes turning Social Security into a full-blown welfare program.    Predictably Irrational, they are!

My reader argues that the system is "unfair" to him, as he has to pay this money in, and has no hope of getting it all back.   I am not sure that is a valid argument, as no one has a guarantee of getting anything back, particularly if you die at age 61 and never collect.   Moreover, the idea that you "get back" everything in taxes that you paid in, is somewhat specious.   Does he complain that he isn't getting his fair share of highways out of his gasoline tax?  That his income tax doesn't pay him back in terms of direct or indirect benefits to him?


Taxation, which is what Social Security is, takes money from all of us, hopefully in an equitable manner, and uses it to spend on the public good.   The disputes, of course, are whether the tax is collected in an equitable manner and whether they are spent on the public good.    With many folks who are mega-rich paying little in taxes (in terms of percentage of income) and many on the other end of the scale paying nothing, it seems like an unfair collection system.

And some might argue that spending $361 Million each, on an already out-of-date jet fighter, is not a smart use of that tax money.  Others might argue that it acts as a deterrent.  Still others might argue that the money spent is mere welfare for certain defense contractors (disclaimer:  I am a defense contractor).

And yes, some will argue that things like welfare, social security, SSI, disability, Medicare, and the like, are "unfair" in that the amount paid in by some, goes to pay others.   But the alternative is to allow people to live destitute lives, at the bottom-end of our society - starving in the streets like in some third-world country.   Not only is that not desirable, it is not sustainable.   Starving people tend to storm the gates of the very rich - eventually.

Some folks, such as Mitt Romney and his 47% comments, that the people who get paid out of the system, don't pay in their "fair share".   But if you think about this, it makes no sense.  If they could afford to "pay in" to the system, and get back exactly what they paid in, why bother with taxes at all?   But of course, that is their point - abolish all taxes, except those that fund huge defense programs, of course!   The idea that we can ask someone making $20,000 a year to pay in all they take out is somewhat specious.

And one might argue that these "safety nets" or other programs allow people to work for minimum wage in our economy.   And in fact, such government intervention in their lives might be preferable to letting them manage their own money - as the poor, by their very nature, do a piss-poor job of that.  Left to their own devices, the poor will spend money on a Jet-Ski, before they buy health insurance or fund their own retirement.  And yes, I see this first-hand, all over America.  And we end up paying for them, anyway, in terms of emergency room care and SSI payments.

And yea, some folks call that the "Nanny-State", and maybe they are right about that.  But from where I sit, I see a lot of very stupid folks out there (having just driven through the Carolinas and rural Virginia, as well as Augusta, Georgia) who could use a good Nanny, if not indeed, a good spanking now and then.

But I am not sure that abolishing or "fixing" Social Security is the spanking they need.   What we need to do - and what will inevitably happen, thanks to AARP - is that the tax limit for Social Security will be raised, from $108,000 to $125,000 or some other number, and more money will pour in.  The "crises" will be solved, and eventually, all those Baby Boomers will die off, and the system will balance out.

It's either that, or Soylent Green.

Why the Richest Man in the World is a Mexican

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Given the nature of the Mexican economy, it might be surprising to some that the wealthiest man in the world is from Mexico.  However, the Mexican economy is well-suited to concentrating money in the hands of a very few people, such as Carlos Slim.   Do we want this system in the United States?
Many on the far-right are convinced that the Democrats want to merge America with Mexico and Canada.  They spread false rumors about an "Amero" coin that will replace the dollar, and a free-trade zone between the three countries.   While the latter is somewhat true (in a limited form), there is no danger of Democrats merging the U.S. with Mexico.

Republicans, on the other hand, look at Mexico with envy.  In Mexico, if you come from wealth, well, you get to keep it - and make a lot more.  The tax base is pretty low, and the system is rife with corruption and influence-peddling.  The net result is, if you have connections, you get money and power - and get to keep them.   No meddling Liberals to whine about the fate of peasants and talk of taxing you to pay for their care.

In Mexico, it is said that basically a few powerful families control most of the country - and indeed, most of the land.  If you are born into poverty, you pretty much stay there.  There are few opportunities for a small businessman to get ahead (as Carlo Slim's Father did) without running into the brick wall of government corruption as well as various gangs.

But once you have money - and connections - well, anything is possible, and in fact, probable.  And Carlos Slim became the richest man in the world, by running telecommunications companies in of all places, Mexico, one of the poorest countries in the world.

OWS protesters like to whine about wealth distribution in this country - they should look South of the Border.   Things are so bad in Mexico that, until recently, millions fled across the border to seek a "better life" working at menial minimum-wage (or sub-minimum-wage) jobs, often toiling at hard labor.   That is the "good life" to an average Mexican - landing that sweet job at the chicken-gutting factory and perhaps only losing a finger or two.

Americans, on the other hand, shun such jobs, which is why Mexicans (and others from Latin America) take them.  And we criticize them for working so hard (as it shows us up).

But the question is - do we want to end up like Mexico?  Do we want to end up as a country with a few very wealthy people commuting to work in Helicopters from their walled and gated communities, while the rest starve or scrape by on as little as possible?  Do we want to have that kind of income disparity here in the United States?

The difference between Mexico and the United States is that, at least for the time being, we can vote, and we do have choices.  For 70 years, the People's Revolutionary Party (PRI) in Mexico ran things.  People finally got fed up, and elected the more conservative PAN party.  Things got worse.  Now, it looks like the PRI might be back in power, but not much will change, of course.  Corruption will still be rampant, and those that have, will continue to have, and criminals will be easy to spot, as they all wear Police uniforms.

We are going down a road, in this country, where a smaller and smaller group of people control more and more of the economy - and our media as well.   Those on the far-right complain about the "Liberal Media", and yet, Fox News remains one of the most popular cable news channels (perhaps the most popular) and can hardly be considered "Liberal".  Rupert Murdoch, owner of Fox News, also owns a number of newspapers, including the Wall Street Journal.   If anything, our media is bending to the Right, not the Left.

I am not sure that the solutions to the "problems" our country faces can best be solved by Billionaires in office.  And for the life of me, I don't understand people who think a Billionaire has their best interests at heart, unless they are also Billionaires as well.

Public Space

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Living in public space makes you appreciate how civilization works.
Traveling by RV, you are dependent on public space, for a place to park as well as simply a place to sit and enjoy the world.  And in any society, public space serves this need.  Increasingly, however, public space is under attack - being sold off to private interests, or viewed as an unnecessary expense on already over-extended local budgets.

But well-maintained public parks and other public spaces are a joy, and really an indicia of how well a civilization is working.    Finding an idyllic park or other spot, just to pause even for a moment or two, is a real joy.  And while your taxes may pay for it, you don't have to pay taxes on it.  Moreover, you can enjoy a space that would be all but impossible for the average person to own.

For example, at Mistletoe State Park, in Georgia, we enjoyed what I call the $20 Million Dollar view.  We parked our RV on a remote site and had a view of the lake and the far shore, uninterrupted by any houses, camps, other people or, well, anything.   In order to own such a view, you would have to pay at least $20 million to own your own lake and the surrounding lands.  But for about $20 a night, you can enjoy it for a lot less.

Increasingly, however, if you want the view, you have to buy the view.  We live in a State Park - Jekyll Island - and few of the homes there "own the view."  The view of the ocean and the marsh are open to everyone, and by State Law, 2/3 of the island is protected from development.   Contrast this with nearby St. Simons Island, where if you want a view, you have to pay a couple of million to get one.  And if you drive on that island, you may not realize you are on an island, as you cannot see the ocean other than at a few isolated public access sites.

And in such spots, even if you "buy the view", chances are, it is a view marred by the presence of so many others like yourself, who wanted to buy a "slice 'o paradise" and thus crowd in with you to get a shot of that fabulous sunset that you watch once a year (but pull the shades on the rest of the time as it overheats the house and reflects off the TeeVee, making it hard to watch).

Public space, on the other hand, is often far superior and, well, paid for.  No $15,000 tax bills will arrive in the mail if you have a picnic on public lands.  And yet, few take advantage of them.  On the Blue Ridge Parkway, we are often the only ones in Picnic areas or camping sites.  We see few, if any people, on the hiking trails.   Folks would rather stay at home and watch television.

Our own island was recently remodeled with beautiful public spaces, including a new picnic park with multiple pavilions with barbecue grills and picnic tables.  It is all nicely done, but when you ask a local resident about it, they feign indifference.  "Oh, I hear it is nice," they say, but of course one doesn't actually go to such places.  They are for other people, who don't own their own picnic table in their backyard (which of course is never used, as who wants to picnic in their back yard?  Besides, America's Idol is on).

As you might guess, we use it all the time.  In fact, pavilion 4 is sort of our own, as it is out of the way and has a nice breeze from the ocean.  It takes little time to pack a picnic dinner and a bottle of wine.  And we keep all the other necessities in the car.  Public space - you paid for it, why not use it?

In the Adirondacks, public space is everywhere - there seems to be a boat launch, public park or hiking trail around every bend.  But other places, such as Long Lake, seem to be "bought up" - at least in parts - with wall-to-wall camps and vacation houses, lining the lake.  The effect is less than ideal.  Not only is it ugly and tacky, you can't even pull your kayak ashore without confronting a "No Trespassing" sign.  I've got mine, jack, you get yours! - that seems to be the order of the day in the places like that.

But after paying staggering property tax bills on trying to "own the view" I am finding that public space is a far more enticing alternative.   It is free, freely available, and you have already paid for it with your tax dollars.  And since most folks today would rather stay home and watch television, it is largely unpopulated and vacant.  You can be lord of a thousand acres, of only for an hour or two, for free, or the low price of a park admission.

Sounds like a good deal to me.  In fact, it is the greatest bargain around.

Cheap Laptops

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A simple PC-based laptop can be had for under $500, brand new.  Why do people pay as much as ten times more for one?
A recent "heartwarming" story on MSNBC was about a stolen laptop.  A fellow buys a high-end laptop, gets it stolen (his second one stolen) and finds it using tracking software.  Not a big story.

The family who claims they bought the laptop, not knowing it was stolen, paid $900 for it, and was supposedly "struggling" to put their son through college.  The fellow who had his laptop stolen feels sorry for them and starts an online fundraiser for the family, raising well over $900.

This seems to be a trend these days - picking people to feel sorry for, and then setting up online fund drives.  We all recall the bus monitor from Rochester, New York, who was teased on the bus and cried, and was shown in a viral video.  She ended up with over three-quarters of a million dollars as the result of an online fundraiser.

While we might feel sorry for this woman, is giving her nearly million bucks any sort of justice?  We don't know her back story or anything.  As a New York State School employee, she might be very well off already.  And it begs the possibility that in the future, people will stage such events for the purpose of raising money. 

And isn't a bus monitor supposed to knock heads together and keep the kids under control on the bus?  When I was in school, we had one named "Sarge" and you didn't mess with her, let me tell you.  But I digress...

Before you go off sending money to someone you "feel sorry for" think about it carefully.  Altruism is suspect, if not totally evil.

What struck me about the MSNBC story was the huge holes in it - holes not apparent to six-figure-salary reporters living in the big city.  To them, $900 is a cheap laptop, as they have paid thousands for their MacBooks.  And to them, everyone has a Mac, right?  And an iPhone and iPad as well, right?  That is just baseline living, to them.

But most of us do not.  I am typing this on a Toshiba Satellite I bought at a Wal-Mart in Maine last year, when I spilled a Martini on my hoary old Dell Laptop.  I paid $320 for the Toshiba, and it works fine for writing, surfing the web, sending and receiving e-mails, and basic graphics chores.  No, it is not a gaming platform.  But who needs that?  Oh, and by the way, the old Dell still works and I still use it.

I guess I am a bit outraged that people think that $900 is a baseline price for a computer for a family that is "struggling" and that we should feel sorry for such folks when the laptop they "bought" turns out to have been stolen.  For a freshman in college, such a luxury is hardly necessary.  But it illustrates how kids today end up with tens if not hundreds of thousands of dollars in consumer debt - there lifestyle expectations are very high - and very expensive.

And it disturbs me that the United States of America is slowly turning into the United States of Feeling Sorry for Ourselves, as we pander to each successive victim story that the media touts - and the media loves to tout a good victim story.

And everyone is a victim, it seems, except me.   Well, the only way NOT to be a victim in America is to not buy into all the victim crap.  Once you do that, you are tagged as a heartless bastard and whatever you get in life is deemed to be what you deserve.  And of course, people will suspect you of being Republican.

But, looking at the big picture, the victim mentality really doesn't pay off in the long run.  We can't all be teased bus monitors who win the lottery.  For every victim celebrated on the TeeVee there are thousands of other victims who get nothing.  And many of these folks are real victims, too - not just some middle-class family suckered out of $900 for a stolen computer (and anyone who can afford to pay $900 for any computer is not a "victim" in any sense of the word).

In the long run, you are far better off being self-actualizing and self-reliant than to play the victim card.  But the media doesn't want you to think that - ask yourself why?  The answer, of course, is that depressed people who perceive themselves as victims, make excellent passive  consumers,  who will drown their misery in car payments and credit card deals.  When they sell you a victim story, they are selling you a lifestyle.

The reaction to the story online was sad, as it reflected how this victim mentality is so deeply set in America.  Most people posting responses said things like, "Well, maybe the college student needed an expensive computer for college!" - as if Freshman English required more than mere Internet Access and a Word Processing program.

Our country has still lost its way - and has learned nothing from the economic fiasco of the last four years.  We still believe we are entitled  to fancy electronics and toys and new cars and cable television and a whole host of crapola in our lives, that costs, cumulatively, a ton of money, but adds little to enrich our lives, either spiritually or financially.

But of course, the media, beholden to advertisers, never will sell that message.  The advertisers want you to buy, and the more you spend and the more you borrow, the better.  And people just don't get that.

We are in an RV park near Montreal, and our RV is arguably the smallest in the place, and one of the oldest.  Our decade-old BMW tow vehicle is one of the oldest cars here.  Most folks here have shiny new cars and large RVs - and take two weeks of vacation a year, or go camping on the "weekends"when they are released from Job-Jail.  They have to go back to work on Monday, as they need to make money to make the payments on it all.

The campground host, seeing our Georgia tags, said, "Gee, that's like what, a 20-hour drive from here?" which floored us, as it had taken us nearly a month to get to this point.  But it illustrated the difference in thinking.  To him, you drove "straight through" to make the best use of your limited vacation time, so you could get back to work to pay for all your crap.

For us, well, you can't even explain our life to someone on the salary-slave bandwagon.  No, we took a month to get here, as we don't have to go back to work.  And we don't have to go back to work, because we don't owe anyone money on anything.  And yes, maybe you can laugh at our old camper and worn-out car, and my cheap Wal-Mart laptop.  But they are all paid for.  And come Monday, I won't be hurriedly packing up all my stuff because I have to get back to the office.

In fact, I won't be back for another three weeks. ( And our net worth is far higher than the folks in the shiny new cars and campers.   Not that I would tell them that, of course.  Sometimes it pays to appear poor.  They might think we are victims!  Just kidding.)

But that is a lifestyle choice.  You can have lots of shiny bling and spend the rest of your life paying for it, or learn to live with less and enjoy life more.   It is a choice, not an obligation.  And no, I don't feel sorry for a family that buys a stolen laptop for $900.  Not when I make do with a whole lot less.

--Sent from my $320 Toshiba from Wal-Mart.

Is "Wealth" a dirty word?

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This is how most Americans view "Wealth" and they assume that it is inherently evil.  Unfortunately, this attitude prevents them from building up any wealth of their own.
Much has been made of Mitt Romney's wealth in this election.  I have no beef with someone being wildly wealthy, depending, of course, on how they made it.  An invention broker, for example, who makes millions of dollars by deceiving small inventors and wanna-be inventors, is not to be lauded for his "success in the capitalist system" as some Republicans would have you think.  Such folks are basically crooks, albeit barely within the confines of the law.  And similarly, one has to ask pointed questions as to how Mr. Romney came into his money, particularly given the concerns about the antics of Bain Capital, a company he owns 100% of the stock of, but claims no memory of how it was ran.  And then there are the tax returns and off-shore accounts.

And of course, more than that, I think it is hard for someone making $22 Million a YEAR to claim to be able to connect with Joe Paycheck and Johnny Lunchbucket, who might hope to save half of one of those millions over a lifetime of backbreaking hard work.   No, I don't think Mr. Romney connects with the little man, and the little man is deceived if he believes that.  Deceived by paid political ads on television, of course.  Yet another good reason to not watch television - or a good reason to spend political silly-season in Canada.  Boy, those provincial elections are controversial!  And the attack ads!  Oh, wait....

But many on the Left, and many poor people, perceive wealth itself as an evil thing, and will quote (or misquote) Bible verse to make their point.  In their mind, the desire for wealth is bad, and therefor anyone who tries to get ahead in the world is inherently evil or "greedy" whatever that means.  And not surprisingly, people who have this sort of view are inevitably poor.

To some extent, it may be an example of bootstrapping poor financial decisions.  When you are poor, it is comforting, to some extent, to think of yourself as morally superior to those rich folks.  At least you are poor and honest!  But that is a booby-prize if there ever was one.  And the evidence of this is that those same said poor people who decry wealth are the same ones buying lottery tickets and/or praying for wealth to come to them.  Neither technique works very well, of course.

Our generation - the 401(k) generation - cannot afford to have such childish views about money and wealth.  We will have to fund our own retirement, which means taking an entrepreneurial view of money and thinking of it in terms of wealth, not something to be spent on a new iPhone or a leased car.  We are not being coddled like the generation before us, who suckled at the teat of corporate largesse, and relied on defined-benefit pensions to make the payments on our retirement Grand Marquis.

And of course, that generation, thanks to companies like Bain Capital, are finding out that those defined-benefit pension promises can be negated in a bankruptcy court, after management has run the company into the ground - sometimes on purpose.  I have a friend with a pension from J.C. Penny who is doing the nail-biting thing right now, wondering whether the company will survive them, or whether their retirement income may be slashed by 40%.  And by the way, 40% is a lot.

So, it is high time we stopped thinking of "Wealth" as something that is bad or evil or worse yet - something that only other people have.  As I have illustrated here again and again, if you want to have an even average income in retirement, you will need to put aside about a million dollars.  Using the 4% rule, that would yield about $40,000 a year (which is not a lot) and when combined with Social Security (which Mitt Romney promises to put a "needs test" on) might bring you up to about the median household income of $51,000 a year in America.

And if that number scares you - particularly when you might barely have $100,000 in your 401(k), well, it should.  Retirement, even for those of us who saved will be a scary thing, as even saving a million dollars will not assure you a cushy retirement of golfing, living in Florida, and traveling the world.

And that, in short is why I started this blog.   I realized I was burning through money, not saving it, and moreover, spending a lot on "things" which were preventing me from having experiences.   We bought a house on a lake connected to the Erie Canal, with the idea of exploring the canal by boat.  Six years later, we never took that canal trip - the cost and labor of owning the home prevented us from having the time or the money.  Now, we can afford to go.

And by cutting expenses, I am "practicing for retirement" by learning to live on less - far less - than I did in the past.  I could comfortably live, today, on that $51,000 annual income.  But in the past, I would have needed twice that amount just to pay all the bills.   I chose bling and things over building up wealth - personal wealth.

Few of us will ever be as wealthy as Mormons, but we can at least try to improve our personal situation the best we can.  And one way is to stop thinking of wealth as evil, but as something that is value-neutral, and moreover necessary in order to survive on this planet.   You have to build up an estate - you have no choice.  Well, the other choice is to live in poverty and be dependent on others - including an unsteady government - for promises of income.

The Victim Mentality

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I wrote previously about Romney’s 47% comment, and how hegot it all wrong, but not necessarily in the way Democrats want to portrayit.  Many of these 47% are ardentRepublicans, even if they are suckling at the government teat.  Romney was wrong, but not for the reasonsDemocrats portray.
But he was right that if we end up in a society whereeveryone petitions the government for aid, we will be in a whole host oftrouble.  And this idea was driven hometo me shortly after I wrote the last piece, by a phone call from a friend inNorthern Virginia.
We used to have a cleaning lady.  Heck, we used to have a lot of things.  Hiring a cleaning lady is a sure sign of laziness or that you owntoo much home.  But I don’t want todigress yet again on another topic.  Butlet’s just say there are a lot of people who watch four hours of television aDAY, while paying $50 to $100 a week to have someone come in an clean for fourhours - once a week.  It is a foolish waste of moneyfor the middle class.
I was never comfortable having “servants” as I do not likethe idea of exploiting or even employing others.  This is why I no longer employ people.  It is a hard thing to do, and there is a reason why managers getpaid a lot to do it, particularly if they are effective.
We paid our cleaning lady and issued a 1099 form for her,and did it all above-board (others were not so keen about this).  Since she also cleaned my office building, Iput her on our group health plan and also made her eligible for our 401(k)plan.  Again, others are not sogenerous.   When she needed anapartment, after a dispute with her slumlord landlord, we bought a condo forher to live in, charging her a modest rent.
Before you think I am a total patsy, that condo, which cost$38,000, is now worth $150,000 and was paid-off a long time ago.  She continues to live there, paying thecondo fee and taxes, which is OK with us. Although increasingly, I am thinking that we are losing some potentialrental income on the place, and the overall amount is pretty staggering.
She is getting older and she said, at one time, that she wouldreturn to Mexico when she became infirm, and live with her children. She owns ahouse in Mexico, which she just deeded to her kids. Not in some slum, either,but in tony Cuernavaca, in a nice neighborhood.
Anyway, I get a call from one of her employers – one of thefew who declares her income.  She ishere legally, of course, on a green card, and she now qualifies for SocialSecurity and Medicare.  The 401(k),which ended up totaling about $7000, is long gone.  Once she realized she could cash it in, she did, no doubt to sendmoney back to her family, as well as pay off her staggering VISA bill.  She is not good with money.
Her employer arranged to get her Social Security and Medicare,and is now trying to get her SSI – Supplemental Income, which is a form ofwelfare for the elderly.  I have mixedfeelings about this.  If you are one ofthe legions of immigrant-haters, you might be thinking that it is time for thislady to go back to Mexico, rather than continue to live here on the governmentdole.  But of course, Social Security isan entitlement, and since she paid into the system (thanks mostly to mydeclaring her income - still sure that having immigrants work under the table is a bad thing?) she gets paid back – even if she moves back to Mexico.
What is starting to gall me, however, is how she continuallyputs herself in peril and then asks others to bail her out.  This is no doubt because that is how peopleare raised in Mexico.  You want ajob?  Ask the government.  You want a house?  Ask the government.  Youwant food?  Ask the government.
Dependency and learned helplessness is ingrainedearly on.  So it is no surprise that sheacts this way, as it works out for her, pretty well, and she ends up betteroff, at least in her mind, than by taking care of herself.
A friend of mine, who is a Cuban-American (or just plainAmerican, if you don’t go in for hyphenation) is bi-lingual and works with thechurch to help many immigrants with various legal and other problems.   He helps them to close on the trailers theybuy, for example, in some of the poorer parts of our town.  They pay cash for these trailers, oftentrying to show up with wads of $20 bills at closing – many of which areforgeries that check-cashing stores hand out.  He takes them to the big, scary bank, to get a cashier’s check for theclosing.  It is a simple thing, but theyclaim they cannot do it, and they play the passive victim and hope the churchor someone helps them out.
Myself, I was never comfortable throwing my fates to the higherauthorities and hoping they would have pity on me.  Why?  Because people arenot trustworthy, and they are inconsistent and arbitrary.  In many cases, if you do not appear victimenough, you don’t get the swag others get. And even in systems that are supposed to be quantified andnon-arbitrary, this is often true.
And in arbitrary systems, like families, it is evenworse.   My brothers were always subjectof concern to my parents.  One was sentto a psychologist, as he was tagged as being “troubled” early on.  The other was pushed to go to law school,with the admonition, “We’ll pay your way, if you want to go!”   When I asked, “What about me?” theyreplied, “You’re OK, you can take care of yourself!”
And so I muddled on, without child psychologists, andfinding a way to work my way through law school.   Perhaps the expectation that “you can take care of yourself”became a self-fulfilling prophesy.  When you are told you can do something, you often can.

It was like my time with General Motors.  A wet-behind-the-ears pothead of 18, I wasthrust into a busy and dangerous factory, handed a clipboard, and told tomanage a crew of 10 men.    No one askedme if I could do it.  They told me to,and that was that.  Expectations areeverything.
And perhaps that is what Romney was trying to get at.   When we tell people they are victims andthat their only recourse is government assistance, well, they tend to seekassistance from the government.
And the victim mentality – and the desire to “help” otherswho may not be in need – is rampant.  You all remember that lady who was a bus monitor who cried on a YouTubevideo, after some kids teased her.  Weall felt sorry for her – heck, I did. After all, we have all been teased at one time or another, maybe on theschool bus, and know how humiliating and painful that can be, even if you arean adult.  
So people opened their pocketbooks and sent her money.  $800,000 later, she retired as a busmonitor.  I am not saying she wasn’t avictim (although some would argue that her job was not to cry, but to knockheads together) but $800,000 for crying on a bus?  That is a bit out of line. I wish her well, and hope she rubs those kids' nose in her eight-hundredgrand.  But I don’t think it is quite inproportion.
She was successful (and not by her design, but by virtue ofa YouTube video) of being portrayed as a victim.  If it were me in that situation, people would laugh and say, “abunch of kids?  You’re a big guy!  Knock their heads together!”  But of course, if I did, I would be accusedof “child abuse” as back-slapping a kid is now considered to be on a par withleaving them chained up in the basement. So either way, I would lose, which is why I would never be a busmonitor, teacher, or any other job like that – the kids have you by the shorthairs, as they are the victims in our society.
I suspect in a Mormon household, kids taste the back ofMitt’s hand on occasion, which is why they are so well-behaved.  But that is mere speculation on my part.
But this rambling diatribe illustrates why it is so hard toput this issue into 100 words or less – and why Romney bungled it sobadly.  The victim mentality is adangerous trend.  It would not be so badif real victims (and by that, I mean real victims, not 10-year-anniversaryKatrina “victims”) were helped by our society.   But that is often not the case – people who don’t deserve orneed help end up living off the labor of others, while others in need end upwith nothing, as they don’t appear to be victims.
And again, if you tell people that if they look like victimsthey will get help, many will do just that. And if you tell people they can do OK by themselves, well, you’d besurprised how many “victims” become self-actualizing.
A recent ad on public radio in Western Virginia was for areading of a play at a local venue.  Itwas interesting, as they played an excerpt from this play.  The play was a re-write of the classic fableof the Ant and the Grasshopper.  Youremember the story – the Ant works all year long to put away food, while theGrasshopper goofs off and does nothing. Come winter, the Grasshopper demands his “fair share” of Ant’s food,even as he did nothing to contribute to it.
In a perverse twist on this tale, we are lead to believethat the Grasshopper “contributed” to Ant’s wealth by making things more jollyand cheerful with his antics. Grasshopper, we are told, is an artist and should be compensatedfor his efforts – and the amount to be compensated is not to be determined byAnt, but by some governmental art agency.
A scary thought.  Butof course, Public Radio does not have a liberal bias, and I know this, becausea soul-searching piece on NPR examined the issue in-depth and came to theconclusion that Public Radio is neutral in content.  Makes sense to me.
Ahh… but Public Radio! The only place where you can be a “victim” of a hurricane a decade afterit has flooded you out.  If it were upto the Left, Katrina “victims” and their descendents, would be eligible forvictim assistance into perpetuity.  Perhapswe should give them land and let them open casinos and sell tax-free gasolineand cigarettes?

$10,000 an Hour?

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Is this guy really worth $10,000 an hour?  Is this the best the GOP can do?


Mitt Romney, according to some sources, made $20 million last year.  $20,000,000 equates to $54,794.52 per day, or $1,611.60 anhour or $28.86 a minute.  That’s everyminute of every day.   Mitt Romney makesmore money per minute than the median American family makes per hour at $51,000per year ($26 per hour, roughly).
But it is worse that that. If we take this amount and divideit by 50 working weeks a year (most Americans get a paltry two weeks vacation ayear) and a 40 hour work-week (again, most Americans work more hours thanthat), his annual income equates to an hourly rate of $10,000 an hour. 
 In other words, hisincome is about 400 times the median family income in America.
Is this a lot of money? Yea, it is.  And since it is alllegally characterized as “investment income” and not wage income, he pays onlya 15% Capital Gains tax on it, not the ordinary income rates you and I pay –even though clearly he labored at Bain Capital to make that dough.
Is making a lot of money wrong in and of itself?  Perhaps not.  You invent a new smart phone, you make millions of dollars.  That is the incentive to invent.  You create a new restaurant chain, you makea ton of dough – you took risks, and you reap the rewards.
But Romney’s money is not from creating wealth, but fromdissipating it.  Bain Capital boughttroubled companies, loaded them up with debt, spun off any profitabledivisions, and then rewarded themselves with huge bonuses for showing paperprofits for a few years.  When it allpredictably (by design) comes apart, they stripped off the pension plan andfoisted that off on the U.S. Taxpayer, through the Pension Resolution TrustCorporation – and left the pensioners with 40 cents on the dollar.
And in many cases, if the company even emerged frombankruptcy, they ended up owning it – as debtor-in-possession.  
Oh, and all the people working at the company lost theirjobs or had their union agreements voided by bankruptcy courts.  Everyone lost except Bain, of course.
So, as an “average American” do you really think you have alot in common with Mitt Romney?  Do youreally think he has your best interests at heart?
Because if you do, you are deluding yourself.  It is long way from $10 an hour to $10,000an hour.