Wednesday’s child is full of woe

I think most of us are familiar with the poem regarding the attributes of children born on each day of the week. Here is the poem for those who have not.

Monday’s child is fair of face,
Tuesday’s child is full of grace,
Wednesday’s child is full of woe,
Thursday’s child has far to go,
Friday’s child is loving and giving,
Saturday’s child must work for a living,
But the child that’s born on the Sabbath day,
Is fair and wise and good and gay.

As I sit here on a beautiful Wednesday afternoon, I am reminded how shortsighted we are, but especially our leaders. The trouble is we need leaders and wanna-be leaders to think longer term as very few problems can be solved short-term and some are growing in magnitude as we are doing precious little about them. So, by failing to do our job, we are creating more Wednesday’s children.

My greatest concern relates to how we are slow to fully address the impact of climate change on our planet. The World Economic Forum noted in their 2015 Global Risks Report that inaction on climate change is one of the two greatest risks to the planet over the next ten years.

Yet, we look to countries like Denmark who are now 100% powered by wind energy. Why? Their leaders understood it would take years to do this and needed buy-in from everyone, as the plan needed to be executed after some would leave office. Coupling that with the sense of urgency of a country beneath sea level, can spur folks to action.

In the US, we have made great strides, but we still have the heavy hand of the fossil fuel industry who has too great an influence on too many elected officials. This prevents them from looking at the real problems facing us. I wrote last time about the alleged misleading of shareholders by ExxonMobil on the impact of climate change on its business being investigated by the New York Attorney General. If found guilty, this would be a fraudulent crime.

Yet, the sister environmental issue is the declining availability of fresh water, which is the top issue of concern by the World Economic Forum. This concern predates and is beyond the Flint Water crisis, although that is important. We have increasing areas of drought which are exacerbated by climate change around the globe and in the US. In one of the great ironies, the Middle East is oil rich, but water poor. And, one of the greatest symbolisms of this concern is the religious leaders in Saudi Arabia allow their people to pray with sand and not waste water.

Another concern that will impact our children is leaving them with our debts. In the US, we have a $19 Trillion debt problem that seems to get forgotten about. This debt will increase even more with our aging population with fewer workers for each retiree. This is a key reason the labor participation rate has declined as we are aging with fewer workers. Yet, this is happening in other places at a greater pace causing problems in Greece, Spain, Japan, etc.

We cannot pay this debt down by ignoring it. And, we cannot cut expenditures enough, so we will need to look to higher taxes. With that said, the two leading GOP candidates tax plans will increase the debt by $12 Trillion and $3.7 Trillion over the next ten years. And, the leading GOP candidate said he will get rid of the debt in eight years, but we should be asking how when you will be increasing it by over 60%? The leading Democrat candidate’s tax plan will slightly decrease it by about $500 Billion over ten years, while the second place candidate will also increase taxes, but offer more benefits and services  (such as national healthcare) which will increase the debt as well. This is in the wrong direction – each candidate should have plan to significantly pay down the debt.

I recognize fully we have poverty issues, income inequality issues, terrorist issues and corruption issues. These must be dealt with. But, at least we are talking about these issues. We must address these other issues or our children will be screwed. It is that simple. And, they will be more than full of woe. They should be angry that we did not address our problems and left them holding the bag.

 

 

Wearing jeans and passing out ball caps doesn’t make you a common man

The two leading candidates for the Republican nomination like to hob knob with the common folk. To show they are one of them, Senator Ted Cruz is wearing jeans and shirt with no tie. Donald Trump likes to wear his ball cap and hand them out as souvenirs. Yet, there is a big snag in their efforts.

Both Cruz and Trump have put forth tax proposals that have significant tax cuts for the wealthy. And, to make matters worse, both tax plans would materially increase the deficit to the extent there are not enough spending cuts to reduce the deficit, per former Republican Senator Alan Simpson.

While the tax cut for the rich is vintage Republican fare, the fact that both proposals increase the deficit run counter to the Tea Party concerns over reducing the deficit and debt. In Cruz’ case, it is especially hypocritical as he personally shut down the government in October 2013 and we would have defaulted on our debt if it were not for ten female senators who told Cruz to get out of the pool. Cruz said he did not care as he wanted to prove a point about the deficit. Yet, his tax plan would materially increase the deficit.

I have often said any Tom, Dick or Harry can get elected saying they will cut taxes. But, we need better stewardship than that. We need to pay down our debt and spending cuts cannot do it alone. That was the conclusion reached by the Simpson-Bowles Deficit Reduction Plan.

One thing is for sure. Neither Cruz or Trump can claim common status by doing exactly what the Republican establishment tends to do – favor the wealthy. That is not quite the revolution their fans are likely hoping for. Plus, being poor stewards with our debt strikes me as salesmanship and not governance.

Fiscal FactChecker: 16 Budget Myths to Watch Out For in the 2016 Campaign

I have written several times that we need to do something about our debt crisis, as the problem is only going to get worse. I liken it to having a water problem in your house. If you don’t fix it now, it will get far worse later on.

In addition to The Concord Coalition who I have mentioned before, a sister nonpartisan group to their effort spawns from the Committee for Responsible Federal Budget called Fix the Debt. The Board of Directors of the Committee include some big names who served in various government, think-tank and business roles. The Fix the Debt group was founded by former Chief of Staff Erskine Bowles and former Senator Alan Simpson of the Simpson-Bowles Deficit Reduction Committee.

I will provide a link below, but wanted to summarize a piece called “Fiscal Fact Checker: 16 Budget Myths to Watch Out For in the 2016 Campaign” which is dated August 6, 2015. Those myths are:

Myths about the National Debt

  1. We can continue borrowing without consequences
  2. With Deficits falling, our debt problems are behind us (this is expected to reverse in 2015-16)
  3. There is no harm in waiting to solve our debt problems
  4. Deficit reduction is code for austerity, which will harm the economy

Myths about Taxes

  1. Tax cuts pay for themselves
  2. We can fix the debt solely by taxing the top 1%
  3. We can dramatically lower tax rates by closing a few egregious loopholes
  4. Any tax increases will cripple economic growth

Myths about Health Care and Social Security

  1. Medicare and Social Security are earned benefits and therefore should not be touched
  2. Repealing Obamacare will fix the debt
  3. The Health Care cost problem is solved
  4. Social Security’s shortfall can be closed simply by raising taxes on or means-testing benefits for the wealthy

Myths about easy fixes

  1. We can solve our debt situation by cutting waste, fraud, abuse, earmarks and /or foreign aid
  2. We can grow our way out of debt
  3. A Balanced Budget Amendment is all we need to fix the debt
  4. We can fix the debt solely by cutting welfare spending

In addition to the above, I wanted to reiterate two global trends that impact the US as well. First, per the World Health Organization, we are the most obese country in the world, as well as having the highest costing health care system in the world. The Affordable Care Act has helped, but we are over-tested, over-medicated and future train wrecks waiting to happen This will create continued cost pressures on Medicare, Medicaid and the subsidies under Obamacare.

Second, per the World Economic Forum, we are an aging population. We are not as bad off as places like Japan, Greece, Portugal, Spain, etc., but as we age cost pressures on Social Security and Medicare/ Medicaid will heighten. For people in their 60’s, the average cost of health care is roughly twice that of folks in their 30’s. The aging is actually hitting some of our states and municipalities with increased retirement liabilities relative to fewer workers being hired. Detroit, Stockton, and Birmingham have all filed for bankruptcy, with this being a contributing cause, plus states like Illinois, New Jersey, etc. are having significant retirement cost pressures.

Please check out these two websites and see who is involved in these nonpartisan efforts.

http://www.concordcoalition.org/

http://www.fixthedebt.org/

Also ask your Senators, Congressional representatives and Presidential candidates what they plan to do about this. Like climate change and the global water crisis, we can no longer wait on action.

That deficit thing is going to get worse

The Congressional Budget Office released its projections that say the decrease that has been occurring in the deficit is coming to an end. With the improving economy, sequestration cuts and not funding as many troops in the Middle East, the deficit has quietly been reduced to a less painful level, but we are still in a deficit position. The last time we had a surplus budget was when President Bill Clinton left office and before the President George W. Bush tax cuts that put us back into deficit.

The CBO anticipates the deficit to rise again this fiscal year and continue to rise. So, the debt will continue to climb and interest costs will become increasingly an important part of the budget. There is a group called The Concord Coalition (see link below) who advocates for addressing this ticking time bomb now. They have a bipartisan group of Board members and help frame a discussion balancing the spectrum of needed spending cuts and revenue increases.

The major parts of our budget that should get our attention are in five areas:

Expenditures: Social Security, Medicare/ Medicaid/ ACA, Defense

Revenues: Corporate Taxes and Individual Taxes

The other stuff is minor relative to these big items, but of course we need to address each and spend judiciously. There are ways to shave spending off each of these key expenditures, without being too detrimental to the underlying programs and needs. And, we could be more dramatic if we want to make significant cuts, but people need to know what they would be losing. We also need to recognize there are some areas, such as infrastructure investments, that need to be increased and funded.

Yet, we also need to reform our tax system to make it simpler for all and make it easier to repatriate some offshore corporate income which goes untaxed here. In my view, we also need to garner more revenue as we are one of the least taxed (relative to GDP) countries of the 33 member countries of the Paris based Organisation for Economic Cooperation and Development. So, we need to base our decisions off comparative information to other countries, as no one wants a tax increase, but that is something that should be considered.

Regardless of what we need to do to accomplish the task at hand, we need to move forward before the interest costs get too burdensome. Also, as we age as a country, our costs pressures will increase with healthcare and retirement costs. If we wait too long, the cuts will need to be more severe and more of us will be impacted. Learn what each candidate will do about these issues. They seem to be silent on these issues and that is not a good thing.

http://www.concordcoalition.org/

Don’t let Black Friday take you into the red and other savings ideas

In the US, the day after Thanksgiving is known as “Black Friday” which is the official launch of holiday shopping. Some even start on Thanksgiving, which is usurping the best family holiday in America, for people to spend money. If you are an American or know one, you know that Americans like to do two things more than anything else – be entertained and buy stuff.

I have written before about ways to save money, as we have too many folks who want yours. Let me use this Black Friday to rehash a few of them and speak to the holiday season where buying gifts is done in excess. If you follow a few of these, you will end up with more money to live better, have less stress, retire earlier, and be more in control of your life. In no particular order:

– you don’t need to participate in Black Friday. Trust me, the retailers will get desperate closer to Christmas and layer in discounts. You will also be less tempted to buy if you take your time.

– speak with your family and friends about gift giving. Maybe you could limit the giving to the kids or have a charity donation for adults donating a small sum to a favorite charity of the recipient.

– for year-round, do not play the lottery. I have written several posts on this, but my favorite line is from John Oliver who stated your chances of winning the lottery are the same as being struck by lightning while being bitten by a shark. Save the $10 a week and at year-end you will have $520 plus interest.

– for borrowing, tear up all credit cards but one or two. You do not need more than that. My wife and I get 3 to 5 offers a week for new cards. You get very popular when you manage your debt and save a lot of money.

– do not borrow from pay-day lenders. They are one step above leg-breakers and you will quickly spiral into a rabbit hole of debt with over a 1000% interest rate. I am not making this up. This is about the worst thing you could do if in trouble.

– be wary of credit consolidators. They are not all created equal, so do your homework. Also, there are a number of non-profit advisors who can help you consolidate or manage your debt.

– be wary of for-profit colleges which are 5 to 6 times the cost of community colleges. A rule of thumb, the bigger the celebrity advertising the college, the worse its record for graduating. These colleges prey on veterans, spend more on marketing than education and graduate less than 15% of their students.

– if you have no health coverage, sign up for the Affordable Care Act at http://www.healthcare.gov. Subsidies to pay for premiums are available up to $95,000 in income for a family of four, higher if a larger family and lower if smaller. Healthcare coverage will get you doing preventive medicine rather than reactive medicine and keep you from going bankrupt.

– if you work, save in your 401(k) plan or something similar. Using payroll deduction, it is like paying yourself first, especially when the employer will match your savings.

Finally, be wary of scammers. If it sounds too good to be true, it usually is. Many scammers prey on church and association leaders to get at others, prey on the elderly with confusion, and prey on everyone with fear (IRS scams, power shut off scams, computer repair scams, etc.). If someone offers you a potential high rate of return with no risk of loss, it is a scam.

If you do all of these things, great. If you know someone who would benefit from the advice of an old fart, please send them this link. Always remember, you do not have to buy anything except food, water, minimal clothing, transportation and shelter. The rest becomes wants and can be managed. Happy holidays.