Europe's Leaders Have No Clue ... Government Mandated "Redistribution" Has Made Europe Weak ... Americans Take Heed

Europe is in recession and has been for a considerable period of time now. The future doesn't look bright either. More of the same, in other words.

So what do the politicians and pundits want do do?

Have more government spending, aka "stimulus." However, that's been tried for several decades now and has failed completely. Heavy government spending is exactly the wrong prescription for what ails Europe (us too) and will only prolong the agony of the citizenry.

What Europe needs instead, as does the U.S., is less government spending and more individual economic freedom and personal responsibility. To keep beating the government spending drum is to keep the economies of Europe from expanding. And economic expansion is the only sustainable way out of the financial mess they're made for themselves.

Here's the truth. Higher government spending equals higher taxation, which may be in the form of (1) increased taxes today, (2) increased borrowing today (leading to necessary interest and principal repayments in the future), (3) a weaker currency today as a result of more money being printed --- or some combination of all three "taxes."

In the end, one dollar of new government spending will always require at least one additional dollar in required taxes.

And higher taxes cause a reduction in economic growth unless those taxes are the result of increased economic growth. So the choice for society is to emphasize either redistribution which causes weak economic growth or market led economic growth by private sector entrepreneurs. In that regard, Europe chose the road to redistribution long ago.

Europe's Social Contract, Lying in Pieces should be a cautionary lesson for all Americans, including the "progressives" and redistributionists among us. That said, the real  solutions aren't the ones prescribed in the following editorial. In fact, more government "stimulus" will lead to even weaker economic performance. But let's look at what the article says, even though it's wrong:

Europe’s Social Contract, Lying in Pieces

A homeless woman in Athens. With millions in Greece and the rest of Europe facing long-term poverty, fringe movements are rising.

 

What began as a debt and currency crisis in the European Union risks becoming a crisis of liberal democracy itself. Four years of grinding austerity across much of the Continent has caused millions of middle- and working-class voters to lose faith in the ability of mainstream political parties to protect their basic interests. It would be a sad paradox if the European movement, conceived in the ruins of fascism and two world wars, and for decades democracy’s best advertisement to the Communist East, undermined its democratic achievements in pursuit of a perverse economic dogma.       

With few exceptions, Europe’s mainstream center-left parties, which long positioned themselves as defenders of society’s most vulnerable, are taking it in the teeth politically. The Democrats in Italy, the Socialists in France and Spain, and the Greek socialist party known as Pasok, having committed to many more years of cuts in social spending, are increasingly out of touch with the desperate situation of young people without job prospects, homeowners unable to keep up with their bills, and older workers facing long-term unemployment, later retirement ages and pension cutbacks.       

 

 

The victims are visible almost anywhere you go in Mediterranean Europe. You see shuttered groceries and clothing shops, abandoned restaurants, idled factories and half-built housing developments overgrown with weeds. Newspapers carry heartbreaking stories of families evicted from modest apartments, people losing their jobs and then their health benefits, young and not-so-young women turning to prostitution to make ends meet, even suicides by self-immolation.

 

Most people in Greece, Portugal and Spain personally know someone whose former middle-class life has been destroyed by the combined effects of recession and government austerity policies. In the midst of this destruction, many mainstream politicians still prefer to pretend that this is just a normal business-cycle downturn that will pass.

 

The European Union’s recent offer to let Spain, France and five other hard-pressed nations extend their budget-cutting deadlines is not nearly enough. These countries need to stimulate their economies, not merely slow down their economic contraction. . . .      

 

Perhaps it is not surprising that millions of disillusioned supporters of centrist parties now cast protest votes for populist fringe movements that echo popular anger even though they offer few practical policy alternatives. Movements as diverse as Greece’s neo-fascist Golden Dawn, Italy’s anarchist Five Star Movement, France’s anti-Arab National Front and Britain’s Europhobic United Kingdom Independence Party have little in common ideologically. Their one shared feature is that they have little respect for the liberal democratic values that have defined and shaped postwar Europe. And growing electoral support is turning them into powerful players. . . .  

 

After World War II, Socialist and Christian Democratic parties jointly fashioned safety net programs that reduced poverty, enhanced living standards, reduced inequality and made European social policy the envy of much of the developed world. That social contract now appears to be shredded."

       

Summing Up

Europe has run out of time, and its socialistic economy has become uncompetitive in the world.

The sad truth is that Europe's "social contract now appears to be shredded" because its redistributionist programs and policies have over time run its economy into the ground. As a result, Europe is now unable to manage its affairs in a fiscally sound manner while creating economic growth and private sector jobs. The fat lady is singing while its economy continues to shrink.
 

Europe's lessons for us are many, and the fixes are possible, but they're not the ones generally offered by the Europeans, either government officials, pundits or the electorate. As a result, they're likely headed toward economic oblivion and irrelevancy in the world, even though they don't yet know what they've done to themselves. It's not a pretty picture.

 

When economies contract over time and more government spending is always the prescribed 'medicine' used to fix those ailing economies, more long term weakness occurs. A vicious downward cycle is the inevitable result.

 

So after more than six decades of the post World War II grand social-democratic experiment, Europe has run out of time. Since something can't go on forever, it won't.

 

But the culture apparently won't allow serious and permanent change from a government run to an individual self reliant economic model based on private sector led risk taking initiatives, innovation and entrepreneurialism.

 

Thus, Europe is failing right before our eyes. I only wish our politicians and fellow citizens would take heed while there's still plenty of time to do so.

 

That's my take.

 

Thanks. Bob.

Looks Are Deceiving ... The Story Behind the Story ... The Financially Secure Old versus the Financially Insecure Young

Overall, our economy is recovering, albeit slowly. Unemployment remains unacceptably high, and government debt and unfunded pensions, Social Security, Medicare and ObamaCare obligations are at historic and unaffordable levels as well.

But that doesn't begin to capture the unfairness involving the growing financial conflict between America's old and young.

Because if we take the time to look below the surface of our recovering American economic situation, we'll see a very troubling picture.  It's about what government benefits for the old are doing to the future opportunites of our young. And in my opinion, it's time we put the issue squarely on the table and out in the bright sunshine.

In other words, the unintentional but very real intergenerational conflict where the oldsters are taking advantage of the youngsters must not be ignored any longer. Let's look directly at entitlements, the effect of the housing bubble and future financing burdens being placed on the young folks. It's not fair.

The young pay for the old. That's the way our entitlements funding works. The generation at work pays for the prior generations that are retired. Pass it on, in other words. At least that's the theory and practice of funding entitlements in America until now --- when baby boomers, early retirees, generous guaranteed benefits and a declining workforce are all contributing to the financial mess in America.

As a result, government spending has grown and the economy grows at a slower pace due to the shrinkage of the private sector necessitated by the growth in the government. It's not a pretty picture, and what we're doing to the younger folks among us needs to be changed. It's not only unfair. It's also unaffordable and making a slow growing economy even slower. That means fewer jobs, less income and so forth. A vicious cycle, to be sure.

 Younger Households Are Slower to Make Gains in Net Worth clearly illustrates the dismal developing intergenerational story. The charts accompanying the article are especially revealing:

"THE total wealth of American households has recovered from the financial crisis and Great Recession, according to the Federal Reserve Board. But that recovery has not been enough to keep up with inflation, and many Americans, particularly younger adults who took on heavy debt to acquire homes before the housing bubble collapsed, are lagging.

Multimedia

Graphic

Off the Charts: The Old Get Richer, but Not the Young

The Fed said last week that household wealth rose by $3 trillion in the first quarter, to $70.3 trillion. It was the first time the total exceeded the $68.1 trillion total posted in the third quarter of 2007, before the recession began, and was the largest quarterly increase since 1999, when the stock market was rising rapidly.

 

In the first quarter, a third of the gain in wealth came directly from rising values of corporate stocks owned by households. That was a little more than the gain attributed to rising real estate values.

 

The Federal Reserve Bank of St. Louis pointed out that there are more households now than there were in 2007, and that there has been inflation as well. As can be seen in an accompanying chart, the average household wealth at the end of the quarter was $613,635, a figure that is 11 percent below the peak of $689,996 (in 2013 dollars) set in the first quarter of 2007.

 

Those averages are deceptive, in that they are raised by the high wealth of a relatively small number of households. A very different picture emerges from looking at the median — the level at which half the households are richer and half poorer. That statistic can be calculated from the Fed’s triennial survey of consumer finances. In the studies conducted in the 1990s, the median net wealth was about one-quarter of the average. In the 2000s, the median fell to about one-fifth of the average, and in 2010, it was down to about one-sixth of the average.

 

During the housing boom, said William R. Emmons, the chief economist of the Center for Household Financial Stability at the Federal Reserve Bank of St. Louis, “exactly the people you would think need to act conservatively were doing the opposite.” Homeownership rates, and mortgage debt levels, rose for younger households, as well as for less educated and minority ones. Those groups suffered more during the crisis, he said, and have been slower to recover.

 

Mr. Emmons compiled average wealth figures for different groups from the triennial surveys, and estimated how they have changed since the 2010 survey. . . . While all age groups have yet to recover to their 2007 wealth, when adjusted for inflation, older households are down just 3 percent on average, while those headed by middle-age people are down about 10 percent. But the decline is nearly 40 percent for the younger group.       

 

During the housing boom, households ended up with more of their wealth in real estate than before, and mortgage debt rose to record levels relative to the size of the economy. The proportion of wealth in homes is now back to close to the level of the 1990s, but the debt levels remain high by historical standards."

 

Summing Up

 

The long lasting effects of the housing bubble on the young are tremendously negative and will be for years to come.

 

The American dream has turned into a nightmare for far too many Americans, and especially the younger among us.

 

If it's true that the truth shall set us free, and I believe it is, then taking a hard look at what government subsidies and programs are doing to the chances for younger Americans to have the same opportunities that prior generations, including mine, have enjoyed is a fundamental necessity.

 

As is understanding that the benefits going to the oldsters in the form or retirement income and health care are not "investments" that will make the future brighter for younger Americans.

 

They will only burden them further.

 

Only worse.

 

That's my take.

 

Thanks. Bob.

Why the U.S. Economy Could Be in a Long Term Slow-Go Mode ... It's Too Hard to Do Business Here ... IT'S THE GOVERNMENT, STUPID!

{NOTE: I'm a long term optimist about the U.S. and our economy's ability to grow. Risk taking entrepreneurs operating in a market based economy will assure us of that future. But we definitely need less government and more personal freedoms, including the freedom to fail.

By  first halting, and then reversing, the now 80+ years movement in America toward redistributionist socialism, the future can and will be a bright one indeed.

But we have to get started and to do that, we have to agree we have a problem of too much elitist government and therefore too much government spending. That, of course, means too much in taxes paid and too much borrowing at all levels of government, which are both harmful to our citizens' personal freedoms, well being, and long term prosperity.}

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With all that said, let's discuss today's current situation.

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Our economy continues to struggle. Stimulus spending programs, tax cuts, sequester centered spending cuts, tax increases on payrolls and efforts at making the "rich" pay their "fair share' (whatever this is, other than more) have all been tried as fixes. And they've all failed.

Yet our economy is still stubbornly weak. So what's the problem? Too much government and too litle private sector freedom and risk taking, in a nutshell. Government spending and taxes go together and private sector investment and economic growth go together. When government spends more, it takes more from the private sector.

In addition to less private sector investment and entrepreneurialism, more government spending creates an environment where non-work is often more "profitable" than work.

The "progressive" playbook of taking and redistributing works for some period of time in a strong and growing economy. But after the bubble has burst, it kills any propects of strong economic activity when there's less to redistribute and less left for private individuals to invest.

Stated another way, the economy now is pretty much like us trying to tread water indefinitely with a weight on our back. We can continue to stay afloat for a period of time, but at some point exhaustion sets in and we have to resume swimming, assuming we don't want to drown. Getting at least some of that heavy "redistribution" weight off ALL our backs would be the first smart thing to do, but that's not the way the "progressives" govern. So for now we're stuck.

Economies trying to get unstuck and resume strong growth are like swimmers treading water. When contraction sets in, politicians try to stimulate the economy and get it growing again. Too often they do that by raising taxes (on current taxpayers) or borrowing money (for both current and future taxpayers to repay) to "stimulate" the economy. Then when that doesn't work as intended, they try even more of the same. Nothing improves. In fact, things get worse.

That's pretty much where the "progressives" find themselves today and therefore We the People find ourselves as well. Treading water in what has been for far too long a contracting economy when compared to its potential for growth. The more government spends to soften the blow, the longer it takes for the U.S. economy to resume swimming at its previously normal pace. The "new normal" has set in and it's not a normal we want to leave to our kids and grandkids. The "old normal" works much better.

How America Lost Its Way has the gory story:

The decline of America's institutions, and the related rise in red tape that hinders business, may spell the nation's economic doom. Harvard's Niall Ferguson talks to WSJ's Charles Forelle about the theory outlined in his new book "The Great Degeneration."

"Not everyone is an entrepreneur. Still, everyone should try—if only once—to start a business. After all, it is small and medium enterprises that are the key to job creation. There is also something uniquely educational about sitting at the desk where the buck stops, in a dreary office you've just rented, working day and night with a handful of employees just to break even.

As an academic, I'm just an amateur capitalist. Still, over the past 15 years I've started small ventures in both the U.S. and the U.K. In the process I've learned something surprising: It's much easier to do in the U.K. There seemed to be much more regulation in the U.S., not least the headache of sorting out health insurance for my few employees. And there were certainly more billable hours from lawyers.

By the Numbers

• 433: Total number of days it takes in the U.S. to start a business, register a property, pay taxes, get an import and export license and enforce a contract
• 368: Total number of days it took to do the same in 2006
• 7: U.S. ranking, out of 144 countries, on the World Economic Forum's 2012-2013 Global Competitiveness Index
• 1: U.S. ranking on the 2008-2009 Global Competitiveness Index
• 33: U.S. ranking for its legal system and property rights in 2010 on the Fraser Institute's Economic Freedom index, out of 144 countries
• 9: U.S. ranking for its legal system and property rights in 2000

Sources: 'Doing Business'; World Economic Forum; Fraser Institute

This set me thinking. We are assured by vociferous economists that economic growth would be higher in the U.S. and unemployment lower if only the government would run even bigger deficits and/or the Fed would print even more money. But what if the difficulty lies elsewhere, in problems that no amount of fiscal or monetary stimulus can overcome?

Nearly all development economists agree that good institutions—legislatures, courts, administrative agencies—are crucial. When poor countries improve their institutions, economic growth soon accelerates. But what about rich countries? If poor countries can get rich by improving their institutions, is it not possible that rich countries can get poor by allowing their institutions to degenerate? I want to suggest that it is. . . .

Seven years of data suggest that most of the world's countries are successfully making it easier to do business: The total number of days it takes to carry out the seven procedures has come down, in some cases very substantially. In only around 20 countries has the total duration of dealing with "red tape" gone up. The sixth-worst case is none other than the U.S., where the total number of days has increased by 18% to 433. Other members of the bottom 10, using this metric, are Zimbabwe, Burundi and Yemen (though their absolute numbers are of course much higher).

Why is it getting harder to do business in America? Part of the answer is excessively complex legislation. A prime example is the 848-page Wall Street Reform and Consumer Protection Act of July 2010 (otherwise known as the Dodd-Frank Act), which, among other things, required that regulators create 243 rules, conduct 67 studies and issue 22 periodic reports. Comparable in its complexity is the Patient Protection and Affordable Care Act (906 pages), which is also in the process of spawning thousands of pages of regulation. You don't have to be opposed to tighter financial regulation or universal health care to recognize that something is wrong with laws so elaborate that almost no one affected has the time or the will to read them.

 

 

NOW READ THIS: A Senate aide pushes a stack of documents bound in red tape. They were used as a prop during a debate on the budget on March 22.

Who benefits from the growth of complex and cumbersome regulation? The answer is: lawyers, not forgetting lobbyists and compliance departments. For complexity is not the friend of the little man. It is the friend of the deep pocket. It is the friend of cronyism. . . .

What is the process at work here? Perhaps this is a victory from beyond the grave for classical Western political theory. Republics, after all, were regarded by most ancient political philosophers as condemned to decadence, or to imperial corruption. This was the lesson of Rome. Democracy was always likely to give way to oligarchy or tyranny. This was the lesson of the French Revolution. The late Mancur Olson had a modern version of such cyclical models, arguing that all political systems were bound to become the captives, over time, of special interests. . . .

 

Whatever the root causes of the deterioration of American institutions, smart people are starting to notice it. Last year Michael Porter of Harvard Business School published a report based on a large-scale survey of HBS alumni. Among the questions he asked was where the U.S. was "falling behind" relative to other countries. The top three lagging indicators named were: the effectiveness of the political system, the K-12 education system and the complexity of the tax code. Regulation came sixth, efficiency of the legal framework eighth.

Asked to name "the most problematic factors for doing business" in the U.S., respondents to the WEF's most recent Executive Opinion Survey put "inefficient government bureaucracy" at the top, followed by tax rates and tax regulations.

All this should not be interpreted as yet another prophecy of the imminent decline and fall of the U.S., however. There is some light in the gloom. According to the most recent United Nations projections, the share of the U.S. population that is over 65 will reach 25% only at the very end of this century. Japan has already passed that milestone; Germany will be next. By midcentury, both countries will have around a third of their population age 65 or older.

More imminently, a revolution in the extraction of shale gas and tight oil, via hydraulic fracking, is transforming the U.S. from energy dependence to independence. Not only could the U.S., at least for a time, re-emerge as the world's biggest oil producer; the lower electricity costs resulting from the fossil-fuel boom are already triggering a revival of U.S. manufacturing in the Southeast and elsewhere.

In a functioning federal system, the pace of institutional degeneration is not uniform. America's four "growth corridors"—the Great Plains, the Gulf Coast, the Intermountain West and the Southeast—are growing not just because they have natural resources but also because state governments in those regions are significantly more friendly to business. There are already heartening signs of a great regeneration in states like Texas and North Dakota.

"In America you have a right to be stupid—if you want to be." Secretary of State John Kerry made that remark off the cuff in February, speaking to a group of students in Berlin. It is not a right the founding fathers felt they needed explicitly to enshrine. But it has always been there, and America's leaders have frequently been willing to exercise it.

Yes, we Americans have the right to be stupid if we want to be. We can carry on pretending that our economic problems can be solved with the help of yet more fiscal stimulus or quantitative easing. Or we can face up to the institutional impediments to growth I have described here.

Not many economists talk about them, it's true. But that's because not many economists run businesses."

 

Summing Up

We have many things going for us, but the government is the biggest thing holding us back

 

That said, and as always, America's best days lie ahead. But how far ahead is the relevant question to be asked and answered.

To get to that better future which awaits us, we have to start heading in the right direction, and that means limiting government spending. Only by doing that will we will be able to limit taxes and encourage the needed burst of entrepreneurialism and private sector investment to make America's economy perform up to its potential.

 

As it is, we have huge structural problems which won't be solved with the "tried-and-true" political short term fixes. We've finally reached the tipping point.

Those "tried-and-true-progressive-redistributionist" remedies aren't working this time, and they won't, simply because our fundamental economic problems aren't cyclical -- they're structural.

 

More government equals less freedom. Less freedom equals less risk taking and private sector growth. Less private sector growth leads to fewer jobs, less income and a growing national debt burden.

 

That leads all us directly back to the "progressive" playbook calling for more government "assistance." That only makes us weaker.
 

Let's reverse  course.

 

Thanks. Bob.

Happy Father's Day

Happy Father's Day to all the fellow Dads out there.

And if you want to take advantage of "our day" and act or even genuinely feel sorry for yourself or even neglected, here's your chance to do so. The facts about Father's Day gifting presented below can be used for some self pity, although I doubt if they will be enough to get any sympathy from our children or spouses.

But what the heck, it's our day, so here goes with the self pity routine. It's worth a shot.

And let's each resolve to do "whatever it takes" next year to break the negative four year losing streak we're on with respect to gifts received. Mom shouldn't win all the time. Or come to think of it, maybe she should.

Americans Spend 41% More on Mom Than Dad presents the totally unsurprising details:

"41%: How much more on average Americans planned to spend on Mother’s Day compared to Father’s Day.

It must have been a bad year for Dads. For the first time in four years, the gap between what Americans plan to spend on Father’s Day and what they plan to spend on Mother’s Day widened.

People always spend more on Mom than they do on Dad. This year on average Americans said they planned to spend about $169 on Mother’s Day compared to about $120 for Father’s Day, according to the National Retail Federation. But this year the disparity is the biggest it has been since the depths of the recession in 2008. While people boosted spending plans for Mom by 11%, the money expected to be shelled out for Dad rose a measly 2.3%.

Granted more people celebrate Mother’s Day than Father’s Day. Some 92% of survey respondents planned to buy for a special lady, compared to about 87% who were spending money for a father. But those averages for planned spending are only among those expecting to take part in the holiday.

Of course, Mom probably does deserve some premium. There is the whole pregnancy and childbirth thing, after all. Mothers also spend much more time on child-care. Even when both parents work full time, 81% of mothers are taking care of kids on an average weekday compared to 59% of fathers.

For their part, fathers do spend more time at work, but they also spend more time in leisure activities (such as watching TV, playing games, socializing and exercising) than mothers — 28 hours compared to 25.

But leisure is all relative. Fathers get three more leisure hours a week than mothers, but they get nine fewer hours than childless men. So Dad may not care that you’re spending less money on him, as long as you leave him alone for a couple of hours."

Summing Up

Just kidding about the sympathy stuff.

Happy Father's Day.

Thanks. Bob.

Government "Help" Facilitates Middle Class "Learned Helplessness"

Throughout my life of nearly seventy years, government at all levels has grown in its influence and invasiveness. America has increasingly become a cradle to grave government dominated society.

As a result, that's made our country weaker and our people less self reliant and free to choose.

We're familiar with the negatives of the hand out versus the positives associated with the hand up approach to helping people.

And we all know too that 'conservatives' are heard to complain about government freebies which often work to encourage non-work among the recipients of those goodies. There's truth to all that.

So why do we choose more government? Well, the fact is that most of us tend to choose working only when it's more attractive for us to do so compared to the relative attractiveness of not working. That's just human nature --- at work. So if we make it "easier" to choose not to work, that's what we'll do. Not take "bad" jobs, work less, save less, retire early and so forth.

But my problem is that government is unintentionally fostering "learned helplessness" among the majority of Americans with programs such as underfunded public sector pensions, Social Security and Medicare promises throughout "middle class" America.

So let's discuss briefly our growing dependence and underfunding of K-12 schools, college loans, Social Security, Medicare and now ObamaCare. What role should government play in our lives? And how much personal responsibility should future Americans assume for their financial health and "general welfare?" Don't we need to have a national debate about the long term nature of these programs and their effect on the long term well being of We the People as a whole?

I think we do. Otherwise we'll never come to recognize the simple fact that for each dollar of government deficits incurred by the taxpayers of today, there's an inevitable tax increase to be paid down the road by future taxpayers, including our kids and grandkids. In other words, deficits today equal tax increases tomorrow, assuming those deficits aren't related to investments creating future economic growth.

And the deficit and unfunded debt creating Social Security, Medicare and ObamaCare payments of today won't lead to future economic growth of tomorrow. They'll have just the opposite effect, in fact.

What brings this government dependency issue front and center for me at this time is the realization that Social Security is now a must and not a supplemental benefit for most Americans. And the realization that if we reduce the benefits anytime soon, we'd do great financial harm to the vast majority of our fellow Americans, since far too many of us have become virtually totally dependent on Social Security for our retirement income. It wasn't suppoed to be that way, but that's the way it's worked out.

But what about the future? Do we want to encourage and perpetuate this cycle of government dependence indefinitely and as a way of life for future generations? Or stated another way, do we want government to have vast power and control over our individual lives and those of our kids and grandkids?

In other words, won't we choose to trust ourselves to pick the schools our children attend (with vouchers, for example), decide how to invest our money for our retirement years (with individuals and not government deciding how to invest our and our employer's current payroll deductions and Social Security 'contributions") and empower individuals to select the amount and kind of medical care that we determine is best for ourselves and our families?

Or have we arrived at such a state of "learned helplessness" that we're willing to cede to the government the control of those matters? And even if we do, are we willing to have our kids and grandkids paying to fund the benefits to us that we didn't fully fund ourselves?

The truth is that the taxes we've been willing to pay have long been insufficient to pay for the American K-12 schools and colleges (including the public sector pension promises that are underfunded). And the underfunded amount is overwhelming for Social Security and Medicare promised benefits we've promised to ourselves, even if we set aside ObamaCare for now. And you can be sure that the poorly named "Affordable Care Act," aka ObamaCare, will be a much more costly proposition than we're being led to believe, too. Yes, we've run up quite a bill for future generations to pay. Why don't we stop?

You see, the simple fact is that in the end, somebody has to pay to fund the promises we make to ourselves but don't fund fully during our working years. That means we're sticking our kids and grandkids with the bills coming due down the road. And we're giving the current government knows best gang control over that future instead of preserving those decisions for future generations. That's what debt does, recognized or not.

But for the Grace of Social Security serves as an unintended advocate for this aforementioned learned helplessness approach for We the People and granting unlimited power to the government elitists to take care of "the helpless" as only government 'do-gooders' can do. Read on and see if you agree with me:

Protesters on December 10, 2012 in Doral, Florida.

"Back in the 1980s and 1990s, when it was still possible to believe that steady investments in 401(k) plans would lead to a comfortable retirement, the notion took hold that the best way to pay for old age was to leave your tax-deferred plan untouched for as long as possible, allowing it to grow into a formidable nest egg.

It still makes sense to save as much as you can during your work life. But the idea that you should hold off breaking into your account even after you’re retired no longer makes sense for most people, if it ever did. 401(k)s have largely failed to generate sums anywhere near sufficient for secure retirements. Long stretches of wage stagnation, high unemployment and widespread underemployment have made it impossible for many people to save for tomorrow while surviving today, and serial stock market busts, repeated financial crises, high fees and prolonged low interest rates have devastated what savings many people had.

Today, less than half of households aged 55 to 64 have retirement savings, and of them, half have less than $120,000.

The reality of dismally low savings has turned conventional retirement advice on its head – and, in the process, highlighted the vital importance of Social Security.

A recent research paper from the Center for Retirement Research at Boston College shows that, today, the best deal for many people with modest 401(k)s is to live off those low balances in the early years of retirement and to delay claiming Social Security. That’s because monthly Social Security benefits are higher the later benefits are claimed.

You get bigger benefits at your full retirement age — 66 for people born from 1943 to 1954, rising to 67 for people born in 1960 or later — than you do if you claim them early.

In addition, for each year you delay taking benefits beyond your full retirement age, up to age 70, you earn a bonus.

Monthly benefits are 8 percent higher if claimed at age 67, rather than age 66, and 32 percent higher if claimed at 70. For example, if your monthly benefit would be $2,000 a month if claimed at 66, it would be $2,160 at 67 and $2,640 at 70.

That’s an attractive return in any case, and especially now, when interest rates are at rock bottom.

What is truly stunning, however, is that retirement experts are saying that the best use of modest retirement sums is to spend them in the near term, in effect buying time for one’s Social Security benefit to grow.

There is a larger lesson in that: If Social Security is strategically important for those with 401(k)s, it is obviously indispensable for the majority who have little or no retirement savings. Benefits need to be preserved and enhanced, not cut."

Summing Up

The long term solution must be a choice between dramatically higher taxes during our working years or the assumption of greater personal responsibility for our financial retirement needs.

If we choose the dramatically increased taxes route, we're admitting that we want more government in our lives and that government bureaucrats will do a better job investing our MOM than we will.

Either that or we're willing to burden future generations with paying for the promises we've made to ourselves in order to fund our retirement years.

I strongly believe this prevailing attitude and approach must change and that we must choose the road leading to greater personal responsibility and control of our own lives and well being.

We have too much government "help" already.

What do you say?

Thanks. Bob.

What Schools Don't Teach Our Children About PERSONAL FINANCE ... It Matters A WHOLE LOT

Here's one of my favorites --- With all thy getting, get understanding.

In other words, work hard to know both the what and why of things.

That said, it's also true that many times understanding that we don't know what we need to know is much more important than knowing what we do know. And not knowing that we don't know what we don't know is a real problem. Personal financial knowledge in our younger years is one of those troublesome "unknown unknowns."

To sum it all up in admittedly awkward fashion, all too often in our own personal financial decisions we don't know what we don't know but need to know and would benefit greatly by knowing, if you know what I mean.

We go to school from K-12 and then many of us attend and graduate from technical school and/or college as well. In the process, years go by and we begin taking responsibility for our own financial decisions and affairs. In turn, those "financially uninformed" decisions can and do impact us, favorably or unfavorably, for the rest of our lives.

Things such as credit cards, student loans, car loans, home purchases, home mortgages, home equity loans, 401(k) choices, including whether to contribute, how much and how to invest those contributions and so forth, all come to mind.

So how much relevant personal financial "education" are we getting from our schools as we're being taught algebra, calculus, geometry and trigonometry? Zip, zilch, nada.

And we're getting all this nothingness in a most important topic while the "government" spends approximately $12,000 annually during our K-12 years. Yet personal finance isn't taught. How ridiculous is that?

Why Teens Need to Learn About Personal Finance tells the story of the "missing education" that very much needs telling:

"Financial education needs to take place all the way from grade school through high school.

Grade schools are doing it right already. They teach kids about money and how to shop and make change, which is age appropriate. After fifth grade, however, personal finance is forgotten. Kids turn to algebra and geometry and never get back to money. That's a problem.

I've worked with 20-somethings in my area who are high-school graduates, and I was shocked at how little they knew about basic finances. They had credit cards but no idea how they worked. They didn't know about savings accounts, bank accounts or fees.

Many of these young adults have a lot of credit-card debt, but they don't understand that making just the minimum payment barely pays off the current charges, leaving the balance to keep growing. They don't know what a 401(k) is, and don't understand that taking advantage of a company match is basically like getting free money. They don't recognize that they need to start saving now.

My children's high school asked me to look over some of the books for a financial-literacy class. They were old-fashioned and not engaging. . . .

The class did address debt but not student loans, which may be the next mortgage meltdown. It is really important for teens to understand student debt, how it works, and how it can be paid off—and to understand these things before they go to college. If they really understood everything up front, they might choose a different school or be willing to compromise on their choice.

For parents—the topic of money is almost like sex—they never want to talk about it with their children. They may be uneducated themselves, or they may not want their kids knowing how much they make. But parents need to teach their children from a young age how to handle money.

Personal finance, like any skill or language, is easier to learn and internalize the younger a child learns it."

 

Summing Up

 

I know that personal finance wasn't taught when I attended school.

 

I also know that sometimes the school of hard knocks, aka personal painful experience, can be augmented in a meaningful and wonderful way by preparing our youngsters not to make the same money mistakes most of us have made. We learned but we learned late and paid far too much for the experience based financial lessons we received.

 

So just because we oldsters never learned about finance in school, that doesn't mean that we don't NOW know through experience that our education was missing in one very important respect --- that being a foundational understanding and appreciation of personal financial matters.

 

That's because we now know what we didn't know but now wish we would have known.

 

Because had we known way back then what we know now, many of us would be in much better position today to enjoy a comfortable, if not financially worry free, period of old age.

 

So why don't we give our kids and grandkids the opportunity that we never had? Even though they may not yet know what they don't know, we sure do.

 

That's my take.

 

Thanks. Bob.

We the People Like the Military and Hate the Congress

We the People have good judgment on the whole, and that's been confirmed in a new poll about how we feel about Congress these days.

Confidence in Congress lowest ever in Gallup poll has the story:

"Chalk up a very dubious distinction for Congress: Americans’ confidence in the institution has fallen to its lowest level ever.

That’s according to Gallup on Thursday, in a new poll ranking the combined House and Senate dead last on a list of societal institutions for the fourth year in a row.

Confidence in the legislative branch is at just 10%, down three percentage points from last year’s poll, Gallup said.

According to the polling organization: “The divided Congress, with Democrats controlling the Senate and Republicans the House, is likely part of the reason for the low levels of confidence rank-and-file Democrats and Republicans express, and is tied to Americans frustrations with Congress’ inability to get much done.”

A further factor that may be a wake-up call for legislators: the 10% level is not only the lowest on record for Congress, but for any institution. Gallup ranked 16 organizations in its newest poll. The military drew the most confidence from Americans, rising one percentage point to 76%.

The coming few months will be telling about whether Congress will be able to do anything to affect its negative rating. A major immigration overhaul backed by business and labor groups is being debated; lawmakers face a deadline for raising the U.S. debt ceiling; and comprehensive tax-reform bills may or may not make some headway.

In any case, Congress has a long climb back to the 41% confidence seen in the mid-1980s, or the 42% high point recorded by Gallup in 1973."

Summing Up

Well, maybe We the People are paying attention after all.

If so, that's a good thing. A very good thing, in fact.

If we lead, the politicians will follow. But first, we have to get mad as hell and take the lead.

It seems like that may be happening ---- finally.

Let's hope so.

Thanks. Bob.