Friday, June 26, 2015

A Lifetime as an American 'Privileged Character' ... Income Inequality and Debt ... Private vs. Public Sector 'Goodness' ... Consumption vs. Saving

As an American, I've enjoyed a privileged life filled with countless opportunities.

The privilege has consisted of being able to make my own way --- to be free to choose my own path and be free to determine the speed at which I travel down life's road. Allow me to expand on this true but often ignored simple fact of American life.

Income inequality is much discussed these days. So is whether the statement that 'All lives matter' is less accurate than 'Black lives matter.' And we also hear a great deal about the greedy private sector compared to the self proclaimed 'dedicated and patriotic servant leaders' of our nation's public sector.

In my view, income inequality is an inevitable and positive feature of living in a free society. To make the point, I'll relate a personal example of that 'unique American advantage of inequality.' The 'unique American advantage' stems from our living in a free society which promises and makes available abundant opportunities to one and all (as in all lives matter).

When I was a young boy, another boy lived briefly in our small Midwestern town one summer. He had the advantages of a refrigerator filled with Cokes, a full length pool table, and a basement in which he could entertain his often envious guests.

In comparison, at my house we drank Kool-Aid, had no pool table and our modest home was smaller than his basement.

But I was indeed raised as a child of privilege. My parents taught my brother and me by example that (except for the house and car) if we couldn't pay in full for something we wanted, we really didn't need it. It could wait. They also encouraged us to get a good education, save money and work hard. That we did. We were then and are now 'privileged characters.'

Here's the point --- with respect to the then much envied boy with the refrigerator full of Cokes, the beautiful pool table and big basement, he left town at summer's end and I can't even remember his name. But like me, he was a child of privilege too.

Americans indeed are 'privileged characters,' one and all. And all lives matter, despite what some 'leaders' want us to believe these days.

Hillary Clinton (of whom I'm no fan) was unfairly attacked the other day for saying that all lives matter. But she was right about that. And since all lives do matter, then the subsets of black lives, white lives, Hispanic lives, Asian lives, Gay lives, young lives, old lives and all other lives matter as well. What Hillary says frequently doesn't make sense to me, but it did this time. All means all. Got it?

Hillary undoubtedly grew up in a house of privileged characters, as do all Americans. In wealthy Winnetka, Illinois, my guess is that the Rodham family could afford Cokes, pool tables and nicely furnished basements.

But one thing that Hillary Clinton, Jeb Bush, and Barack Obama don't have are personal experiences in the private sector. They are all born and bred politicians who have lived off the hard work of the American taxpayers, many of whom they often choose to vilify. But as Americans, that's OK with me. That's their right.

In my family, Dad worked in the private sector as an hourly employee and charter member of the union's bargaining unit. He also worked occasionally as a bartender, played drums in a band, umpired and refereed sporting events, and volunteered as a coach of both youth and adult sports teams. Through his example, he taught me a great deal about a life well lived.

During college summer breaks, I was lucky enough to get a job at the distillery where Dad worked. As an adult, my career began as a member of management representing the company in labor negotiations. In fact, I worked my entire career in the private sector and became what Hillary calls a 'greedy fat cat.' Maybe she should take the time to look in the mirror.

Hillary and others of the 'privileged' political class claim that people like me are out of touch and condescending toward those less privileged economically. Of course, she doesn't know that. How could she? But that's part of her perceived 'job' as a Democratic politician. I get that, even though I think it's despicable. But I what I really don't get is why so many of our fellow Americans believe what she says about the evils of competition and the private sector.

Contrary to what Hillary says, I was taught that all Americans are privileged, and that the private sector is the source of our nation's prosperity and our citizens' world leading economic well being.

Now let's switch gears and look briefly at another glaring difference between us old fashioned types and today's big spending politicians as well as too many debt ridden American households.

When a reduction in consumption is a good thing has this to say:

"Articles (like) “U.S. Consumers Remain Cautious,” point out that consumption is two-thirds of our economy. Hence it's good to encourage spending. This is very short-range thinking. When people aren't consuming, they are saving. You can't simultaneously spend and save the same dollar.

National savings are a disgrace. The median savings for 55 years and older is only $33,000, according to the U.S. Government Accountability Office. After World War II, people saved about 10% of their after-tax income. Savings rates are now only 5%. Most of that 5% is from higher income people. We have to cut spending, hence consumption, by at least 5% as does the government or future generations will be unable to pay interest on the government debt, much less the principal. . . .

When I was young, our family had no credit cards and we were encouraged to save 10% of our income. Then, a very large percentage of people also benefited from their employer's defined benefit programs, i.e., pensions. Now, a better savings target is more like 15% due to the reduction of firms offering pensions. Instead of pensions, employers now offer defined contribution plans like a 401(k)— which only about half of the employees use. . . .

Our political system has fallen into the spend-it-while-you-got-it routine. Perhaps, it's even worse and should be stated as promise-it-now-because-we-can-borrow-more. All of this leaves future generations with a terrible burden just to pay the interest without hope of paying the principal. Our national debt is about $18 trillion, but we have over $200 trillion in unfunded promises. . . .

But there is no law that says that people have to be prepared to retire. Retirement planning is a do-it-yourself enterprise. People must look ahead at what retirement income they may need and how it will be offset with Social Security, pensions and withdrawals from savings that must stretch for decades.

So both individuals and politicians have to be thinking more about the long-term. Politicians have to bring their promises in line with future government income at the expense of fewer votes. As individuals we have to learn to be self-sufficient by compromising our consumption with some savings for the future.

Right now, both individuals and the government are way out of whack and are unwilling to make some short-term sacrifices so their future will be better."

Summing Up

When we were young, we often heard the following, "Who do you think you are --- a privileged character?"

Now I know the answer.

Indeed I was then a privileged character, I am now a privileged character, and as an American, I always will be a privileged character.

And it's always in the best interests of each privileged American character not to become an overly indebted one.

That's my take.

Thanks. Bob.

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