Wednesday, July 16, 2014

How To Get Rich--Gradually

Nancy and I live in an “upscale” retirement community, i.e., a community that is somewhat more luxurious than most. As one might imagine, it is populated by people with more money than the general American population. As the national economy languishes in the sluggish recovery, the people here have noticed their net worth increasing steadily. Why is this? Why should rich people be getting richer while the average American is struggling economically? (There is something wrong with this scenario.) I will try to answer these questions in the following. But…for now, understand that the effect is basically because of faulty monetary and fiscal policies of our federal government.

Elderly people have always controlled an inordinate amount of the nation’s wealth; but the extent to which they are doing so at this time is ridiculous! Nevertheless, these people had nothing to do with the policies that caused this maldistribution of money. All they have done is to follow the admonitions of common sense personal money management, which I will outline below. These admonitions have been available to Americans for decades; and there is nothing new or innovative about them. Here is the clue to having more money as time goes on:

1)     Start early to save as much money as you can. Utilize individual retirement accounts (IRA’s) or 401(k) plans as recommended by a reliable financial manager. https://investor.vanguard.com/what-we-offer/iras/benefits-of-an-ira?WT.srch=1 Someone has said that the greatest miracle in the world is compound interest. For instance, $1000 invested at age 20 at 4% interest compounded monthly will amount to $156,978.54 at age 65!

2)     Arrange to have automatic payroll deductions made from your paycheck. After you get accustomed to these regular deductions and accommodate your standard of living to your resultant money income, you will never miss the deducted money.

3)     Carry no credit card balances; pay off your credit card completely every month. Credit card interest is very high—often about 18%/year. Remember, interest should be to collect, not to pay.

4)     Live as if you are poor. Do not indulge yourself in luxury items, e.g., extra houses, boats, expensive vacations. You do not need them.

5)     Stay away from the mall. There are too many temptations there. And…do not ever respond to e-mail solicitations to buy anything you have not requested. You do not need them if you have not asked for them.

6)     Borrow only for a house, an education, or for a modest business investment. If you are borrowing money for an education, be sure that the resultant education can be applied to making a reasonably sure income. Borrowing money to study anthropology, music, history, or Bible studies, will never result in enough income to justify the investment needed. Never borrow to buy a car—if you cannot pay cash for a car, you do not need that car. Buy a house rather than rent, and do not finance it for more than 15 years. Pay off that mortgage soon, as a priority. 

7)     Take a course in retirement planning at the local community college.

8)     Start saving money for your children’s education very early in their lives. Be careful about locking money into plans that will not allow flexibility in subsequent use. It is very worthwhile to maintain absolute flexibility in all money you save.

9)     When your children go to college, be sure that they declare a major by the end of their first year in school; and do not let them change after that. Changing majors will waste valuable investment in college classes. Do not let your children vibrate around taking college classes for fun. Be sure they mean business in school. In addition, do not finance a student who is making less than a 3.0 grade point average or who is taking less than 15 credit hours per term. Do not let them waste time in college. Explore educational opportunities for your children that are less expensive than state universities, e.g., online learning or community colleges.

10)  Avail yourself of the services of a reliable and reputable financial counselor early in your life. Do not go to a counselor who sells securities or insurance. Pay him up front for his advice, but do not buy anything from him. Make that clear before you do business with any counselor.

11)  Do not buy nursing home insurance. Insurance plans for that potential need will tie up your money so that it cannot be used for anything else in emergencies. If you happen to be one of the lucky persons who never need nursing home services, all the money you have saved will go to the insurance company.

I believe that if the government would taper off the printing of money to pump into the pockets of the wealthy through Federal Reserve Bank bond purchases and let up on regulations to businesses, then the poorer parts of our population would be able to catch up to the gains being made by the rich among us.

 

 

 

 

 

 

Sunday, June 29, 2014

The Middle-East Problem—A World War I Legacy

I have been reading a fascinating book, Catastrophe 1914—Europe Goes to War by Max Hastings. This accurate and complete account of the First World War is worth reading for anyone interested in its history; I strongly recommend it all my readers.

The Wall Street Journal has published online in its monthly update for June 2014 a series of events, economic effects, personalities, and much more that have become the legacy of that terrible war. Below I have copied one, short article from that collection of essays, because it has such importance to us, today, i.e., the legacy that war has had on our present day problems in the Middle East. These problems began and are still being aggravated by the British “Balfour Declaration” of 1917.

“On Nov. 2, 1917, British Foreign Secretary Arthur Balfour sent a letter to Baron Walter Rothschild, a leader of the British Jewish community. Published in the Times (of London) newspaper one week later, the letter said: ‘His Majesty’s government views with favor the establishment in Palestine of a national home for the Jewish people, and will use their best endeavors to facilitate the achievement of this object.’

“The manner in which the nascent Jewish state was created by the British has had far-reaching consequences.

 "Confronted with the collapse of the Ottoman Empire as a result of the war, Britain and France signed an agreement to divide up the territories. This deal contradicted promises to local Arabs of self-government should they successfully rebel against the Ottomans.

“Realizing that the U.S., which had recently entered the war, didn’t look kindly on colonial land grabs, the British made a commitment to support a Jewish homeland in Palestine, something for which leading Jewish groups had been campaigning for since the 1890’s. The British hoped the declaration would get American Jews to pressure their government to allow Britain to keep control of Palestine after the war, valuable to Britain because it could secure the east bank of the Suez Canal, a waterway of strategic importance to its empire.

“After the war, Jewish immigration proceeded apace. Land was a major bone of contention. Settlers bought it, sometimes from absentee landlords living in Syria or Lebanon liquidating foreign assets, sometimes from local Arabs. Many of these owners, according to the British high commissioner in Palestine, John Chancellor, were so mired in debt to moneylenders that they had little choice but to sell.

“The settlers, wanting to farm the land they bought, then relied on British authorities to evict Arab farmers who would not leave. Evictions produced resentment, then attacks. The settlers created their own militia; Arabs responded in kind.

 “By 1930, Chancellor was calling the Balfour Declaration ‘a colossal blunder’ as the British found themselves trying to keep the peace between two increasingly bellicose communities. Eventually an Arab revolt broke out in 1935, which persuaded the British to try to restrict Jewish immigration.

“The end result was a Jewish revolt, secretly backed by the French, which led directly to the foundation of the state of Israel in 1948, and numerous Arab attempts to destroy it thereafter. Much of the animosity that has roiled this region for almost a century can be traced back to the policy-making and colonial rivalry immediately after the end of World War I.”

 

 

 

 

Wednesday, June 25, 2014

America’s Political Positions—A Definition

                                                Conservatives

Conservatives are those among our populace who seek to retain the best parts of our governance that have worked well in the past. They are reluctant to change systems rapidly; and for that reason, they have been criticized for obstructing progress. It must be admitted that there is some truth to that criticism. However, it is true that conservatives are not opposed to changing situations and policies if the changes are well thought out and do not negate the time-honored, tried, and true policies of the past. Business men/women have predominantly been conservatives; and for that reason, they have controlled much of the wealth of the nation. (That phenomenon has been much over-stated by their political opponents on the left.) Conservatives are not averse to innovation. The innovation demonstrated by business operations have made America the most productive nation in the world.

The TEA Party
The TEA Party is a spontaneous uprising of conservatives whose mantra is Taxed Enough Already; and it has been the group that most strongly promotes lower taxes, less government regulation, elimination of deficit spending, elimination of the national debt, protection of free markets, close adherence to the Constitution, promotion of civic responsibility, and reduction in the size of government.

The TEA Party believes the American people, given their guaranteed freedoms, will thrive in a democratic, capitalist environment, which allows individuals to strive toward ever-greater achievements, innovations and the efficient production of needed and valued goods and services.

The TEA Party sees American politics as burdened by big money from lobbyists and special interests with an undue influence on the peoples’ representatives.
The Tea Party movement is seen as a threat to the entrenched political parties and thus is the continual target of smear campaigns and misrepresentation of its ideals. The TEA Party strongly and explicitly disavows any and all hate speech and any and all violence as well as insinuations of violence. The TEA Party is a peaceful movement that respects other opinions and views even though they do not agree with the views of the Party. http://www.teaparty-platform.com/

Liberals
Liberals think of themselves as the innovators of the nation. They have traditionally stood up for the rights of the working person; and, thus, have presented a political stance of populism. Currently, they have been proponents of civil rights for minority groups. Liberals claim membership by environmentalists, gays, feminists, and other splinter groups on the political left. They have claimed and formerly held the loyalty of labor groups, although that alliance is apparently disintegrating in the face of present-day liberal legislation in the form of the Affordable Care Act.

Progressives
The progressive movement in America was formed at the behest of the National Executive Committee of the Socialist Party in 1921. The movement was originally organized around the interests of farmers and various laboring groups.

The progressive movement was first established as a social and political pressure group organized under a national agenda in 1924 at their national convention. The platform of this movement included calling for public operation of the railroads, coalmines, and waterpower resources, direct election of the President, an end to the use of courts to declare legislation unconstitutional, enactment of a farm credit organization, increased tax rates on large incomes and inheritances, and legislation providing for minimum employment standards for women. The Conference instructed the National Committee to add additional planks relating to child labor, civil liberties, the rights of organized labor, and other matters.

The original progressive movement was preceded by President Woodrow Wilson, who believed strongly in its subsequent principles. Presidents Theodore Roosevelt, Franklin Delano Roosevelt and Lyndon Baines Johnson would also be called Progressives, today—they believed in Progressive principles. President Obama, of course, is a strong proponent of progressive ideas and policies. Progressive ideals feature a renewal of guarantees for protection of civil rights and generally an institution of idealistic utopian personal rights, many of which were and are already guaranteed in the Bill of Rights of the U.S. Constitution. http://en.wikipedia.org/wiki/Progressive_politics

Subsequent critics of the movement have seen the Progressive Movement as a direct refutation of the rights of Americans to make money and other profit by entrepreneurial free enterprise. They have seen the Progressives as attempting to usurp the American form of government completely in favor of a democratically elected socialist system.

The Splitting American Political System

Americans are increasingly lining up on one side or the other. Conservatives frequently see themselves sympathetic to the TEA Party views; and Speaker Boehner has recently said that Republican Party beliefs are generally compatible with TEA Party stands on political issues. Mainline Republicans, however, see the TEA Party as too far to the right of the political spectrum to make it a viable political force in America.

Liberals, these days, are frequently wont to call themselves Progressives, rather than “liberals;” however, traditional American political sentiment finds their socialist-leaning ideas dangerous. Americans are traditionally disposed to favor free-enterprise entrepreneurial social arrangements.

Nevertheless, Americans find themselves today ever more divided in their opinions. This leads to an increasing lack of an ability to arrive at consensus over lots of issues.  

 

 

 

Saturday, June 14, 2014

The French System of Health Care Insurance

Yesterday, I posted a piece showing that ObamaCare (ACA) will not work.

Today, I propose to describe a system of mixed public and private health insurance that would have a good chance of working and improving the health care industry in America, i.e., the system that is in place in France. The French healthcare system was named by the World Health Organization as the best performing system in the world in terms of availability and organization of health care providers. I do not hold up the system of the National Health Service in Britain or the system of socialized medicine in our neighbor, Canada as good examples of ideal health care systems. Many health care workers in America have seen the problems in Canada, from whence come patients seeking health and medical care because they cannot get the service they need at home, or they find that wait times are far too long in their native Canada.

 The health care system in France is a mixture of health insurance operated by the government and private insurance. However, the government dominates their system. French Government health care is like a single-payer system; it does not work through private insurers, as ObamaCare attempts to do here in the United States.

First, we need to look at the economic facts of life in the French system. France spends 11.6% of its gross domestic product on health care. On the other hand, in the United States at this time, we spend 16% of our GDP on health care. The French spend $3679 per capita in their country on health care. In the U.S., we spend $7439/year/person. Two statistics are of interest: The life expectancy at birth in the United States is 79.1 years. The life expectancy at birth in France is 81 years.

The government in France sets the reimbursement rates for physician and hospital payments. This results in a physician reimbursement rate, which is 60% of the rate earned by American physicians. France has also been able to control tort claims against health care and medical providers, so exorbitant legal fees are kept to a minimum.

France has a system that pays physicians for each patient they see; French physicians are not salaried. This is a significant difference from the VA system run by the United States government. In the U.S., VA physicians do not have any incentive to see very many patients, because their income is not dependent on their performance. In France, however, the need to earn income motivates them to see patients effectively and efficiently.

The French government maintains the National Agency for Accreditation and Health Care Evaluation, which is a body of evaluators who publish practice guidelines, which are recommendations on good practice that doctors are required to follow according to the terms of agreements signed between their professional representatives and the health insurance funds. There are also recommendations regarding drug prescriptions, and to a lesser extent, provision of medical examination. This agency is the French version of the Independent Practice Advisory Board of the ACA in America. In other words, this agency is the French counterpart of our IPAB—the part of ObamaCare that is so often accused of rationing health care.

While I am on the subject of rationing of health care, I want my readers to understand that I think health care rationing is a good idea; but…it should be done at the hands of physicians, for the most part. Bureaucrats cannot do health care rationing effectively and fairly. There is much money and effort wasted in the United States on ineffective surgery and other medical interventions. The only way to stop that wasteful use of medical/surgical resources, as far as I can see, is for the government to institute some form of rationing. Of course, I am fully aware that rationing will not always be infallible in its effects; but something absolutely must be done to stop the abuse and over use of expensive and ineffective medical and surgical interventions.

As an American, I am quite wary of government management, in general. I see very few examples of government management improving on entrepreneurial, free-market, management. But…in the case of run-away health care costs and the use of ineffective, dangerous, and costly interventions, I think something absolutely must be done to control unwise medical care. The French system looks better to me than ObamaCare.   

 

 

Friday, June 13, 2014

ObamaCare Won’t Work—Here’s Why?

The Affordable Care Act—ObamaCare—just won’t work; it was a poorly crafted piece of legislation and its unworkableness has been tacitly admitted by President Obama. To testify to this statement is the fact that there have already been 41 significant modifications to the Act—most of them via executive order of the President, himself. New objections are cropping up every day. Now, even the unions are balking at the requirements of the law. However, the basic problems of the Act are as follows:

The Medical Industry Institute, in concert with the Department of Health and Human Services (a part of the U.S. executive branch), in a study of 2014 health insurance enrollment data and its predicted trajectory until 2024 has concluded that by that latter date, premiums for an individual in the Silver health plan will find his premium increase by $1,375/year. A family of four applying for similar coverage will see a premium increase of $4,198/year. This is an increase greater than the total increase seen between 2008 and 2013. The steepest increase will occur after 2016. On 1/1/17, all the requirements of the ACA will kick in and 60% of the policies sold in 2013 will not qualify for sale! This is too much of a premium increase; and people will not be able to afford it.

Last month the government increased the money in the “risk corridors” which are meant to bail out the insurance companies if they fall short of income to cover all of the ACA’s various requirements. Even that will not be adequate to cover the costs insurance companies will incur. In 2017, health care insurers will no longer be allowed to cover losses by using the risk corridor money. Consumers will be left paying the bill by greatly increased premiums.

To make matters worse, in 2017 the reinsurance program will expire and health care insurer plans will no longer be able to bill the government for 80% of their costs when a client uses more than $45,000 of services in a single year.

The Congressional Budget Office estimates that private companies will drop employee health insurance policies for more than 7 million employees by 2020—preferring, instead, to send them to federal insurance exchanges for insurance. It will be cheaper for companies to pay the less expensive penalties after 2017 than to purchase health insurance, themselves.

This above fact will leave the newly uninsured with few options. Many will try to get Medicaid. The CBO calculates that Medicaid enrollment will increase by 2-3%/year through 2024. However, if family income is greater than 133% of the federal poverty level (That is $11,670 for an individual and $23,850 for a family of four.), they will not qualify for Medicaid. After 2016, they will have to pay $695/year as a penalty for not having health care insurance. At that income level, it is obvious that those low-income families will not be able to buy health care insurance. The only way a family like that might be covered is if the federal government supplies them with heavy-duty subsidies. For these reasons, CBO estimates that by 2024 there will be more than 40 million uninsured people in our country—that is 10% more than there are today!

How will people compensate for these difficult facts? Consumers will most likely go to qualified ACA plans with very high deductibles and very limited doctor/hospital choice.

So…what can be done? I predict that the ACA will either go down completely in a ball of fire or it will be nibbled down by repeated revisions until little remains of it—probably the latter will be the fate of this ill-gotten piece of legislation. But…that will leave he American public again at the mercy of run-away increases in health care costs. That must not happen! We need a health care insurance system that works and that will not cost us an arm and a leg. Tomorrow, I will attempt to show how a good health care insurance system might work as I will explain the system in use by France.

Tuesday, June 10, 2014

Get Over It! Grow Up and Take Responsibility!

United States universities have rejected the graduation speeches of several world actors with whom they have disagreed on social issues, showing everyone just how “open-minded” our universities really are. However, following is an excerpt from a graduation speech given at the University to Texas at Austin on 17 May. The speech was given by Admiral Bill McRaven, the head of the U.S. Special Operations Command—the man who commanded Seal Team Six, which killed Osama bin Laden.

“Every morning in SEAL training, my instructors, who at the time were all Vietnam veterans, would show up in my barracks room and the first thing they would do is inspect my bed.

“If you did it right, the corners would be square, the covers would be pulled tight, the pillow centered just under the headboard and the extra blanket folded neatly at the foot of the rack.

“It was a simple task—mundane at best. But every morning we were required to make our bed to perfection. It seemed a little ridiculous at the time, particularly in light of the fact that we were aspiring to be real warriors, tough battle-hardened SEALs—but the wisdom of this simple act has been proven to me many times over.

“If you make your bed every morning, you will have accomplished the first task of the day. It will give you a small sense of pride, and it will encourage you to do another task and another and another.

“And by the end of the day, that one task completed will have turned into many tasks completed. Making your bed will also reinforce the fact that the little things in life matter.

“If you can’t do the little things right you will never be able to do the big things right.

“And, if by chance you have a miserable day, you will come home to a bed that is made—that you made—and a made bed gives you encouragement that tomorrow will be better.

“So if you want to change the world, start off by making your bed….

“Several times a week, the instructors would line up the class and do a uniform inspection. It was exceptionally thorough. Your hat had to be perfectly starched, your uniform immaculately pressed and your belt buckle shiny and void of any smudges.

“But it seemed that no matter how much effort you put into starching your hat, or pressing your uniform or polishing your belt buckle—it just was not good enough.

“The instructors would find something wrong. For failing the uniform inspection, the student had to run, fully clothed into the surf zone and then, wet from head to toe, roll around on the beach until every part of your body was covered with sand.

“The effect was known as a “sugar cookie.” You stayed in that uniform the rest of the day—cold, wet, and sandy.

“There were many a student who just could not accept the fact that all their effort was in vain. That no matter how hard they tried to get the uniform right—it was unappreciated.

“Those students did not make it through training. Those students did not understand the purpose of the drill.  You were never going to succeed. You were never going to have a perfect uniform.

“Sometimes no matter how well you prepare or how well you perform you still end up as a sugar cookie.

“It’s just the way life is sometimes.

“If you want to change the world, get over being a sugar cookie and keep moving forward.”

(This blog post was redacted from the Weekly Standard 2 June 2014, page 4.)

 

 

Friday, May 30, 2014

On Choosing a Mate

Nancy and I have just come home from a wedding between our grandson, Jonathan Manring and the former Sarah Morton. A more perfectly matched couple you cannot imagine. We were quite impressed with that marriage. But...we thought at the time about the other young, unmarried, people at the wedding. Will they make such wise and advantageous marriages for themselves? Thus, here comes some unsolicited advice from a couple of oldies.

In choosing a mate, one should remember that with the mate comes the mate’s family—and that entails a lot of baggage. Some of that baggage might include different worldviews, different values, habits, customs, goals, affinities, and religion. One should consider how these differences are going to stack up with one’s own qualities and values; because when you marry someone, you will need to live with the other person’s qualities for a very long time.

Let us talk about differences in religion: Homogeneity in religion in a marriage is very important. Marriages between a Jew and a Christian, a Muslim and a Christian, even a Catholic and a Protestant are often not happy joinings.  Our religions are so integral to our very being that difference in that area can cause everlasting conflict. The only way those differences can be resolved is that one or the other partner must completely give up his beliefs to conform to the other—or else, they both must give up religion, altogether. Neither of these solutions bring good resolution to a marriage difference.

Racial difference between husband and wife can cause dissention. When one marries a person of a different race, the racial/cultural characteristics come with the new spouse. If you can live with that, then you will probably do okay with a spouse of a different race. But…think about it. Racial differences can be a problem.

Political differences often split couples apart. It is very hard for a conservative to live with a liberal/progressive. Differences in this area are becoming more and more prevalent and divisive.

Watch out for marrying a divorced person or one with a family history of divorce. Divorce in a family infects other members of the family, and when conflict arises in the family (as it surely will, occasionally) a person who embraces the possibility of divorce for conflict resolution will not infrequently resolve the conflict by suggesting divorce. NOT A GOOD SOLUTION!

Marrying an “only child” can cause difficulty. “Only children” have often been imbued by their parents with the idea that they are about the most wonderful people in the world, i.e., intelligent, clever, personable, etc., etc. If a person carries that mindset into a marriage he may be difficult to live with.

How about bad habits? Some habitual behavior can be a powerful disrupter in a family. One of the worst habits to bring into a family is heavy drinking and/or drug abuse. How often have I heard from a young woman a remark like the following: “We love each other so much, I am just sure he will change his drinking habits after we are married.” That is the devil’s delusion. Drinking habits usually get worse after a wedding, not better. An addiction to pornography can cause intense difficulties in a family, too.

Do not marry someone who has ever lied to you! Enough said about that.

Money handling is very often the divider between couples. If a person has not learned to live frugally and without materialistic values, that person is probably not the one you should marry. Money matters!

Watch out for materialism in your intended. Over-buying and spending can disrupt a whole family economy and put the family in distress. Over-use of credit cards is a trap you should avoid like the plague.

Marriage is a place where common values, practices, religion, and all the other things I have mentioned above should be found. Do not marry someone very different from you, thinking that you are going to “grow together;” it probably won’t happen. More frequently, couples with significant differences will actually grow apart.

Following is a check list of things marrying couples should consider:

Does the person you have chosen:

T_____ Keep promises
F_____

T_____ Obey rules
F _____

T_____ Speak or act calmly when hurt or angry
F_____

T_____ Avoid alcohol, drugs, smoking and premarital sex
F_____

T_____ Do what is expected without being watched
F_____

T_____ Never hit or strike someone when angry
F_____

T_____ Care about children
F_____

T_____ Help and finish household chores
F_____

T_____ Be on time
F_____

T_____ Listen well
F_____

T_____ Tell the truth always
F_____

T_____ Have your same believes and values
F_____

T_____ Work for a living
F_____

T_____ Spend money wisely
F_____

T_____ Is liked by my family
F_____

T_____ Always have to have their own way
F_____

T_____ Have never been to jail for a crime
F_____

T_____ Has never had another wife
F_____

T_____ Like my family
F_____

THINK ABOUT IT!