One of the Many Problems with Politics

In quest for votes politicians bombard us daily with outlandish theories to bolster their claims and win our vote. In preparation for the upcoming presidential elections, politicians have started a year earlier than usual advocating pie-in-the-sky proposals hoping to outdo one another and gain the nomination.

The problem for me is that many of these proposals appear to be half-baked and not well thought through. In fact, some include distortions and exaggerations designed to advance a point of view. This cacophony masks the lack of clear thinking and avoids leveling with the American people.

A Few Examples

Taxation.

Politicians on the hard left advocate draconian tax increases on the 1/10 of 1% in the name of fairness. They include raising the federal income tax rates up to 70%, imposing a wealth tax of 3% on income above a certain amount, increasing inheritance taxes up to 85% for estates exceeding a valuation, and elevating the current percentage of taxes on capital gains.

The tax system is often used as a political football. Last year’s reform fixed some loopholes while it created others. It shrunk the number of brackets when it should have added 2-3 more to address fairness issues related to the rich and super rich tax rates. The system surely needs changes to resolve these perceived inequities. Currently, the system is perceived as unfair. Draconian measures, however, are not the answer.

It looks ludicrous to me to ask those who pay little or no taxes whether somebody else should be paying more. An independent commission should be formed to determine what constitutes fairness in taxation. Relying on political hacks will surely continue to lead us toward oscillation.

Principally the impact on: Job Creation, on Housing, on Wall Street, on R&D, on Defense, on Philanthropy, on Farms Ownership, on Property Rights, just to mention a few.

Let address one for a minute: philanthropy. 

The proposed draconian taxes would pretty much wipe out one of the most generous social justice-oriented source of funding. Americans are very generous. They earmark large portions of their wealth for good causes.

The proposed taxation would make it impossible to amass super-wealth in the future. Trillions of dollars are spent each year by foundations established by super wealthy donors. Such system of taxation would make it difficult for future Gates, Hewlett, Packard, Zuckerberg, Moore, Ford, Rockefeller, Carnegie, and other big foundations to emerge.

Another case is:  Farm Ownership.

The proposed taxation system would just about wipe out family ownership of our farms because it would force heirs to sell farms at distress prices to pay the taxman, thus making way for corporate farms to get bigger and more powerful, leading to the elimination or reduction of farm jobs.

What seem to drive this radical approach to taxation are, in my view, three factors: envy, resentment and hate. Lets face it. Some people are jealous of others who are economically better off. Surely, they might suspect, they have gotten rich because of special privileges, e.g., inheritance, old boy network or illicit conduct. Merit is ignored or excluded all together. These resentful and envious folks have problems accepting the hard work and sacrifice entrepreneurs and immigrants make to clime up the ladder. I recognize that some wealthy folks do engage in excesses, which can be turnoffs.

Socialism.  

We seem to ignore the time tested wisdom that there is no one best system (it all depends) and that all systems have pluses and minuses. It is true that capitalism has no heart. It is also true that socialism has no soul. Let me elaborate.

Folks in developed countries have long recognized that capitalism needs to be supplemented with government intervention to remedy its downside. We have seen over the years labor laws enacted to shield workers from unfair and unsafe labor practices, We have witnessed during our life time laws enacted to provide assistance to the poor and needy. We have seen taxation used as a means of income redistribution. Countries have been more generous; some more than others in dispensing welfare programs.

Communist China concluded some 50 years ago that pure communist policies by themselves would not improve the standard of living of the Chinese people. The ruling party wisely decided to supplement its political system by introducing capitalism as a parallel. This binary solution has contributed to formidable rise in productivity and standard of living.

Contrast China’s approach with that of Cuba, Venezuela, Nicaragua, and the former Soviet Union, and you might conclude, as I have, that socialism by itself runs out of gas rather quickly. While at the beginning it lifts the bottom tier of the population (proletariat), in the long term it loses the advantage that comes from a growing economy, and permits its select nomenclature to accumulate privileges and benefits.

In the end no country becomes richer or better off by robbing Peter to give to Paul. A country becomes richer by producing more than it needs and using the surplus as an export.

Redistribution is akin to sitting on a balloon. As you shift from one position to another, you might change its shape but you do not change its size. No country can progress without motivated and capable individuals.

To me, socialism by itself is a zero sum game, and capitalism by itself is a greedy affair. Socialism becomes more powerful when it is blended with the proven capabilities of capitalism. The opposite is also true. Capitalism with a conscience gains more followers and supporters. So, the big issue is not whether to select one or the other, but what is the proper blending of the two, e.g., how much of each is necessary for the benefit of all.

This country’s success over the centuries has been tied to its core founding principles of freedom, smaller government, and individualism. For many, socialism is an anathema. As we shift from a philosophy of “to each according to merit” to “to each according to need” many will surely continue to resist the shift. As we increase the gap between the rich and everybody else we surely will run into more resistance and protests by those who might be left behind. We need a balanced approach.

Identity Politics

I would be remiss in this blog not to address this political phenomenon.

Like Romans before, politicians have learned that rulers can dominate their constituencies by dividing them. While we lament our divisions as a nation, we seem to foster more divisive politics. The British leveraged what they learned from the Romans to rule half of the world through the late 1940’s. Not to be outdone our politicians of the day have taken this approach to a higher level.

Technology has made possible to slice and dice us into a multitude of cells. Each cell becomes a rich target for grievances, resentments, and inequalities.  By pitting different cells against one another enough chaos can be created that encourages divisions and polarization.

I personally dislike being pigeonholed: white, old, male, legal immigrant, married, parent, college educated, heterosexual, European, 1%, privileged, and so on.

My race is contrasted with black, brown or other racial configurations. My age puts me at the opposite side of the younger generation. Being college educated pits against my high school and non-high school neighbors. My being a heterosexual is used to suspect me of homophobic bias. By being classified as part of the 1% puts me into a category that has difficulty relating to the workingman, overlooking the fact that I started my journey at the bottom. Being an immigrant puts me in collision course with nativists even though I have served in the U.S Armed Forces and possibly have paid more taxes than they had.

This slicing and dicing kind of takes away my individuality. After all, I am just someone … with a few qualities and many foibles. As humans we are more complex than each cell or its composite suggest. Our brain is a gift that endows us. As we learn more we have the capacity to change.

America Bashing

I must admit that I am totally baffled by this trend.  It has become fashionable in some quarters to pillory the country and accuse it of all unimaginable sins.

I just don’t get what the purpose is and what benefits flow from tearing down what many will profess is the best country in the world! Still many on the hard left see a flawed country not meritorious of its wealth, power and prestige. In fact, they see it as ill gotten.

Is America perfect? No! It is still a young country in the process of becoming more inclusive, more diverse, and more just. Most of us are aware that mistakes have been made and that people have suffered as a result. Changes have been made to ensure a more leveled and humane field.  

America has been the chosen destination for millions of immigrants over the past three centuries in search of freedom, opportunity and a better way of life. While some lament our lack of control over illegal immigration, millions of law-abiding immigrants are permitted in each year. Over a million of the new arrivals become U.S. citizens every year.

Last time I checked, the Soviet Union built a wall (Iron Curtain) to keep its people in. Folks are now criticizing Trump because he wants to build a wall to keep out those coming in without permission and by breaking our laws.

Politicians that oppose the wall or barrier do so by not differentiating between lawful and unlawful entry. They clamor that Trump’s policy is anti-immigrant and racist to boot. Trump is against ILLEGAL immigration. I don’t see racial animus everywhere or lack of compassion. International norms continue to ensure admittance of those with valid reasons for asylum.

As we learned during the sixties, there is a vast silent majority in America that has a way of waking up and cleaning house. This surely will happen when folks reach an impermissible level of dissatisfaction with unrelenting attacks on their country and way of life.

We all deserve a more civil discourse.

Ideas About Retirement Planning

Retirement has a way of sneaking up on you. I retired in 2009 after working more than 50 years. Many of my friends and contemporaries have preceded or followed my ride into the sunset. Not all have done a good job of planning their finances. A few have had the wind-luck behind their sails; most have had to fight off the opposing wind.

The Espoused Theory vs. the Theory in Practice

Financial analysts tell us that there are three distinct phases to achieving our financial goals: (1) making money, (2) saving a good portion, and (3) making what we save grow.

Easily said, but not so easily done.

Most people are good at making a decent living. Those with higher skills or better education tend to do better than those who have no special skills or education. Those with entrepreneurial abilities often outperform those who are more content with working for others. If a family has two earners, that family will do better than the household with a lone earner.

Except for the lower 25^th percentile, Americans enjoy one of the better standards of living in the world. Unlike some other countries, we do not have a mandated national pension system, just a meager social security system.

Keeping or saving a good portion of our earnings is where you find the biggest trap. We live in a materialistic society. We are encouraged to spend. We are also encouraged to keep up with our neighbors. Mortgages, leases, credit cards, and other debt instruments lure us to spend most of what we earn, and sometime more.

It is a well-documented fact that the worst investment people can make with any surplus is to do one of the three things: buy a second home or time share, buy a boat, or buy an RV. Why? First, they rapidly depreciate in value, and second, they incur taxes and significant upkeep costs.

Soon the government, banks, and insurance companies claim most, if not all, of what you earn, leaving you in the red or with a paltry surplus. Social security is the main savings outlet for most. A few will make sure they also put something aside in the 401(k) or IRA. Public employees probably can have the most generous t retirement nest egg.

Some employees in fast growing sectors of the economy can earn stock options that can morph into sizable nest eggs. Of course, not all stock options turn into blockbuster winners. In fact many lose their value once the company falters.

Growing your hard earned savings is challenging. If you did not save enough to begin, you are not going to be growing much. If you do not have a solid investment portfolio, you risk having your savings shaved off by inflation. If the equity in your home is your primary asset, you can only grow by the percentage appreciation of real estate in your geographic area.

Most of us are not financial wizards. Therefore, it is wise to have a reputable wealth manager advise us as to our options, risks, growth potential and tax consequence. What has worked for me is the following:

·      Invest a portion in tax-free high yield municipals.

·      Invest a good portion in stocks that pay qualified dividends (taxed at lower rate).

·      Invest a portion in high growth stocks.

·      Diversify the portfolio so that risk is spread across industries.

Upon retirement what really counts in my view is that your income stream be as high as it was when you were working and with fewer obligations. In other words, make sure you earn more than you did while actively employed.

Downsizing

I dislike the term. To me downsizing is not a strategy, anymore than outsourcing was during my working years. In fact, the need to downsize is the realization or admission that we did not plan ahead well and that we might have dissipated some of our resources.

Many upon retirement are forced to cut back on their standard of living, housing, leisure options, and move out of their home. So, in the golden years, they are encouraged to move to low cost areas, domestically or internationally, so that they can stretch their retirement income.

I can live with downsizing as a result of health issues. Moving to assisted living is certainly good for those who are in need of ambulatory and/or care assistance. Now that we live longer, this option is a must for some.

Rightsizing

I am all in on resizing our situation without sacrificing the level of comfort we became accustomed during our glory earning years. New rules must be put in place to make the transition work.

1.    Articulate your priorities. For me, it boiled down to a level of comfort I felt I had achieved during my career.

2.    Payoff your mortgages. Eliminate any cash outflows that include interest payments.

3.    Payoff your credit cards. You do not charge what you cannot pay off at the end of each month. Credit card interest is obscene.

4.    Buy out any leases you might have for a car, boat, or RV. You keep these toys because you enjoy them and you use them, not because they are good investments.

5.    Establish a pro-forma budget. I don’t like to fly blind. I want to know where my money goes, and whether I can afford to let it go there.

Retirement should be the culmination of a life well earned financially. You should be able to do what you always wanted to do and in the style to which you are accustomed. It is not a time to tighten your belt. It is a time to be comfortable.  After all, you cannot take your money with you. Give the excess to charities or to help others in need. Encourage your heirs to earn theirs. Give freely of your time to others who need to be mentored, coached, encouraged, and supported. Many might have done so to help you.

Remember, for you, the future is now, not next week, next year, or later. It is now! Don’t postpone your life. 

Empty as much as you can your bucket list!

Table Manners

Have you observed how people eat? Have you noticed their individual idiosyncrasies? Have you paid attention to your own manners? I suggest that there are lessons we can learn by doing so.

Let’s examine the following styles:

Fast eaters – they rush through the meal. For them time is of the essence. They want to finish first. Who knows, they might have been raised in a large family where slow eaters don’t get much to eat. They don’t seem to savor the food as much in their eagerness to fill their stomachs. Many fast eaters are also big eaters. Most of these types rely on outside supplements to digest their food, e.g., anti-acids.

Slow eaters – they are the opposite; they take it slow all the way savoring every bite and making sure that they have chewed the food correctly. Who knows, they might have been raised in a small family, perhaps they were the only children. They do not seem to be hungry but somehow they manage to polish off their meals. They methodically go about their business and avoid rushing through afraid of getting indigestion. Some psychologists suggest that some of these characters were not weaned properly.

Intermittent eaters – these folks are basically pickers. They pick at their food. They examine it, they taste it, they settle on those items they find tasty or better looking. Who knows, they might have been raised in a well to do family where food was abundant and folks used to eat multiple meals but in smaller portions. A great example is the Spaniards. They eat 5-6 times per day and never seem to gain any weight.

Perfect eaters – they take their time and they savor each bite. They try everything in the plate settling for the most desirable morsels. They are into leisure dining. They treat meal times with respect … a time with family or friends, a break in an otherwise turbulent outside world. They love all kinds of food and do not mind trying new or exotic dishes. They do not seem to worry about their weight or calories intake.

I will skip commenting too deeply about Compulsive Eaters out of fear to offend friends and relatives. Many become obese and spend most of their lives searching for weight loss programs or cures. Even though they might shed pounds, they revert compulsively to earlier habits and put the weight back on. They satisfy their hunger with quantity not necessarily quality. Psychologists suggest that these people have unmet oral needs. I don't envy them at all. I feel sorry for them instead.

Now lets shift our journey in a different direction. Let’s look at tactics. This element might perhaps reveal a part of their personality:

Salting – Some folks salt their food prior to tasting it. They assume from the start that their food is not salty enough. The problem is that once you salt your food you cannot un-salt it. The only apparent remedy seems to be to drink more fluids. I associate this behavior with an impulsive personality. They seem to act before they think. I could be wrong on this one. It could probably be a learned behavior.

Salads – Europeans like to have their salad after the main meal as a way to fill up any empty spots in their belly. Americans, on the other hand, like to start their meal with a large salad as a way of stimulating their appetite. Internationalists might choose to skip salads all together eager to try an appetizer or two. I don’t know about you, I like salads as a starter in lieu of appetizers.

Dessert – this is the tell-all variable. Some folks do not consider their meal complete unless they have had some sugar. For the health conscious, fruit is a great substitute. For some the decision is not theirs, but their spouses. How many times have you seen a lady tell her husband to order a dessert so that she might taste it? Weight conscious people see pounds rather than slices or cups. They are terrified by the prospect. A few will smile and rub their hands when the treat arrives. These are my people!

Cheese – our French cousins will often by-pass dessert for a table full of exotic cheeses. Few other nationalities can keep up with the French. At last count, the French have over 225 different kinds of cheese. Italians and Spaniards like to mix things up. They will marry cheese with thick marmalades and call them Romeo and Juliet. I have observed this method in use in Brazil as well.

Aperitifs – some like to start things off with a Cinzano or a fruity wine. Others will choose instead a mixed drink such as martini, daiquiri, old fashion, a gin and tonic and so forth. This is territory for the sophisticates, connoisseurs and gourmands. Folks who live outside this territory don’t even know what an aperitif is.

Digestivo – as the name implies, this is a drink to help you digest your meal. It is the frosting on the meal. Again, this is sophistication and cosmopolitan territory. Folks living outside this territory do not seem to need help with their digestion. I envy these people! Life is much simpler that way.

By now you must be thinking that you have heard enough. Nothing new! The subject might even bore you.  I want to take you in a different direction now. Life itself.

Do you rush through life without stopping to smell the proverbial roses? Perhaps, this piece will suggest that you should slow down and enjoy the journey.

Are you a person of habit? In everything you do, you have a checklist that you feel you have to complete in order to make the trip worthwhile?

Are you a butterfly? Are you going from flower to flower catching and dispensing the pollen without stopping and feasting on a particular gift or relationship? You are not alone. Many people inhabit this territory.

Do you jump to conclusions too quickly and salt your view beyond what is necessary or even useful? Too much salt may get in the way of bonding with other people. It might even become a deterrent. It is also bad for your health e.g.; high blood pressure.

Are you investing the proper time and energy in things that matter to you? Your family? Your job? Your church? Your hobbies? Your health?

I hope to have stimulated in you the need to take a critical assessment of your life and to isolate the things that matter most to you.  There are no right or wrong answers to these and other questions. You are the ultimate arbiter as well as the ultimate beneficiary.

Have a roadmap on how to live a better life! It will help you stay on course without losing your God-given spontaneity. 

Good luck along your learning curve.