Clinton v.s. Trump… Who Will Do the Most To Fix or Amplify Income Inequality?

lady and manIncome inequality is not a good thing by any measure. More people earning more money and spending that money on everything from new homes to cars to groceries and vacations is what helps our economy grow for everyone. If only a few people control all the wealth and income, then the economy will continue to weaken and no one will win.

That said, boosting income for the lower 99% artificially through transfer payments (free money giveaways) and other economic tricks and tactics will only provide an unsustainable short term partial fix with a day of reckoning on the horizon where the 99% will ultimately feel most of the pain. If the upper 1% lose 90% of their income they will still have more than enough for the essentials. Not so for the lower 99%. An economic shock like that would be devastating.

99 - 1It is essential that this Income inequality puzzle is solved. It effects everyone in the country in so many ways and influences the ecology, our health, and personal safety.

So what will Hillary Clinton or Donald Trump do to improve or amplify Income Inequality if they get to the White House?

Recently the New York Times asked their readers to choose the most important question to them from a selection of fifteen possible questions. Nearly 90,000 readers responded and the Income Inequality question scored the second most burning question right behind a question on climate change.

While the televised presidential debates can look like a mud wrestling match at times the candidates’ responses in a newspaper story show only the actual words they are using not the rest of the distracting circus show.

The New York Times asked the candidates:  “What would you do to reduce extreme income inequality in this country?  The actual word-for-word text of their answers is in the actual article but I will summarize what they said here:

Hilary Clinton basically said how terrible income inequality is and laid out her proposals to help reduce it. Her list included promoting profit sharing for all employees, more jobs, support small businesses, 12 weeks paid family leave, universal pre-school for every four-year old, and a fairer tax system. She finished with the clinton-trumpstatement that; “We won’t raise taxes on people making less than $250,000.”

Donald Trump used his valuable New York Times ink to blast Hilary of course. He claimed that she is an extreme globalist who helps foreign corporations and governments raid wealth from U.S. workers. His solution to reduce Income Inequality is to control our borders and get the fair-trade agreements with our trading partners to be more fair. And he also proposes to “massively” reduce taxes, regulations and energy costs so “America can be the great jobs magnet of the world.”

Both responses are scary for anyone who knows how economies really work…

Hilary Clinton’s response looks like a typical politician desperately running for office who is offering the world to her potential voters without facing the realities of costs. When you do the math, if you taxed 100% of the income of the upper 1% you would not be able to sustain this kind of spending. Not to mention how fast the 1% would relocate to a more tax friendly country so the year two tax receipts would be zero. And she better not even think about a wealth tax. This will send people for the doors. That wall on the Mexican border would be to keep wealthy Americans in the USA so their wealth could be taxed away. You think  wealth tax would not get on the table?  It’s already there in the form of the property tax we all pay whether we own a home or rent. Yes renters… When the property tax goes up you rent will go up.

And Hilary’s promise of not raising income taxes for people making less than $250,000 a year feels a lot like Obamas affordable care healthcare program promises like how we could keep our own doctors and our insurance premiums would go down.

Donald Trump’s response seems to show that even though he is representing himself as some kind of business person he doesn’t know much about the real mechanics of operating an economy.

IE Chart1Scary…

So all we learned from this New York times article was that neither presidential candidate has any idea about what to do to get the US economy working again. All they care about is winning the election.

Where does that leave us?

Basically if you are counting on the fine people in Washington or your local city or state governments to magically wave their wands to solve the income inequality problem then you will probably be wrong. The Federal government consistently spends more than they take in right now and many state and governments are technically broke when you consider the huge municipal employee retirement obligations they are hiding.

The government in any of its many forms doesn’t have the money or motivation to tackle the income inequality problem.

It’s really up to us to tackle the problem ourselves…

To start, if every man, woman and child in this country made a commitment to better education for our children and not relying on strangers to do the whole job within ten years you would see a whole new income inequality formula. Without the right education a person cant even get on the first rung of the income ladder.

maxresdefaultBy commitment to education I mean little things like reading to our toddlers every night (even if it’s the sports page), making sure teachers know you are involved in your child’s education, and putting the priority on getting homework done every night.

And if there is any man, woman, or child who is not ready to make the commitment to their kid’s education then you might want to say that they have earned there spot and their child’s spot at the lower end of the income ladder.

Harsh… Yes, but that’s how economies really work. Without leaders that inspire people to commit to their goals you can’t ever tax/spend or deregulate/untax your way to a better economy.

The people need to do the hard work not the politicians.

The Political Conventions Are Over… How did we get into this mess and what does it mean for income inequality?

Hil-TrumpThe Republican and Democratic political conventions are over and the two champions of their parties have been selected. These two conventions were little more than a platform for a parade of speeches by various political hacks saying stuff we already know in hopes of grabbing some prime time TV attention.

Leading up to these conventions we knew who the two presidential nominees were going to be and we know exactly what they stand for.

And… Both candidates scare me right now.  A lot!

On one hand we have a Democratic presidential nominee who will probably promise us the world (things like free college tuition to start) but as the current president has found, its not so easy to actually run a government. Especially when everyone is at each other’s throats like they have been for the last seven and a half years.  Scary…

Mule ElepahntOn the other hand, we have a Republican presidential nominee that scares about everyone including most of the people in his own party. The unprecedented number of people who watched the televised Republican debates shows that Mr. Trump is fun to watch as a nominee but I’m not really sure he can lead the country in a rational, thoughtful, compassionate way. No matter what his wife says. Even if she is skillfully using Michelle Obama’s words from eight years ago.  It makes we sort of want to see a debate between this Slovenian fashion model and current first lady/former high powered attorney. In a fair fight I’m pretty sure I know who would win. But a cat fight worth watching.

All this convention political noise was just designed to get us to like these two hugely unlikable presidential candidates.

People said a lot of great things. Somewhere deep down we started to feel a little better about making a choice this November. At least that’s what the political party captains would like.

But I really don’t see much of a choice…

Especially when it comes to getting the country on the path to resolving the two ton guerrilla (I didn’t use elephant because of the political connotations) in the room. Income Inequality.

The unemployment numbers are telling us that a higher percentage of people than ever are working yet the economy seems to be in a weak sluggish position. This is simply because too many people are working too many hours for too little pay. At the end of the week they get a paycheck that barely covers their basic living costs and Obama-care premiums.

All this while people at the other end of the income spectrum are earning more income than ever and thanks to lenient Fed policies they are enjoying an unprecedented high valuation of their assets.

If you listen to one scary candidate, the solution is to tax the heck out of the big earners and find ways to transfer that cash to the people at the other end of the spectrum. Better known as a “Hand Out”.

If you listen to the other scary candidate, he is preaching a system with less government regulations, more opportunity and lower taxes. Better known as a “Hand Up”

Yes folks it is that simple… One system is a “Hand Out” and the other is a “Hand Up”.

What happens with a "Hand Out" system... The walls make people mad.

What happens with a “Hand Out” system… People just don’t like the walls!

We know for sure the Hand Out system does not work. At its extreme is looks like socialism. You know, that Soviet system where everyone gets education, a job, food, and a place to live. Not much choice but they do get the basics and everyone except a handful of “leaders” are very equal on the income scale. It’s works best for the Vodka companies since this system seems to really promote alcoholism. The most famous “virtually everyone equal system” collapsed years ago because it can only survive as long as someone is there to foot the bill. And when taxes go up or things get really bad people will leave unless you build a wall. And that wall will only keep people from leaving for so long.

If you don’t believe me… Ask the state of New Jersey about why a guy named David Tepper left the state because of its high income tax rate for a new home in Florida with a Zero percent income tax rate. The move saved him millions of dollars a year. Wouldn’t you do the same thing?

New Jersey may need to build a wall…

Tax and spend, Hand Outs, are no way to build a long term sustainable economy and try to chip away at Income Inequality. Higher taxes and rampant government spending will just make the problem worse for everyone in the end.

Who is this guy named "Rich"? It's everyone who earns a paycheck!

Who is this guy named “Rich”? It’s everyone who earns a paycheck!

In reality this Income Inequality problem we are in these days is most likely the result of an economy in transition. We are painfully moving from a union controlled manufacturing economy to a free agent services economy.

In the past, millions of workers enjoyed a middle class life while doing the hard work of making things like cars, TV sets, shoes, and furniture. Through the important work of labor unions salaries and benefits always kept pace with the needs of a middle class lifestyle. And that was in an amazing time when one wage earner could provide for a family. And they lived a nice life.

But… As we all experienced when the U.S. auto, steel, shoe, clothing and furniture manufactures collapsed this socialist type non-market driven pay/benefit system could not survive when no one was there to pay the bill. Now most cars, steel, shoes, clothing, and furniture still manufactured in the USA are done in non-union factories where pay/benefits are more in line with the actual value created.

So the Bottom line for these newly anointed presidential candidates is that one candidate is unelectable. And the other candidate promises us four more years of the same Washington gridlock we have had for the last eight years.

Scary… Especially if you are on the wrong end of the income inequality scale.

Only real innovation can fuel the demise of Income Inequality

Only real innovation can fuel the demise of Income Inequality

The simple solution is that the fine people we send to Washington to represent us in Congress pull together and create some policies that might have a little “Hand Out” component but be made up of largely sustainable growth oriented job-creating “Hand Up” policies.

The Fed has done their job with easy money and low interest rates but without the help of congress all those sacks of money just sit in bank vaults not helping anyone. Don’t be fooled by this media-generated presidential election horse race noise. The real culprits in this inequality gridlock situation is congress.

Congress needs to pull together and decide it’s time to get America back on track. Small business is what really fuels growth. Get out of the small business person’s way and you will be amazed what can be accomplished.

Remember… All of today’s big businesses started as small businesses in the past.  They all started with a motivated person with a great idea and a plan to get things going.

These two guys had an idea back in 1976. Now Apple directly employs over 66,000 people and over 627,000 people indirectly.

These two guys had an idea back in 1976. Now Apple directly employs over 66,000 people and over 627,000 people indirectly.

If Congress enacts a package of small business incentives, education initiatives, research/innovation credits, and reasonable regulations more people will move up the income ladder and large scale inequality will be a thing of the past.

Think it can’t be done?… We’ve done it before and that’s why America out-produced, out-grew, and had the fastest increase in standards of living back in the 1950’s. And the 1970’s weren’t so bad either.

Congress needs to bring back the good old days. No president can do that on their own.

Do We Really Know What To Expect From Mr. Trump At This Week’s Debate?

Since Donald Trump announced his presidential candidacy on June 16th he has shaken things up on the political landscape like never before. He has single handedly taken a pretty boring time in the election cycle and given people a reason to read the news, watch television, and laugh at comedians.

Either we are waiting for Mr. Trump to shoot his mouth off again or succumb to party pressure to drop out of the race for some not so nice things he has said.  Everyone seems to have their own countdown clock to Mr. Trump’s candidacy implosion date.

TDPollsBut in the meantime… Even though he has said some questionable things about our neighbors to the south and attacked a former Republican Presidential standard bearer  Mr. Trump has rocketed to the top spot in all the polls with a 19% preference rating among Republican primary voters.

This is significant unless you believe that somehow Donald Trump has used some of his billions of dollars to buy the poll takers or that Democrats are secretly participating in the poll with designs on causing some sort of election day upheaval.

How could Mr. Trump’s poll success be true?…

Like a professional golfer Donald Trump has been promoting his message on his hat… “Make America Great Again!”

In a country heavily populated with politicians who really don’t communicate anything they obviously stand for because it may offend or scare even one potential voter , Mr. Trump may have ceased on a core message with some real impact.

Make America Great Again!DT1

Maybe it’s this theme that has carried Mr. Trump to the top of the polls. It’s simple. It resonates. It makes sense.

From our crumbling roads and railways to our laughable public education system and our forgotten middle class I don’t think many Americans feel as great as their parents or grandparents did.

At this week’s Republican debates while nine of the candidates try to say what keeps  them out of trouble with even the smallest special interest group, I think Mr.
Trump is going to pound on his “Make America Great Again!” theme and leave the others in a rubble of confusing electioneering rhetoric.

This is what crumbling infrastructure looks like

This is what crumbling infrastructure looks like

I’m sure Mr. Trump is going to shoot his mouth off at least once.  He is going to give the media at least one golden sound bite that will undoubtedly offend, insult, and slam someone.  The comedians will crack jokes about his hair. The Republican National Committee Chairman is going to hope it’s all a dream that he can escape by clicking his heals together and repeating, “There’s no place like home.”

But at the end of the debate…  viewers, republican primary voters, and the other candidates will probably realize one thing…

Like him or not, Mr. Trump’s candidacy is for real. The political game may be changing forever. Play by the old rules and be prepared to fall into obscurity in a world where voters are looking for something different.

Could The John Kerry/Obama Iran Nuclear Deal Really Just Be Dangerous Appeasement?

John Kerry Iran 1

Look Who Is Smiling And Who Is Not

Why do certain people in Washington seem to be jumping for joy because of the latest news out of the Iran nuclear treaty talks? And why do I feel like somehow I have fallen asleep to wake up in 1938?

Maybe our friends in Washington are the ones who need to wake up…

I have to admit that probably like the rest of you I have not really been following the day-to-day of this Iran Nuclear Deal story. That’s because they have been working on this Nuclear Deal since 2003. That’s right, somehow people have been meeting and hammering out details on this for over ten years. When does a smart person stand up and say… “Maybe the Iranians are stalling while they perfect their version of an atomic bomb with training wheels.”

A nuclear bomb is a nuclear bomb no matter how you spin the language!

Look Who Is Smiling And WhoNot

Look Who Is Smiling And Who Is Not

The latest headline says that the best this Nuclear Deal can be expect to do is extend Iran’s attainment of nuclear bomb making capability from two or three months to about a year. Okay so do the math…  This deal was announced on April 2nd (it should have been April 1) and they are saying the new deadline is June to work out the details. That’s oddly two or three months away!
What do you think those busy little Iranian Nuclear Bomb makers will be doing over the next two or three months? They won’t be taking a vacation at Club Med!

And lets be clear here on who we are dealing with when we sit down to the negotiating table with these Iranians… They are the same people who are funneling arms and soldiers to heat up the action in Iraq. That’s the place where we spend countless American lives and bazillians of dollars to try and get on the track to something resembling a free society. And… According to our very own state department (that’s the little ice cream shop John Kerry runs) the Iranians have been sponsoring terrorism all over the world for many years.

Iran PaperAfter so long at the negotiating table only an idiot (I don’t use that word loosely) could think the Iranians are doing anything other than stalling.

If they really just need nuclear material for power generation and medical needs as they say then it is less expensive to just buy what they need than to set up entire factories and supply chains to manufacture it. If they really need the nuclear bomb material for peaceful reasons then why are they also developing long range missiles. To deliver electricity and medical supplies?

No… I think the Iranians have other plans for this nuclear material and they involve obliterating Israel as they have said many times.  And after that who do you think is next on the Iranian Nuclear Bomb hit parade? Not the French, Polish, Germans, Italians, Russians, or Chinese who trade with Iran and have been pushing Kerry for a deal so they can continue selling them stuff.
We are the ones in the Iranians cross hairs. I sure the Supreme Leader of Iran has a live stream of New York Time Square on his iPhone so he can keep tabs on what’s cooking there.

Death to America IranUnfortunately there is no scenario I can even imagine where this Iran Nuclear Deal works out with happy people around a campfire sipping hot-chocolate and singing show-tunes together.

Unless our guys in Washington wake up and realize the Iranians are stalling (after all it has been over ten years now) and do the tough work of shutting down their nuclear ambitions either Israel will send a few bombers to Iran and turn their research facilities into a pile of steaming ruble or Iran is going to unleash a new brand of Nuclear war like the world has never seen. Neither is a pretty picture.

Which brings me to the word of the day… Appeasement.

Look Who Is Smiling And Who IS Not

Look Who Is Smiling And Who IS Not

This is the only reason I can think of that our guys in Washington have let this Iran Nuclear Deal charade go on for so long. When Obama says things like this Iran deal is “Our Best Bet” it worries me. How can you “Bet” with the lives of so many millions of innocent people?  Can they revoke a Nobel Peace Prize?

This my friends is called Appeasement.

When you try to deal with people who have a clear agenda that includes your obliteration bad things happen. All you have to do is look at how the 1938 British Prime Minister Neville Chamberlain’s Appeasement of Adolf Hitler worked out.

On September 30, 1938 Chaimberlain was shaking hands with Hitler after they made a deal then on September 7, 1940, less than twenty-four months later Hitler started the Blitz on London and bombed that city for fifty-seven consecutive days.

That’s how Appeasement works out.

The really scary part is that most Americans are comfortable thinking that the folks in Washington will take care of us. Those Politicians are the smart ones tasked with the job of keeping the world safe from Iran’s nuclear ambitions. It’s been over ten years!  The Iranians mere months away from producing bomb material.

But remember all these guys in Washington have magic keys to comfortable well-stocked bunkers where they can lay low and watch House Of Cards and Scandal reruns while the nuclear dust clears. All we have are four dollar flimsy single-use umbrellas and Pop-tarts.

Can Aetna’s CEO Teach Obama The Realities of Minimum Wage and Income Inequality Economics?

aetna2Today Mark T. Bertolini, Aetna’s Chief Executive Officer, announced that the health insurance company would boost the incomes of its lowest-paid workers by as much as a third. The move by the big health insurer affects around 12% of Aetna’s domestic work force who will see a raise to a floor of $16 an hour. These are primarily employees in customer service and billing-related jobs.

The CEO stated that the reason the company is raising wages is not because they want to be good guys. They are raising wages because it is becoming increasingly difficult to fill open job positions and retain employees. That is what could be called natural economic forces.  Better know as competion!

With the entire health insurance industry growing because of of the government’s healthcare law insurers are having a harder time finding people to do important jobs like customer-service, billing, claims-processing and similar tasks.

Aetna1Aetna is only the first to move on this increased wage front. Within months don’t be surprised when most of the other insurers are forced to do the same to get all their essential tasks done. Empty desks and unfilled job requisitions will push employers to raise wages. Then,  as wages increase, more potential workers may be enticed into the workforce to fill these open jobs.

Maybe even workers from other industries with similar skill sets will make there way to higher wages offered in the insurance sector. People will certainly consider the move if it is for a nice high pay raise. Some may even go back to school to pick up a few extra classes so they can qualify for these new higher wage jobs. Pishing up the entire wage scale.

This is how the natural forces of economics works.

And what about the lower wage jobs newly vacated?

As long as the government does not interfere and force wages up the new vacated job will still be there and waiting for someone who wants to jump on the first rung of the career ladder. You always have to start somewhere.  At the lowest wage levels employers are willing to take risk and spend more on training. But at some of the government imposed minimum wage rates for entry level positions employers may just get by with fewer workers. Not a good thing for anyone. This how you break an economy.

callcentreNext… All these Aetna employees will just need to worry about the number crunchers in the back room who will be looking for a way to bring labor costs down. At these higher levels it may start to make more financial sense to move these tasks offshore at a fraction of the costs.

If you think it won’t happen think again…

Can these service jobs be more complicated than technical support for computer gizmos, booking a flight, reading an x-ray. or preparing income tax forms?  All these used to be done by U.S. based employees. Pay levels went up, desks were empty, employers and customers suffered… Then the jobs were sent to India and the Philippines.

 

Why Do Minimum Wage Economic Experiments On The People Who Can Be Harmed The Most?

minimum-wage-increase-800x800Some of my holiday travel took me through the fine city of Chicago. You know, that big city on Lake Michigan that happens to be in the state that is currently one of the top contenders for going broke at any minute.

And now it seems like they have put the same smart politicians in charge of experimenting with the economic future of the city and it’s fine people.

The Chicago City Council approved a plan to boost the minimum wage in the city from $8.25/Hour up to $13/Hour by mid 2019. That’s over a 57% increase!

There are plenty of studies that have looked at the effects of raising the minimum wage and it seems proponents and opponents pointy out the ones that support their current positions.

This Bloomberg article titled, “Everything we don’t know about minimum wage hikes” seems to be one of the first that takes a more balanced view of the subject. But the real issue is that we live in an economy with built in checks and balances. This is better known as a free market as opposed to the kind of economic system they have in countries like Russia, China, or Cuba where the government controls the economy.

In a free market, supply and demand factors for goods, services, and workers defines prices and wages. These all come together is something that can resemble gravity when it all works properly. You can cheat the system with tweaks and intervention but eventually you can’t alter the real effects the same way you can’t cheat gravity.

What does all this mean?

Somehow the smart rulers of the kingdom of Chicago have it in their head that by artificially pushing up wages people will be better off. They will have bigger paychecks and a better life. These glad handing politicians just don’t get it that they are messing with strong economic forces that will at some point snap.

Here are a few things these smart Chicago Council Members have probably not considered when concocting this potentially dangerous experiment:

raisewage1. They are abandoning workers trying to get on the first rung of the work ladder and hurting current low skilled workers. 

When a business is forced to pay well above the “Market Rate” (that is the natural free market price people would be willing to work for) they will need to hire employees that can get the job done quickly, reliably, and efficiently. And if a current employee can’t rise to the job requirements they will be let go.

This means that only people with the higher level of expertise will be offered and keep jobs. There will be no room for those low-skilled people just starting out in the work force. There will probably not be room for some of those who currently hold jobs at the current wage rate. Instead of opening their first paycheck of 2015 and seeing a bigger dollar amount they will also see a pink note telling them they don’t have a job anymore.

As the wage rate increases higher skilled but currently unemployed or underemployed people will filter back into the workforce taking jobs from just the people the Chicago City Council wanted to help. What’s better $8.25/Hour or $0.00/Hour?

2. Businesses will need to make adjustments

Basically businesses and the economy is a closed system. That means we really can’t create money out of thin air. The government is the only one with a printing press. In a business you can only spend the revenues your company brings in. Sure you can take out loans to make it through a temporary cash crunch but eventually the cash that goes out can’t be more than what comes in.

That’s how business works.

So as wage expenses per hour go up business owners will have two basic choices… 1) Cut work hours or 2) Raise prices.

Seattle-minimum-wage-555x285Businesses may not cut actual workers on the payroll but they will certainly cut the total number of hours worked. Sure they will be making $13/Hour but they will be working fewer hours so their paychecks and the business’s payroll costs will be the same. A classic example of this is how most fast food restaurants now have self serve drink stations. You thought they were doing this because they loved you… Nope they are forcing you to serve your own drinks so they can get away with fewer paid workers. That’s right, when you pour yourself a drink at McDonalds you just became and unpaid worker. Next you may be assembling your own burger.  Think about this the next time you fill your plate on one of those grocery store food bars and then pay for your food by the once. You just became an unpaid worker of that food store.

Raising prices is always an option for a business but as prices go up volume will probably go down. And that does not even take into account the effects of competition from other businesses in the area. Plus when prices go up your customers may stop and consider if they really need your product or service right now. Not necessarily a good thing for your weekly sales numbers.

The other kind of adjustments business can make should really scare the people on the Chicago City Council… I am referring to things like moving their business out of the city, paying people cash under the table, going with cheaper non-labor inputs (like worse quality food), outsourcing labor, or just shutting down because the business can’t be profitable.

If you think this shutting down a business concept is a little harsh remember that for most businesses labor is their largest cost component and the Chicago City Council just artificially increased those costs by over 57%. If a business was on the edge or barely profitable before then this will certainly finish the business off. No business. No jobs. No tax revenues. Collapsed real estate market. Sounds a little bit like Detroit, doesn’t it?

3. Costs will rise and that $13/hour will just not go far enough. 

Lets assume Chicago business don’t leave and workforce size is not reduced…

Happy workers will see a nice big jump in their weekly pay checks and since it’s a closed system, those increased costs will result in higher prices. The same workers who just received a nice raise will now be paying more for just about everything they buy. And they will be paying more in taxes too.

These Chicago City Council Members and the other fat-cat politicians will probably feel no real pain from this wage increase. It’s the vary people they are trying to to help that will bear the pain when this wage experiment starts to run off the rails.

Will Chicago Look Like Detroit Some Day?

Will Chicago Look Like Detroit Some Day?

So then you must be thinking that it is futile to raise the minimum wage because most of the pay raise will be eaten up by higher living costs.

You are only half right… It’s fine to increase wages. No problem with that. But wage increases need to be a natural part of the economic system. That means that increased wages are because of increased labor demand or increased productivity not because of artificial government intervention.

The last time wages were manipulated was during the rise of labor unions… You know, the unions that wiped out the U.S. steel industry and bankrupted General Motors and Chrysler. And… turned Detroit into a wasteland. Are we ready to play that game again?

By the way… According to the CNBC article the minimum wage is set to rise in 21 states this week.  Most are not raising it as much as Chicago but it is still going up.

Is Obama Missing The Point On How To Actually Do Something About Income Inequality For Black Americans?

OBAMA9214Between an enlightening article on the plight of Black Americans in the Sunday New York Times and Obama continuing his campaign for a higher minimum wage I’m beginning to think our President may be on autopilot of some type.

I will admit that it is probably much easier for him to keep calling for a higher minimum wage but will that really solve the big problems related to income inequality?

Some may think a higher minimum wage is the silver bullet but after seeing the following facts in the New York Times Sunday article I realized what a big problem we are faced with in this country:

• The net worth of the average black household in the United States is $6,314, compared with $110,500 for the average white household, according to 2011 census data. The gap has worsened in the last decade, and the United States now has a greater wealth gap by race than South Africa did during apartheid. (Whites in America on average own almost 18 times as much as blacks; in South Africa in 1970, the ratio was about 15 times.)

• The black-white income gap is roughly 40 percent greater today than it was in 1967.

• A black boy born today in the United States has a life expectancy five years shorter than that of a white boy.

• Black students are significantly less likely to attend schools offering advanced math and science courses than white students. They are three times as likely to be suspended and expelled, setting them up for educational failure.

• Because of the catastrophic experiment in mass incarceration, black men in their 20s without a high school diploma are more likely to be incarcerated today than employed, according to a study from the National Bureau of Economic Research. Nearly 70 percent of middle-aged black men who never graduated from high school have been imprisoned.

And as the article writer says… “All these constitute not a black problem or a white problem, but an American problem. When so much talent is underemployed and overincarcerated, the entire country suffers.”

I totally agree with this! You can’t debate these numbers and what they can mean for the future of the country. Unfortunately Mr. Obama seems to be out of touch with these facts. And especially lacking in any real solutions to get things going in the right direction.

The most interesting fact here is that, “The black-white income gap is roughly 40 percent greater today than it was in 1967.”

This is saying that basically all the government programs and the Trillions of dollars spent over the last fifty years may have missed the mark when it comes to moving disadvantaged people up the economic ladder.

But I guess it’s always easier to just write a check than create, implement, and track real solutions designed to make things better in the long run.  I truly believe that if the people at the bottom of the economy can move up the ladder it will be better for all of us. Unfortunately more and more evidence is showing that the government programs we have been using are just not working. More money alone will not solve the problem.

And… Just raising the minimum wage will probably make matters worse. As I have pointed out in past articles and especially this one where I show how Mr. Obama’s higher minimum wage will actually profoundly hurt the people he wants to help.

So what’s a possible solution?

Instead of just complaining about solutions to this problem or offering some kind of quick fix (that has not worked in the past) checkbook solution I have a simple Four point plan that could get this situation back on track.

 1. Education It is obvious that without an good education there is little hope of a better life. People complain about how these schools are unsafe and how all the teachers are burned out and more… But I say we mobilize an army of one million grandmas. Lets put them in every classroom to be sure the kids behave, are safe, get their homework done, and the the teachers are actually teaching. These Grandmas would be a formidable force. They will do more good than billions of dollars in wasted government funds. They are the key. What made me think about the Grandma factor? Back in the 1980s the Chinese government was failing miserably at controlling their population which was on track to cause a mass starvation. What did they do? They enlisted the countries Grannys to solve the problem and now China is in little threat of overpopulation.

2. Jobs Since the beginning of this country wave after wave immigrants have arrived here with no language skills and no education plus they have been called names and  discriminated against from the first day of setting foot on US soil. No one was ready to give these hundreds of millions of people jobs so what did they do? They started their own small businesses. They sold fruit, built cabinets, sewed clothing… What ever it took to provide for their families. There was no choice. It was either that or go back to a potentially worse (and maybe deadly) situation back in their home countires. My previous article shows how a simple cleaning lady working on her own can make around $90,000/Year. How can people just go out and start a business? First find a need then start a business to fill it. Need more help then take a look at this great resource to help people with the steps to create a small business. This program has been helping people start businesses since 1966 and has a great track record.

3. Personal Finance – Far too often people earn enough money but because of a lack of basic personal finance skills it is wasted or people are floored by some kind of financial calamity that could have been avoided. I’m talking about Budgets, Insurance, Taxes, Retirement Savings and more. Your state forces you to pass a test to get a drivers license. They need a basic class and test to certify that people can handle money. Without it no amount of income will be enough.

4. Clear Out The Jails – Far too many potentially productive Americans are sitting in prisons. Most are not a threat to their neighbors and want to be better people. Identify the ones who should be set free and let them out with the understanding that if they commit crimes that endanger others again they may not be set free a second time.

All of this will not happen by magic. As with my Million Grandmas Education Improvement idea it is going to take grassroots commitment, involvement, and responsibility.  This is how the hundreds of millions of US emigrants worked their way up the economic ladder over the past two hundred years.

And isn’t it convenient that our President started out as a community organizer?

He is just the person we need to head up this unprecedented effort get more people moving up the economic ladder. We will not see results in a week, month or even a year. But I can pretty much guarantee you that with these four ideas put into action with full community support and commitment that in fifty years (probably much less) there will be statistics that we can be proud of.

So what could be holding Mr. Obama back from these kind of positive community based solutions?  He surely does not need permission from a near worthless congress to get going on this right now.

Is Better Education Really The Key To
Solving Income Inequality?

thwTwo interesting articles popped up over the weekend. One article looks at how the trucking industry is having a hard time finding people to take their driving jobs even at $50,000 a year plus benefits.  The other article basically blames most of a persons bad luck and poor choices in life on their parents.

First let’s look a little closer at this Truck Driver shortage…

Because of increased government safety regulations truck drivers are not allowed to drive as many miles as they did a few  years ago hence their income has been capped a bit. These weekly maximum mileage regulations are probably good for any of us who drive on our nations highways because they certainly help reduce driver fatigue and make the roads safer. The downside is that drivers just can’t earn as much money.

Truck Driver GraphThat said… The starting annual pay for entry level long haul truck drivers is around $50,000 plus benefits. Not a bad paycheck and definitely will get a person on their way to a middle class lifestyle.

What kind of education is needed to drive a truck?

Trucking employers do not require a college degree. I don’t even know if they require a high school diploma. To drive a truck you will need to attend a several week driver training course paid for by the trucking company then you are ready to go. No college debt to worry about.

I wonder how many June college graduates wish they had a $50,000/year job waiting and no college debt?

TDI-truck-keys-to-office-rev-DSC00948So this is an example of how piling more public money into education may not really get the desired end result. Unfortunately once someone earns a four year degree they seem to think they are above anything that even looks like physical labor. Unfortunately their high priced college education may have forgot to give them any marketable skills.

Truck driving may not be the most glamorous job you could have but if you can stay sober, don’t have a nasty arrest record, and can read a map it could be a way onto the rolls of the productive Americans earning a solid paycheck. Sure you might have just earned a degree in Political Science, Psychology, or Fourth Century Latin Literature but what’s better, living in your parents basement or a life on the open road?

bad-decisions-tatOn to the second article… The New York Time’s Nicholas Kristof makes the journey back to his childhood home in Yamhill, Oregon and sees so many people with drug and alcohol problems plus long prison records so he comes to the conclusion that no matter what you do if your parents took the wrong path it is pretty much a done deal that your life will be hard.

All you will have to look forward to is addiction, crime, unemployment, and prison.

Not a pretty picture. and it’s sad to think that with all the public money spend on education, according to Mr. Kristof, if your parents had a hard life you are in for more of the same. And your children are destined to repeat the painful cycle.

Prison-barsMaybe it really takes more than a good education system to move up the economic ladder. Educational opportunities could really be just like the cover of the book. Those school buildings, yellow buses, high paid administrators, rows of shiny new computers, and libraries are only part of the story. The part that can be bought with tax dollars.

The difficult part is getting the kids motivated for the hard work of becoming productive citizens. But that can’t be solved with a fatter government check book.

 

 

Is Obama Missing A Simple Fix To
The College Debt Crisis And Income Inequality?

NYTCOver6-20-2014A recent article in the New York Times brings a lot of solid information together related to the College Debt Crisis we have been hearing about for some time now. The article has the wrong title (It’s Official: The Boomerang Kids Won’t Leave) but the facts the writer lays out are pretty grim and have some serious implications for the future of Income Inequality in this country.

The bottom line is that tens of millions of young adults have taken on over $1.2 Trillion (yes, that’s with a “T”) in debt and they just don’t have the jobs to pay that debt off in any reasonable number of years. Some of these people owe over $100,000 and are earning barely a minimum wage.

Somewhere someone got this rumor started that people with a college degree are guaranteed a future of high paying jobs.

Well… They, and by “they” I mean probably the colleges and universities that have profited the most from that false rumor, left out an important little caveat to that secure future myth of nice paychecks. While you are at college you need to pick up some skills that companies find valuable.

So here’s the basic scenario…

1) An eighteen-year-old kid itching to move out of the house gets accepted to the college of his/her choice.

2) This newly accepted kid has no idea what to major in so picks something fun like English, Latin, Physiology, Political Sciense, Art History, Communications, etc…

3) The kid finds out that it will cost $100,000 for four years and since mom and dad are struggling to save for retirement they can’t write a $100,000 check right now.

If you major in French you can read this menu.  Unfortunately, you will probably also be the waiter.

If you major in French you can read this menu. Unfortunately, you will probably also be the waiter.

4) The college has a nice office where kids sign on the dotted line and get a loan. Boom! Four years of freedom, parties, casual sex, and even a little learning. What kid wouldn’t sign up for that package?

The biggest problem here is that the college gets their money no matter if the kid even graduates and the funny thing about student loans is that the only way to get out of the payments is to die. Bankruptcy will not wash this debt away.

So you’ve been hearing about this College Debt Crisis for a while now. Smart people even say it is affecting the housing market since this generation of kids have to pay this debt off before they get on the home buying ladder.

Then Obama gets up there and in his smooth fashion throws an “executive order” out to allow these borrowers to cap their payments at 10% of their income and he is supporting a plan to refinance the loans at a lower interest rate.

Very nice indeed but that is what I would call “lip service”. They still have to pay off the huge debt while working at a minimum wage job.

These people are in a hopeless situation and over the next few weeks the next wave of college freshmen will be signing their lives away on the dotted line adding to the huge problem.

This needs to stop now!

And here’s a simple way to actually stop this College Debt problem from getting even worse.

When you take out a consumer loan for house, car, boat, computer or what ever, the lender is obligated to show you a truth in lending form that spells out clearly how much you are borrowing and what it will cost you to pay the loan back.

Why not an Obama “executive order” that forces the colleges to include a paragraph in the loan paperwork to be signed by the new student that clearly shows them their future income potential. These statistics are easily available for each possible major a student might select.

Here’s an example college loan full disclosure paragraph….

I, Joe College, has elected to attend Party University and major in Political Science at a cost of $98,252 for four years. After graduating I will be paying approximately $1,042 per month for 10 years to repay this loan. The latest statistics show that those students who major in Political Science have a 2% chance of getting a job in their area of interest at an average after tax monthly income of $2,983 so if I am one of the lucky 2% to land a job I will be spending over on third of my take home pay to retire this F#&@ing loan. and if I end up in the 98% of people who do not get a job in Political Science I will probably be in a minimum wage job that did not even need a college degree. In that case I will not even have enough take home pay to make this monthly loan payment and provide for a basic life style even close to what I have living at home with my parents right now. 

college-partySo… If that new college student signs this he/she will know right up front what they are really in for so when they can’t make the loan payments later they can’t say they were not warned.

Of course the “College Loan Full Disclosure” paragraph would read differently for Accountants, Finance Majors, any of the many variety of Engineers, or other majors that deliver people to employers hungry for people with real skills.

And what about the tens of millions of people already caught up in crushing student loans?

They better treat their parents well or find somewhere else to live.

 

 

State Of The Union Preview… Will Mr. Obama Pound Income Inequality or Propose Real Solutions?

SOU3I await tomorrow’s State of the Union Address with much anticipation. This is the chance for President Obama to lay out his vision for the next year. We are on the way out of wars in the Middle East, the Affordable Care program seems to be stabilizing, and economy is acting like it wants to improve.

Tuesday night’s speech should be very hopeful and positive.

At this point the President is at a crossroads of sorts. Sure his approval ratings are near all time lows and in general the American people do not hold our D.C. politicians in high regard right now but this could be Mr. Obama’s chance to re-energize the country.

SOU1So he can do two things Tuesday night… He can whine about Income-Inequality or find ways to solve the problem by proposing some real actionable strategies, tactics, and programs to start getting more people back to work.

By whining I mean he could decide to place the blame on others and not take personal responsibility. By solving the problem I mean propose things that everyone can rally around. People who have been out of work don’t want another hand out from an Uncle Sam who has to borrow from the Chinese and other false friends to pay for that hand out.

I think the unemployed would rather be working and the working poor would rather move up the income ladder. With US Corporations and Investors sitting on a record amount of cash I think a hint more business friendly policies could be a catalyst for an unprecedented economic renaissance.

JobTrainingWhat kind of help could Obama propose. How about some better training programs? Lets get people the skills they need for all those jobs that are unfilled in the marketplace right now. How about some basic job skills training to help people new to the work world to acquire the basic skills and attitudes needed to get on that first rung of the employment ladder?  And… how about giving those first time job seekers a chance in the market place by letting employers decide the wage rate that works the best?

That’s right… Simple economics dictates that if the minimum wage goes up employers will need to cut workers and/or demand a deeper skill set from the people they do hire. This will virtual close off the job market to new entrants. Can’t climb the ladder if you can’t jump on the first rung.

Right now this country needs a leader…

John_F_Kennedy_NASA_SpaceI think of President Obama as the CEO of the country. He has the position to make things happen. To inspire us all no matter what political leanings we have. The way President Kennedy inspired the entire nation with his space race goals.

If you were the shareholder of a company and after that all important annual meeting you felt your CEO did not have a clear actionable plan for the coming year and the stuff to rally the entire team how would you feel?

I hope we don’t feel that way after tomorrow night’s speech.