Does The US Government Support Income Inequality By Condoning Corruption In Africa?

coruption2I was in an Uber car speeding to an airport last week and as usual I struck up a conversations with the driver. She was an extremely articulate woman from one of those  small non-picture postcard  west  African countries. She was so happy to be safe in America where she could earn some money and send her son to a good school.

Okay…  so I was making a quick escape from Chicago when I was talking to this Uber driver.   That’s the city with one of the highest murder rates and worst schools in the country. There is currently a fight going on to raise the minimum wage from $10/hr to $15/hr as a solution to potentially relieve some of the income harsh income inequality there.

Odd that this Uber driver considered Chicago a garden spot…

Traffic slowed as our friendly conversation turned into a heated lecture as she schooled me on corruption and the resultant hopelessness back in her home country.  Government sanctioned corruption in her country saps the economy of needed resources and challenges people every day. Government officials expect payoffs for everything from a driver’s license to placing your child in a decent school.  And if you dare start a business in one of these countries  there will be a weekly knock at corruption5_0your door by at least one government official looking for their unearned cut of your revenues. And that is if you can afford the under-the-table payoff to get your business license.

That’s corruption… And the toll it takes on education, employment and human spirit keeps the poor below the poverty line and continues to enrich those in political power. Think about this next time you hear someone complain about income inequality in the United States.

According to this Uber driver she makes around $17 an hour. She loves her job, freedom, and how she can provide for her family. This would not have been possible back in her home country in Africa.

So what about the billion or more people still in Africa dealing with these corrupt governments?

ForeignAidJokeTshirtWell it wouldn’t be so bad except our US Government seems to be supporting the corrupt African governments on many fronts.

Over the next few days President Obama will be visiting Kenya and Ethiopia. There will certainly be a multitude of photos with Obama and African government officials smiling, shaking hands, and generally chatting it up. Looking to be the best of friends…

In the meantime the smart people at Transparency International rank Kenya as 145th most corrupt country out of 175 countries measured (the USA is 17 out of 175).  Luckily Ethiopia is not as bad as Kenya. Ethiopia ranks 110 out of 175.

The Obama's with the President of Kenya

The Obama’s with the President of Kenya

The problem is that with all the financial aid we send to the dark continent we really don’t know how much does any good. With corruption this high much of that money may be going into government pockets instead of where it is needed.

Why does the US Government tolerate and even condone this corrupt behavior?

I guess in a more perfect world a bolder US Government could impose sanctions and isolate these corrupt African government officials instead of shaking their hands and making nice.

Unfortunately the formula looks like this… Corruption -> poverty -> hopelessness -> anger -> terrorist radicalization -> terrorist attacks.  Maybe fixing the corruption would reduce the terrorism threat faster than sending money and weapons to corrupt African governments.

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.

Why Would OXFAM Twist The Income Inequality And Wealth Inequality Numbers? I Know Why…

oxfamThe world seems top be abuzz because of today’s Pre-Davos OXFAM report stating how 1% of the world population will shortly own 50% of the world’s wealth. On the surface those numbers could be pretty scary. Bringing to mind scenarios where the wealthy 1% become the evil taskmasters to rule over us all.

The thought that 1% of the worlds population would hold 50% of the wealth should certainly strike fear in us all…

That is unless you have the real numbers and even a passing grade in primary school math. I’m not talking calculus or anything here. The terror of this 1% holding 50% of the worlds wealth can quickly be dispelled with the use of a simple four function calculator.

First some facts…

1) According to the U.S. Census Bureau’s U.S. and World Populations Clock the current world population is around 7,218,930,000. This number is constantly increasing sicne there is a birth every 8 seconds and a death every 12 seconds. To make my point I will use the number above. That’s around 7.2 Billion people living on earth right now.

PopCLock2) According to a handy Wikipedia page using some seemingly reliable sources the 2014 sum total of the worlds wealth is around $263,242,000,000. Sorry for all the zeros but that is just over $263 trillion.  This is also the number shown in the OXFAM Worksheet that went along with their report.

Now the simple math part…

No need to get out your calculator since I will do all the calculations for you. But by all means please do check my math. I know you will want to once you see the number I come up with and how you probably neatly fit into the category of the the richest 1% in the world.

Here we go…

1) Since the World population is 7,218,930,000 then 1% of that world population is (7,218,930,000 x 1% (or 0.01)) equal to  72,189,300 people. Those are the evil 1% hording the planets wealth.

BillGates2) Since the World’s sum total wealth is $263,242,000,000 then the 50% of that wealth that the evil 1% holds is (263,242,000,000 x 50% (or 0.50)) equal to $131,621,000,000,000. Looks like lots of cash, right?

3) Now since the evil 1% or 72,189,300 people in the world hold 50% or $131,621,000,000,000 of the World’s hard-earned wealth that means that on average each of those potential evil doer one-percenters has (131,621,000,000,000 ÷ 72,189,300) exactly $1,823,275.75 dollars in their passbook savings account down at the corner bank.

That’s sounds like a lot of money to hoard. Or is it?

Stop and think about what you are worth for a minute… I’m not talking about how much cash is in your wallet or gold hidden in your wine cellar. I’m talking about how much money do you generate?

That $1,823,275.75 probably looks like a lot of money to you but lets look at it this way…BUFFETT CREDIT

If OXFAM or your favorite uncle or Warren Buffet sent you a check today for $1,823,275.75 (forget about the tax ramifications for now) instead of going out and spending a penny of it, what if you put it all in a supper safe 30 year U.S. Government bond paying 2.5%?

At 2.5% a year interest rate you would receive a nice pretax check from the U.S. Treasury for (1,823,275.75 x 0.025 (or 2.5%)) $45,581.89.  How close is that to your current pretax take home pay plus any returns from your current investment portfolio?

Wait a minute!

That’s right if your gross income on your 1040 this year will shown a number over $45,581.89 and you don’t think it will fall much below that for the forseeable future then technically, I got some bad news for you,  you (your blood, bone, and never-say-quit spirit) are an asset that is worth at least $1,823,275.75. I’m sorry to say you are technically in this exclusive 1% club. No secret handshake required.

88587_wealthiestpeopleThis concept that the present value of your future earnings should be considered at all may seem a little out on a limb but it is not really. Most of the wealth held by all the richest people in the world (people like Bill Gates, Warren Buffet, and Mexico’s Carlos Slim) is in stock certificates and the value of their stock is nothing more than the present value of the expected future cash flows of the those companies. Don’t believe me? Then check here.  Basically what all the words on that page are saying that all a stock is worth is the present value of the expected future cash flows.

So if you are not making at least $45,581.89 a year you can stock reading right now. But if you are making that much or more go look in the mirror. You are the evil 1% the people at OXFAM have in their gun-sights. Be careful because if word gets out your life may be inconvenienced by a crowd of protesters outside your home, office, car, or favorite coffee shop.

How can this possibly be true? How could you actually be part of the evil 1%?

Any time you see supposedly smart people like those at OXFAM start to throw around these type of percent numbers your B.S. meter should start to click like a Geiger Counter within a few miles of Chernobyl Hot Dog, Beer and Perogi stand.

Member: The Evil 1%

Member: The Evil 1%

If you run the real numbers. taking into account the real wealth of people all around the globe, you might find that we are all a part of some kind of 1%. And we are all not that evil. Some one may want to convince you that you are the 99%. Maybe you are. But, run your numbers and you may find that you are solidly in the 1%. Enjoy it. embrace it. Yes, you are special.

The bottom line is that there are a lot of people in the world and there is a lot of wealth. A lot more that the fine people at OXFAM could even imagine. Most of it like the value of a Papua New Guinea Farmers Sweet Potato farm can’t even be accurately measured.

Unless…  You are OXFAM looking for a Monday morning slow news day headline… Then those scary big percentage numbers are just fine.

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.



When Robert Reich Speaks It’s Always Scary…
What’s The Latest He’s Saying About Income Inequality?

111229_robert_reich_ap_328I’m always ready to listen to a smart economist. They usually have some great things to say that can help make things a little clearer.

I have listened to many Robert Reich commentaries on NPR and its seems that about half of what he says makes a lot of sense. It’s the other half I worry about. Unfortunately that may be the half that some people believe the most.

In Mr. Reich’s latest article he tries to debunk the biggest myths of Income Inequality and what he says is just scary. Like most of the politicians in D.C. he has probably never tried to run an actual profit making business and this shows in his systematic explanations he uses. They hard firmly founded in some other world than the actual one we live in and the same one real people have to establish and operate businesses to make profits.

Has Mr. Reich actually Walmart_USforgotten that without business making profits there will be no taxes for the government to collect to pay for the essential services needed to keep the country moving.

Let’s look at what he claims are “lies” why his income inequality positions just wont work in the real world….

Lie number one:
The rich and CEOs are America’s job creators.

Mr. Reich says “The truth is the middle class and poor are the job-creators through their purchases of goods and services. ” But he forgets that without the companies to provide jobs there will be no place for these people to work.  And without the proper profit incentives those companies will go elsewhere as many of them already have. But Mr. Reich may be partially correct on this one since the US Government is really the largest single employer. China’s army comes in number two followed by Walmart in third place.

Lie number two: People are paid what they’re worth in the market

P1-AW426A_EXECP_G_20100726194903He says… “The facts contradict this. CEOs who got 30 times the pay of typical workers forty years ago now get 300 times their pay not because they’ve done such a great job but because they control their compensation committees and their stock options have ballooned.” That’s right, in effect the CEOs are the owners of the companies and in a free society like ours the owner gets to set his own compensation along with the compensation of the people who work for him or her. If the company does not choose to pay enough then they will have a hard time finding employees. But as long as qualified people are standing in line outside the company’s employment office door at the current pay rate then why pay more. I would like to see if Mr. Reich doubles the pay for the person who washes his car, or serves him a meal in a restaurant, or starches his shirts. I doubt it. He lets the market determine how much those workers are paid. And that’s the way we do it here in this country.

small-businessLie number three: Anyone can make it in America with enough guts, gumption, and intelligence.

Now this is really an insult to everyone who has landed on our shores over the last few hundred years. Plenty of people have started successful businesses here with little more than guts, gumption, and intelligence. Everywhere you look you will see individuals who have perceived though many hardships to start their own businesses and eke out a good living for their families. That is really what this country is about. How can he forget that? Take that away from the next generation, make them believe that they will never achieve their dreams for what ever reason, and you will have poisoned the well for the future. And that is just what I am afraid could happen. If you tell someone enough times that they will not make it on their own (for what ever reason) eventually they will start to believe it.

What’s the better foundation for building a stronger America? Telling people they can’t make it on their own or getting out of their way and telling them that with enough guts, gumption, and intelligence they can do what ever they want. Keep telling them that and they will certainly start to believe it. Especially with all the great examples out there.

Earns McdonaldsLie number four: Increasing the minimum wage will result in fewer jobs

On this one Mr. Reich says… “In fact, studies show that increases in the minimum wage put more money in the pockets of people who will spend it – resulting in more jobs, and counteracting any negative employment effects of an increase in the minimum.” Then he goes on to give some details on studies in adjacent counties in the country and how no one lost their jobs.

Again Mr. Reich is missing some of the practical aspects related to raising wages above market rates.

Unfortunately if all these fast food restaurants and the like raise wages the owners will need to raise prices. And those higher prices get passed along to the same people who just got a pay raise. And… As I have discussed in previous posts on this subject, the person who has that fast food job at an $8/hour wage will not be the same person $14/hour. When the annual pay for fast food and other low-skilled jobs starts tp get closer to $30,000/year watch how fast those college educated unemployed zombies living in their parent’s basements come out of hiding and finally get jobs. That’s right, if the minimum wage is artificially increased instead of set by the market the exact people who need those jobs will be unemployed. The new educational minimum will be a college degree for those entry level jobs. And at a higher wage those people will be required to work harder than ever.

Robert Reich is one of the smartest guys in the world. But before he can scare anyone else I wish he would go run a corner hot dog stand for a few months so he can see what the real world looks like.

Could The Latest Income Inequality Data Be Lying To Us?

mouth moneyTwo interesting Income Inequality stories seem to be bouncing around.

One story from The Atlantic claims that a shorter life could be the unfortunate fallout from Income Inequality. That means a shorter life for those with less money. I’m sure the story would have been buried if  it showed the opposite was happening. If a life of champagne and caviar was prematurely killing the members of the 1% club we would probably not hear about it.

The other story covered in the Huffington Post and many other places is about how French Economist Thomas Piketty seems to think that Income Inequality will just keep getting worse unless we impose a Global Wealth tax to redistribute income. And do it fast!

It’s amazing what people will say to create a hot headline when they are on a book tour. And how they bend statistics and common sense to get a little time out in the light of day.

And… These are normally pretty smart people. Is this like yelling fire in a crowded movie theater ow what?

First lets look at the story in The Atlantic about how richer people just seem to be living longer…

BN-CK785_income_G_20140417175313The data and pretty charts seem to say that if you are not part of the wealthiest one percent you should probably buy a big life insurance policy because you will have a short life.  They are trying to say that less money causes a shorter life.  This is like gathering some numbers and finding out that people who use Macintosh computers live longer so the U.S. Government  should  distribute Macs to everyone so they can all live longer healthier lives. It it was only so simple.

What this study fails to point out are the thousands of other factors that could be at work shortening peoples lives beside their Income level or if they own a Mac Computer.

The choices made by someone in some backwoods West Virginia county compared to a Washington D.C. one percenter could be very different and profoundly influence each of their lifespans. Simple choices like drug and booze consumption, what they eat, how they exercise will make the difference not so much the size of their bank account.

I would propose that someone earning very little money but making good health choices will always live longer. And… It does not cost much more to make clean health choices does it?

If you think I am wrong then tell me why the five place on earth where people live with the longest lifespans do not seem to be populated by rich one percenters?  Yes… These are places like Okinawa, Japan and Ikaria, Greece.

wealth tax2How about what that French Economist has to say…

Basically his concern is that the rich will just keep getting richer and the poor will keep getting poorer.  And his briliant solution… A global Wealth tax!

When I hear this stuff I start to think people have been living in some subterranean cave and just poked their heads out for a few minutes to look at the world.

If this economist would have looked around a little longer before spouting he would have discovered that the stock market has had a great run up since it crashed back in 2008. This is how things like the stock market have worked since the beginning of time. They go up and they go down. When they are going up like they have been people who take risks get rewarded. At least on paper they get rewarded.  I say that because much of this wealth he is talking about is “fantasy wealth”. Bill Gates and Warren Buffet’s vast riches mostly exists as numbers on some computer somewhere. As soon as the stock market heads down, and it will, that wealth disappears. It’s “fantasy wealth”!  Just like monopoly money.

And… If a global wealth tax is put in place a portion of all this “fantasy wealth” will need to be turned into real cash. So what do you think will happen to the stock market if most of the people sitting on shares of stock, where this wealth is located, need to sell some stock to pay a global wealth tax?

marketcrashWhat happens when there are more sellers than buyers in any market?

That stock market will crash right along with any market like Gold, real estate, or Bennie Babies when there is a rush to sell.

And.. As we hopefully all know crashing markets don’t help anybody.

The smartest thing I saw was a New York Times article that smartly points out that how all this 99% and 1% class warfare talk is pure nonsense since the 1% and 99% are not any people in particular. They are just buckets and people move in and out of these classifications all the time. According to this real research 12% of the U.S. population will move in and out of the top 1% bracket over a ten year period.

And… 39% of Americans will spend a year in the top 5% of the income distribution, 56% will find themselves in the top 10%, and a whopping 73% will spend a year in the top 20% of the income distribution.

When you start looking at real numbers this Income Inequality story starts to make more sense.