Tag: money

Categories
National politics

What Is A Billion

I got a forwarded email about putting some perspective on what “a Billion” is and how easily politicians throw around numbers on that order of magnitude. Here’s a summary from the email that attempts to put some perspective on the “one billion” figure:

    • A billion seconds ago it was 1959.
    • A billion minutes ago Jesus was alive.
    • A billion hours ago our ancestors were living in the Stone Age.
    • A billion days ago no-one walked on the earth on two feet.
    • A billion dollars ago was only 8 hours and 20 minutes, at the rate our government is spending it.

While this thought is still fresh in our brain, let’s take a look at New Orleans It’s amazing what you can learn with some simple division. Louisiana Senator, Mary Landrieu (D), is presently asking the Congress for $250 BILLION to rebuild New Orleans. Interesting number, what does it mean?

    • Well, if you are one of 484,674 residents of New Orleans (every man, woman, child), you each get $516,528.
    • Or, if you have one of the 188,251 homes in New Orleans , your home gets $1,329,787.
    • Or, if you are a family of four, your family gets $2,066,012.

The first two numbers got me thinking because if it was 1959 a billion seconds ago then it was 1000 B.C. a billion minutes ago. It turns out that a billion seconds is 31.7 years (so 1976) and a billion minutes is 1901 years (107 A.D.). If those numbers were calculated in 1992 then the 1959 number would be correct for a billion seconds and the billion minutes would have been nearly 60 years after Jesus died.

Despite that discrepancy, the value of $250 Billion dollars for New Orleans should open our eyes to the sloppy and generous spending practices of Washington. $250 Billion is nearly $1000 for every man, woman, and child in this country. Our government thinks that it can stimulate the entire national economy for less than it would take to rebuild New Orleans ($165 Billion vs $250 Billion). With numbers like that anyone should start being interested in making our government more fiscally conservative.

Categories
Local politics

Increasing City Council Pay

The news that our mayor asked city council to raise his pay and theirs got me thinking about this issue more closely than I’ve ever thought about it before. It makes sense that it would be a sensitive issue, but even in the private sector I’m a bit leery of giving someone the power to set their own level of compensation with money from other people. Congress is a good example of the abuse of this power as they have set a system of automatic pay increases (every year as I recall) unless they take action to prevent the pay increase.

I’m not accusing our city council of anything even remotely like that but I wanted to see if anyone had any thoughts or experience with this type of issue that might help shape my position. I’m trying to balance fair compensation with maintaining the integrity of the public service aspect of serving in city government as an elected officer. I’ll share my position after I firm it up a bit. I plan to be talking with Johnny Revill (a member of our city council) about the issue since he lives near me.

Categories
National politics State

Fortune 535

Check out the Sunlight Foundation’s Fortune 535. It gives numbers of the net worth of each member of Congress based on congressional reporting requirements. Some of the numbers won’t be very surprising, but others will probably make you take a second look. In any case, make sure you do more than just look at the final number. For example – I looked at the Utah congressional delegation and saw that Sen. Bennett was the richest of the 5 ($5 million) and Rep. Bishop was the poorest ($16,000). Another glance shows that there’s more to the story. Rep. Bishop started his congressional career 6 years ago with a net worth of negative $55,000 and Sen. Bennett has seen his net worth drop by $43 million over the last decade (losing nearly 90% of his original worth).

I’m not trying to argue who is a good guy, or a bad guy. Nor am I trying to stir up pity for either of them. They just make a good illustration of the need to look deeper than any one number to get a better picture of the intersection of money and political figures.

Categories
culture

More on Consumption

A great comment led me to this video – which everyone should see:

Categories
culture

Money – It’s Not Just for Rich People

Money - It’s Not Just for Rich People I have read a number of books on personal finance over the years because good money management is a key to happiness – it’s hard to really be happy when facing an endless mountain of debt. When I read Money – It’s Not Just for Rich People from Janine Bolon at SmartCents there were few really new concepts. Much of the financial advice is based on earlier works such as Your Money or Your Life, which I had read previously.

There was one major new principle though which goes beyond simple math and into the karma of financial decisions. That’s the 60/40 principle. I’ll leave the details to the book, but it was completely unique to find a book which acknowledged that financial success or failure is not exclusively tied to how much we earn and/or spend, but also to how we spend. Though she makes no reference to it, the sentiment is not unlike the invitation to:

Cast thy bread upon the waters: for thou shalt find it after many days. (Ecclesiastes 11:1)

If you want a real path to financial independence – something more dependable than winning the lottery – I recommend picking up this book. It distills the principles into a memorable formula and tells the truth about financial independence – it requires discipline in your spending habits and an accurate understanding of the difference between needs and wants.

So what does a book about personal finance have to do with conservative politics? Aside from the fact that all conservatives are either rich business people, stupid enough to think they can get rich, or just plain old ignorant bigots (tongue firmly in cheek), not much except that the principles of personal financial success and the principles of sound government seem to be equally misunderstood by the public at large. Also, I agreed to do a review on this book and it’s been a long time in coming.

Categories
politics State

One Party State

Most people are probably not yet aware that the state legislature is in session yet and already our unbalanced government is drawing flack from both sides of the political spectrum. From the left we get complaints about a task force to study merit pay for teachers. I like the idea of merit pay, but the task force being proposed is highly questionable as it is overwhelmingly composed of legislators rather than educators and citizens. It goes so far as to pay the legislators on the task force, but not the other members of the task force. It is so loaded with legislators that if they were to split the legislators proportional to the makeup of the legislature they would have 9 Republican legislators and one (likely Republican) governor’s designee who can simply dictate the outcome of the study against the other 3 Democratic legislators and 6 professional educators – this assumes that they put 3 Democrats on the task force – which is not guaranteed.

From the right we have complaints that our state laws governing the use of campaign funds are too lax. It seems like the simplest of common sense that campaign donations should not be used on other campaigns or for personal use unrelated to active campaigning. It’s nice that we have laws to require full disclosure of any gift over $50, but that’s no excuse to allow campaigning to be used as a source of personal income.

You really should visit the original articles to get the full extent of both issues. Nice start to the political year.

Categories
National politics

Budget Math

I wish I knew where they got their deficit spending number, but KVNU’s For The People really caught my attention with the side-by-side listing of the deficit spending in the budget President Bush just signed. They claim that $240 Billion of the $555 Billion is deficit spending. That’s over 43% of the total budget being paid with imaginary cash. The original excuse for deficit spending (back in the Depression era) was that it could be used to fund emergencies, as a temporary measure to get us past tough times such as war or depression. The problem here is that no matter how great the emergency, if you are spending everything you earn plus another 76% of what you are bringing in it’s time to find a way to reduce your costs by 40% (which would still leave us with deficit spending this year of $20 Billion).

What really got me about all of this is that although we are in a war right now that war only accounts for $70 Billion so we could remove that spending completely and we would still have $170B out of the $485B being paid on promises. (That’s still 35% deficit spending.) There was $28B in domestic spending that the President didn’t want (only $142B to go) and $10B in pork earmarks. In other words, nobody even attempted to spend less than 30% of the budget with play money. If Congress had started with the budget proposed by the President and simply subtracted everything they didn’t like we would still have been spending more than $100 Billion dollars that we didn’t have. I think we can say that this government is numerically bankrupt – who cares that they exercised their power to raise their credit limit so as to prevent them from being financially bankrupt this year.

Categories
politics

Useless 401K

Why is it that the government gets to tell me when I can spend my money?

That’s a question I have asked myself many times. The “you can’t touch it until you’re 60” rule is proof of why it is not the business of government to get involved in what private citizens do with their money (within the bounds of the law). I remember hearing a story from the Romney campaign about Mitt Romney sitting down with his sons at dinner and asking them about their savings. He was surprised to learn that none of them had any savings in the form of 401K or IRA accounts. Their reasoning was that they could not afford to lock up money in that kind of long term plan because they would not be prepared if they had any financial emergency. I remember thinking “I can relate to that.” For Mitt Romney the result was that he now proposes a Tax Free Savings Policy:

Governor Romney Will Make Middle Class Savings Tax Free. Governor Romney’s plan will allow middle class Americans to save tax free by changing the tax rate on interest, capital gains and dividends to absolutely 0%. By helping more Americans save and invest, we can meet the challenges of an aging population and ensure the financial security of America.

– Governor Romney’s Plan Will Allow Over 95% Of American Families To Save And Invest Tax-Free. Any taxpayer with Adjusted Gross Income of under $200,000 would pay a tax rate of absolutely 0% on all of the income they earn from their savings, capital gains and dividends.

My experience has been that I got a job and could not contribute to the 401K plan at the company for 6 months – of course that was when I was technically working as a contractor from a temp agency. At the end of the 6 months my job status changed to being a direct employee of the company and the clock restarted on their waiting period before I could contribute to their 401K plan. I had hardly begun contributing to that 401K plan after their waiting period before the company started downsizing and I was out of a job. I now work for a very small company that does not offer a 401K so I have to roll over my pittance from the other plan into a personal IRA, but I can’t actually invest the money until I have many time more money than I would be rolling over. My current company offers a 403B but there is no guarantee of their matching anything I contribute so the incentive is absent.

As I was contemplating that predicament I also started to consider the implications of contributing to either a 401K, a 403B, or an IRA – anything I might put in any of those would be locked away. What if I had a need, or what if I wanted to retire early? If I put my savings in any of those I would have to have a separate means of savings to fund an early retirement. Essentially the government is locking me into working for at least 30 years unless I have a very lucrative career.

From my perspective the tax-free savings policy sounds like a good thing. I hope it gets enacted. Maybe our current lame-duck president could start pushing for it. If he did I can guarantee that I would view him more favorably at the end of his term than I currently view him.

Categories
life National pictures

HSA Figures

I’ve already admitted that Health Savings Accounts are not the full solution to our health care system, but they are among the most powerful tools that we have today. The example of Whole Foods grocery really illustrates the point.

Five years ago, the Whole Foods grocery chain switched to a high-deductible plan. If an employee has a sore throat or a sprained ankle, he pays. But if he gets cancer or heart disease, his insurance covers it.

Whole Foods puts around $1,500 a year into an account for each employee. It’s not charity but part of the employee’s compensation. It’s money Whole Foods would have otherwise spent on more-expensive insurance. Here’s the good part for employees: If they don’t spend the money on medical care this year, they keep it, and the company adds more next year.

It’s called a health savings account, or HSA.

CEO John Mackey told me that when he went to the new system, “Our costs went way down.”

Yet today, some workers have $8,000 in their accounts.

The same articles states that:

If people paid their own bills, they would likely buy high-deductible insurance (roughly $1,000 for individuals, $2,100 for families) because on average, the premium is $1,300 cheaper. But people are so conditioned to expect others to pay their medical bills that they hate high deductibles: They feel ripped off if they must pay a thousand dollars before the insurance company starts paying.

From my own experience when people really understand the program they like it. Here are the numbers that our company found as we have been shopping for insurance lately. We chose one high deductible plan and one standard plan that each employee could choose from. The high deductible plan was $2500 a year cheaper in premiums. We calculated that the worst case scenario for the high deductible plans – paying every penny of the deductible without receiving a cent from the insurance company – would cost $884 more than the same medical care under the standard plan (this assumes that much of the deductible is used in preventive care where the standard insurance charges a copay for each visit, if it were some accident that cost the whole deductible for the HD plan the difference is no more than $700). On the other side – the person on the HD plan has to spend a minimum of $3900 (okay it came out to $3899.99) before they have spent as much – including premiums – as the person on the standard plan.

When we started discussing the plans as employees there were 2 of us who were already planning on getting HD plans. By the time we made the decision on what plans to offer 70% of the company had decided to switch to HD plans.

Categories
National politics

SCHIP Numbers

The SCHIP politics are perfect for people with different ideals to keep political pundits happy – do you favor smaller government and oppose helping children, or do you help the helpless by taking money from everyone else? President Bush did what he said he would do and vetoed the bill. Congress failed to override the veto. So now it’s back to the drawing board without anyone having changed positions. I’m all for smaller government and that was an ambitious expansion, but the numbers didn’t add up even if I were less conservative.

. . . the vetoed bill that would have more than doubled the funding from $25 billion for the next five years to $60 billion and expanded coverage from 6.6 million children to 10 million.

So for 2.4 times the price we can ensure 1.5 times the number of children – that sounds like we’ve just introduced a lot of waste into the system.

Bush and many House Republicans . . . want the program narrowly tailored only for those making twice the poverty level or less, though they would not remove anyone making more who is already enrolled. The president says that leaves about 500,000 children who are eligible but not yet enrolled.

“I want to provide enough money to make sure those 500,000 do get covered,” Bush said Wednesday. “That ought to be the focus of our efforts.”

At first, Bush only wanted to add $5 billion in spending, but government budget analysts say that is not enough to cover the rising health care costs of those already in the state programs.

Somehow I just can’t escape the conclusion that the mentality “if it’s getting too expensive just let the government pay for you” can only lead to financial ruin for the country. Have we forgotten that funneling money through the government does not increase the amount of money available. Even if government programs cost nothing it would be a zero sum equation. If costs are rising then we need to find a way to reduce them, not just play hot-potato with the bill.

Apparently there is an alternative solution being proposed in the House that covers those under 200% of the federal poverty level and then gives tax credits for those up to 300% of the poverty level. This would give coverage to most of those who would have been covered in the original bill, but through different mechanisms – the question on this new bill is – what’s it going to cost. Even if I prefer tax credits over federal programs I don’t want to pay $65 billion to cover 10 million children with tax credits any more than I want to pay $60 billion to expand the existing government program.