Crazy From the Heat

I have not had any internet access at home, so I am blogging from my workplace.

I went down to the Gulf of Mexico and swam for 4 hours. The beach is only 30 minutes away, I discovered. When I came back, the air conditioning in my RV had failed. The ambient temperature has been 99 degrees Fahrenheit during the day, with the heat index at 110. So I had to spend the weekend in the heat. I think I might have lost some water weight from all the sweating. Don't worry, I'll gain it all back; I always do.

My job seems to be starting out well. Business activity is booming here along the coast. Besides the project we are working on, there are many oil refineries being built and there are several road construction crews out doing work upgrading the highways here.

If you are looking for work, you might want to look into getting a job with the oil industry. Everything it touches seems to turn to gold here.

Now if I could just get my internet up and running at home.

What's Wrong With America and What Will You Do About It?

I like the question asked and the answer given. We must answer this question to determine who we are as a people. It is central to our value system as a country.

I Have Arrived

I actually arrived at 12:15am on Wednesday, but I didn't get internet access until tonight.

So far, I am quite pleased with my job. I am working on a project that will use carbon dioxide that would normally be a waste product from petroleum exploration (and is believed to contribute to global warming) to help extract more oil from the ground. See this page for more information about it. It is being advertised as a kind of "green" solution to oil exploration.

We are extremely busy with our project. Beaumont, Texas is a nice town. It's small enough that you don't have traffic jams at 5:00, but it's large enough that you have access to major shopping centers that you would expect in a large town.

If you need to see major sporting events or shows, Houston is only a little more than an hour away.

I am slowly settling in. After the initial shock of moving, I am quickly discovering that things are pretty good here. The weather is a little hot and muggy, but it isn't anything a little air conditioning can't fix. Besides, the ocean is not too far away, either. That's a premium when you are from a landlocked state.

Another difference in the weather is that the biggest threat is hurricanes rather than tornadoes. I was told with hurricanes you get days of warning rather than minutes.

The people I have met have been friendly for the most part; and I am already starting to think that some of my observations in Oklahoma may have been somewhat myopic. On the other hand, I think I may be living in a kind of oasis given what happened on the stock market today (and reading Charles Smith's predictions today at Of Two Minds).

I don't know how long this will last, but I intend to enjoy it while I can.

A New Beginning

As of Wednesday, I am leaving the private practice of law. I have taken a job with a private company and because of the all of the work involved in the move, will be blogging lightly until I get settled in to my new position late in the week. I have a lot of work to do to prepare for the transition to my new life.

This is a time of sweet sorrow for me. No more Seven Years of Bad Luck. My fortunes appear to have changed. For the first time in I don't remember how long, I feel that I finally have some hope for the future. The oil industry is booming, and I am going to try to ride the wave for as long as I can.

Now it's the story of the Seven Fat Cows and the Seven Skinny Cows. I think we may be entering into a new time of the Seven Fat Cows. But we shouldn't become complacent. We must prepare for the Seven Skinny Cows. Oil is a cyclical market, and it is notorious for being a "feast or famine" and "boom and bust" market. And I am not even entirely convinced that it is not being manipulated right now. In any case, you have to strike while the iron is hot, and it sure looks hot to me.

Fake Job Ads

Hat Tip to Daily Kos writer BobOak for bringing attention to this information.

Apparently, many job ads put in American periodicals and internet job sites are placed in order to prevent Americans from getting jobs. This is essentially a type of fraud as the employer has no intention of hiring any applicants for the position -- even if they would be willing to accept the position at a lower salary and the applicant is highly qualified.

This is an indication that there is no shortage of American workers, there is a shortage of American employers willing to hire American workers.

Building Wealth

I saw this at at Bankrate.com:

Take a 30-year-old earning $30,000. He or she would only have $216,000 in a 401(k) at age 67, assuming he or she was saving 3 percent of salary, the company was providing a 1.5 percent match and their investments were returning 7 percent per year, according to Vanguard.

So, the sad truth is that nine of 10 American baby boomers have less than $250,000 saved for retirement, a 2005 survey commissioned by Merrill Lynch found. As we've seen, that isn't enough. And if you're hoping for a pension, well, good luck, because half of working Americans don't have a pension plan and even if you do, you can't count on it being there later because corporate America has been shifting away from pension promises. As Americans, we've got to take personal responsibility for our financial future and that of our families.

I thought: "This would be a great lesson on why we need a national pension system." But, no; that is not the point the writer, Jennifer Openshaw, could think to make. Instead, she said "buy real estate" because

"it's tangible and, as an investor, you can enjoy both the appreciation and the income generated as rents rise in the future. Plus, you get the power of leverage with your money -- something you don't get with many other investments -- meaning you might put only 20 percent down but you enjoy appreciation on the entire value of the home."

This is a common theme in financial "self-help" books; but really now, how many people can afford a second home on $30,000 per year? How many people can afford their first home on $30,000 per year? What if the home loses value? (You can read about that problem over at The Housing Bubble Blog and Calculated Risk Blog.) These "financial gurus" never seem to talk about that.

She also talks about the need to have adequate health care insurance.

What is it about these financial gurus and the disconnect between the examples they give of the financial situations of the people they use as examples and the solutions they give? They always seem to give millionaire answers to people with immediate cash-flow hundredaire problems. The problem isn't just that Americans are using too many credit cards (although that is a component of the problem); the problem is also that the working class is not being compensated based on their productivity and sharing in the profits thereof.

The answer actually is pretty obvious: pressure businesses to raise their employees pay so they can save adequately and raise taxes on the wealthiest to pay for the social services and programs that the working class is going to need.

John Edwards: End Poverty Within 30 Years

Presidential candidate John Edwards has proposed that we work the end poverty in the United States within 30 years. Senator Edwards sees this as "the great moral issue of our time." I agree. Click on the title above to read his press release.

A New Deal For Generation Y

In an article at the American Prospect Online, Offering the Young a New Deal, writer Paul Starr proposes that we create a New Deal for America's Young to provide education funding, health care benefits and job training. From his article:

Many of the forces affecting the economy today come to bear hardest on young people starting out in life: the soaring cost of a college education; the difficulty in finding jobs that provide a middle-class income; lack of health insurance coverage; the long escalation in housing prices; and the conflicts between the demands of work and family life.

We need a New Deal for the young -- a Young America program -- that can help young people cope with those challenges. At least part of that program ought to draw on the lesson of the GI Bill. Americans will be ready to be more generous to the young if the beneficiaries have demonstrated responsibility and contributed something through their own efforts. The United States no longer needs to draft or recruit most of its youth into military service. But we could make national service, whether civilian or military, a routine experience, for some in their late teens and for others after college. And, in return, we could help them to deal with the responsibilities of paying for their education, first homes, health coverage, and the rising costs of raising children.

A Young America program would not provide something for nothing. Like the GI Bill and Social Security, its benefits would be earned. And because of its focus on youth, it would be a way of helping Americans, individually and collectively, become more productive as well as more secure.

The premise of a Young America program would be the inclusive conception of freedom and power that are at the core of modern liberalism. An increasingly unequal America that exposes so many of its young to poverty and insecurity cannot be the strong and prosperous nation all Americans want it to be. Government can be the means for expanding the horizon of freedom, creating opportunity, and making a society both more powerful and more just. The world used to think of America as a country where the young had possibilities unmatched anywhere else. The United States could be that country again.

This is just the kind of thinking that we need. We need to expand opportunities, not restrict them.

Income Disparity Grows Widest in 30 Years

Yahoo News is reporting that income disparity is at a three-decade high in America.

WASHINGTON (AFP) - The gulf between rich and poor in the United States is yawning wider than ever, and the number of extremely impoverished is at a three-decade high, a report out Saturday found.
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Based on the latest available US census data from 2005, the McClatchy Newspapers analysis found that almost 16 million Americans live in "deep or severe poverty" defined as a family of four with two children earning less than 9,903 dollars -- one half the federal poverty line figure.

For individuals the "deep poverty" threshold was an income under 5,080 dollars a year.

"The McClatchy analysis found that the number of severely poor Americans grew by 26 percent from 2000 to 2005," the US newspaper chain reported.

...

The surge in poverty comes alongside an unusual economic expansion.

"Worker productivity has increased dramatically since the brief recession of 2001, but wages and job growth have lagged behind. At the same time, the share of national income going to corporate profits has dwarfed the amount going to wages and salaries," the study found.

"That helps explain why the median household income for working-age families, adjusted for inflation, has fallen for five straight years.

And more families are in need of filing bankruptcy than ever before, but the BAPCPA "reform" passed by the Republicans when they gained complete power in Congress and the Presidency has severely limited that option. Bankruptcy was one of the few safety valves that our country had. The BAPCPA law sought to weld it shut.

It is just more evidence that we are shifting more of the burdens of cost of society onto those who are least able to afford it. And other stories show how we provide government welfare to those who need it the least.

The New Debt Bondage

A new story in the New York Times brings light to the exploitation of young workers in magazine subscription sales.

In interviews over seven months, more than 50 current and former members from almost as many crews painted a similar picture of life on the road.

With striking uniformity, they told of violence, drug use, indebtedness and cheating of customers during their cross-country travels, often in unsafe vehicles and with drivers who lacked proper licenses.

Hat Tip to Josh Marshall of Talking Points Memo who says that it is a "a mix of Fight Club, Urban Cowboy and pretty much any other dark, sex, violence and drug drenched movie or cultural phenomenon you can think of."

From the story:

In Collinsville, Ill., Daniel Burrus scrolled through digital photographs of bloodied faces as he described how, on a crew he helped manage for several years, men who missed their sales quota were forced to fight each other.

In Flagstaff, Ariz., Isaac James sat with his wife and newborn daughter as he told how he and others on his mag crew — as they are typically called — stole checkbooks, jewelry, medicine-cabinet drugs and even shoes from customers’ homes.

When I first started practicing law, I received a call from a distressed father whose son was severely injured in an auto accident from an unsafe van crash in Oklahoma. Here is one from 1999. I don't think it is the same one as the one I got called about, but the facts are very similar. The one I was called about would have been in 1995 or 1996 (I think), which is when I first started practicing.

I remember when I investigated the corporation that was involved, I found that the owners (I am pretty sure it was the same ones in the story from 1999) were creating a new corporation almost every week -- or at least month -- to hide who the real owners were. There were corporations within corporations and addresses were changed frequently. I didn't have the capital to handle such a complex case, so I didn't get the chance to work on it. But I am glad some attention is being brought to the problem now.

This is just a small part of the big picture of what is wrong with our business values today.

More Middle Class Squeeze

Families Feel the Pressure as Mortgage Delinquency Rates Rise

By Christian E. Weller

December 14, 2006

America’s middle class is already burdened by a trifecta of economic pressures: the labor market is slowing, household debt burdens are reaching new record highs, and interest rates have been creeping higher for most of this year. Now comes a distressing new report from the Mortgage Bankers Association, which reported yesterday that delinquencies on mortgages rose sharply in the third quarter of 2006.

Delinquency and default rates on loans and personal bankruptcy rates are still at comparatively low levels—only 4.7 percent of all loans in the third quarter—but they have been rising rapidly over the course of this year. Other measures of financial distress are also pointing one way for American families—up. With all pieces of the trifecta staying in place, rising delinquency rates on mortgages may be the beginning of a trend toward more middle class financial insecurity.

...

The data on bankruptcy rates also show a worrisome trend over the course of 2006. Bankruptcy rates dropped precipitously in 2006 in the wake of large filings in 2005 just before the new bankruptcy law went into effect. However, from the first quarter of 2006 to the second quarter, the annualized personal bankruptcy rate, measured as bankruptcy cases relative to the U.S. population, grew from 1.2 in 1,000 to 2.0 in 1,000—an increase of 33.7 percent. The bankruptcy rate in the third quarter stood at 2.2 in 1,000, an additional increase of 9.6 percent in that quarter alone.

Middle class families are caught between low income growth, a high debt burden, and rising interest rates—and for the moment, these ingredients are here to stay. The most recent third quarter delinquency, default, and bankruptcy figures show that the dangers to middle class economic security are not theoretical concepts. They are a harsh reality for a growing share of middle class families.

Click on the title for the rest of the article.

For a discussion on what all of this means, see Mish's Delinquency Footnote #12

Robert Reich: Stop Linking CEO Pay to Performance

There is a good post and discussion of income inequality over at Robert Reich's blog.

More on the New Casino Economy

The Okiedoke Blog has a piece about one of the fired Dayton Tire Plant workers winning $280,000 at a local casino. A comment there makes the same point I made earlier about our new Casino Economy. That is to say: workers feel like they have a better chance of success playing at a casino than they do working at a job -- even though they know the odds are in the house's favor. The commenter at Okiedoke, however, linked it to Oklahoma history: pointing out Oklahoma's historically depressed (and suppressed) wages lead to Okies feeling as though traditional values of thrift and the work ethic don't create as much opportunity for success as gambling.

Inflation or Deflation?

Maybe it's both:

Indeed, Tuesday's WSJ had an article that detailed

"Increasing numbers of Americans are encountering similar choices as employers ask them to buy their own benefits, including disability and life-insurance policies, medical and dental coverage, and even benefits not normally found in the workplace like homeowner insurance and identity-theft coverage. Few businesses are actually replacing employer-paid benefits with these so-called voluntary benefits -- "voluntary" because you pay for them yourself. But some experts predict that eventually, American workers will have to buy many of the benefits they now get free at work, much the way most of the burden of funding retirement savings has shifted from employers to employees in recent years."

Paying for something that was previously part of your compensation package? Pick your poison: Either that's wage and income deflation, or price inflation.

The War on Wages

Representative Barney Frank (D-MA) gave a talk last week wherein he talked about the challenges for the working class. A few choice clips from his speech:

What I do want to talk about today is the economy, and it's a problem that we have in America, and it's a problem that is worldwide. It is the increasing separation of the well-being of the average citizen from overall economic growth.

...

The rising tide lifts all boats has always been a problem. If you think about that analogy, the rising tide is a very good idea if you have a boat. But if you are too poor to afford a boat and you are standing tiptoe in the water, the rising tide goes up your nose.

...

That debate appears to be over. We've given out a handout. One of the things that struck me yesterday when we were putting that together was we got some quotes from various people from the left, from the right, from the center about inequality in America and it struck us as we looked at them that we couldn't tell who said what. That's why you were given them as a kind of a matching test. There is now a consensus. The income of 80 percent to 90 percent of Americans has substantially lagged economic growth. That fight about whether or not it happened is over. The questions, though, are now: One, should we be worried about it; two, if we are worried about it, can we do anything about it; and, three, what?

Well, there were some, particularly conservatives, who said, "Oh, don't worry about inequality. Inequality, that's just a matter of jealousy. As long as everybody's got something, that's OK."

FRANK: Well, of course, part of the problem with that is that the definition of what is adequate is not a fixed point. What you believe to be adequate, what your kids believe to be adequate, what you need to live a decent life, is an evolving concept.

It's also the case that when a handful of people have a lot of money, they may be driving up prices for others. There are people, I guess, who don't care about inequality as a moral issue. I do.

But there is a broader point here about why it matters, and that's the political factor. One of the consequences of this separation between economic growth and the well-being of the great majority of citizens is that an increasing number of citizens don't care about economic growth. Not surprising. Not only do they not benefit, but in many cases they get the short-term disruptive effects.

I mean, there was a great concept from Joseph Schumpeter of creative destruction in which, as the old economic order is destroyed, resources are freed up for the new order.

Well, increasingly, we have people who see the destruction in their own lives, but don't see that they're going to be part of the new creation.

And so, for those who don't care about inequality as a moral issue or don't care that there are people who are hurting, think about what it does politically. We are now in a situation in which many of the people in the business community are very frustrated because they cannot get adopted at the national level policies that they think are important for growth.

...

Let me give you an example of what I think is the disingenuousness of those who say we should do trade without any regard for the environmental and labor practices of our partners.

George Bush says that one of the main reasons we cannot do the Kyoto Treaty is that it will not cover India and China, and that will put Americans at a competitive disadvantage because we will be bound by it and they won't be.

Many of us say: Yes, you know, you're right; there is a competitive advantage by not following environmental laws when we are. Let's then require of India and China that, if they want access to this great market that's the United States, that they have to do something about the environment. And we're told: Oh, no, you can't do that; that's introducing something that doesn't belong in a trade bill.

Similarly, with wages, the World Economic Forum, headquartered in Davos, just put out their CEO survey in which they noted that the Asian exporters -- the most active Asian exporters -- and the Baltic states pay wages well below what competition would suggest and what productivity would suggest -- therefore, according to the Davos report, giving them a competitive advantage in getting people to do business there.

In other words, my conservative friends understand that mistreating your workers and ignoring the environment give you a competitive advantage. They just don't want us to do anything about it.

Historically, I think they haven't wanted us to do anything about it because a lack of those things in those countries becomes a reason not to do them here.

At any rate, we are now stalled. We can't get any progress on trade, on foreign direct investment, on immigration, to some extent on the implementation of productivity.

That's why the business community ought to care. Even if inequality doesn't bother them, even if Mr. Nardelli getting $210 million for being fired when other people make $7 an hour for working very hard, even people untroubled by that -- and I envy them the ease of their consciences; they must get a lot more sleep than a lot of us do -- if they don't care on those grounds, they ought to recognize that we are in gridlock;

Editorial comment: There are people who argue that sociopaths are often more successful in business precisely because of their mental illness.

And I understand -- people say to me, "Well, look -- look at what Wal-Mart does. I mean, look what it does for the consumer."

Well, if you can't afford health care for your kid, a cheap T- shirt is not much of a consolation.

And this anti-union policy that we have has been a serious problem. The health care situation in America. We should be -- and this is in business's own interest. It costs more to make a car in Michigan than in Ontario -- by a significant amount -- solely because of our health care system.

If we were to have a universal single-payer health care system, which took health care out of the wage system -- stop depressing wages -- we encourage people to join unions, and we did other things, including in the tax system, we would begin to reverse the inequality.

And there's one very important piece to this, and that's the role of government. Government plays a very important role in achieving the quality of our life and in reducing inequality.

That didn't used to be controversial. A guy named Roosevelt got elected four times on that issue. That was the New Deal: use our collective capacity to work together not to interfere with the free enterprise system, but to work alongside it so you reduce inequality.

Corporate profits as a percentage of the national economy have gone way up in the past five years. God didn't do that. The economy did it and the government helped and -- although to some of these people God and the government are the same thing, but I obviously don't agree with that.

We have now got the beginning, I hope, of an uptick in real wages. But you know what's happening? Many of these same business community leaders and others who complain about they can't get support for trade and they can't get support for immigration and they can't get support for foreign direct investment, they're now worrying about wages going up. Read the financial pages of the papers. There is only one concern about inflation: wages may go up.

Wages have significantly lagged growth. They have significantly lagged productivity. And if they even begin, as they have now, to start going up, respected opinion tut-tuts and says, "Oh, that's a terrible idea; we can't allow that to happen."

Ben Bernanke, to his credit, has said, "Well, if wages go up to the level of productivity, it's not inflationary."

The fact is, we have a catch-up period for wages and people are now saying, "Well, you know what? Productivity may be slowing down, things may be getting worse. We'll have to clamp down." Yes, well, you know what? Everybody else has had a pretty good dinner except the people working for wages. Everybody else ain't a lot of people.

But telling the people who work for wages, "Oh, sorry, just as you were about to eat we're closing the restaurant" -- do it if you think it's right, but don't be surprised when their reaction is this negative one you get.

It has always been my philosophy that no one should be deprived of food, water, shelter, medical care or the means to provide for themselves. Obviously, keeping wages so low and not having some societal provision for health care conflicts with that philosophy.

John Edwards, who just announced that he is running for President of the United States, has stated that "poverty is the great moral issue of our time." I agree. Of course, we are both lawyers, so it is not surprising that we think alike.

I am a capitalist, so I think it is important to maximize profits. But I am also a lawyer, so I also understand the importance of "doing justice." It is also part of my philosophy to balance maximizing profits with the importance having social justice. Right now, our country is out of balance. We have a system that is maximizing profits, but it is not doing social justice.

American Roulette

From the article:

It used to be that when the economy thrived and productivity grew, pay for working people rose accordingly. Yet as the Times reported this past summer, the first six years of the 21st century look to be “the first sustained period of economic growth since World War II that fails to offer a prolonged increase in real wages for most workers.”

People have put up with all this because it happened so quickly and for the same reason that the great mass of losers in casinos put up with odds that favor the house: The spectacle of a few ecstatic big winners encourages the losers to believe that, hey, they might get lucky and win, too. We have, in effect, turned the U.S. into a winner-take-all casino economy, substituting the gambling hall for the factory floor as our governing economic metaphor, an assembly of individual strangers whose fortunes depend overwhelmingly on random luck rather than collective hard work. And it’s been unwitting synergy, not unrelated coincidence, that actual casino gambling has become ubiquitous in America at the same time.

It used to be.... I have been thinking this a lot lately. And the metaphor of the casino is one I have been thinking about, too. As more Native American tribes here in Oklahoma open up casinos as a means of partially funding their governments, I drive by them and think "this is what it is coming to: the only way that a lower or middle class person can hope to break out is to win a jackpot at a casino or win the lottery." Thrift and hard work are being discouraged.

Let me give an example of what I mean: you work for a company all your life only to find out that the money you expected in retirement has been paid to the executives who then have driven the company into bankruptcy. As a result, you lose your health care and pension benefits that you worked for your whole life. I can see someone looking at that situation thinking "what's the point? I'm not ever going to see my retirement anyway. I might as well take my chances at the casino; the odds are better."

It's a Values question. Are we going to encourage people to work, or aren't we? If we reach a point where people think that they have better chances at a casino, they'll probably go there.

Somewhat OT: By the way, as I also do Native American law, and I regularly go on Tribal complexes. I can also tell you that some tribes have put the casino money to work, while others are not proceeding so quickly. I may elaborate on this point at some time in the future, but for now I will keep my thoughts private.

Skilled Labor Shortage?

From the article:

One survey from employment service ADP released Wednesday showed U.S. private sector employment shrank in December, the first decline in 3-1/2 years.

But many economists and labor market experts say that job growth and the economy overall would be significantly stronger if employers could find the skilled workers they really need.

"I'm hearing across the board, across industries, companies indicating they can't exploit market opportunity because they can't find people with the right skills," said Jeff Summer, an executive at Deloitte Consulting who leads the firm's management practice. He said that there's virtually no long-term unemployment for skilled workers.

"It's down to the nub already," he said. "Supply and demand is completely out of whack."

They never say what skill sets they are looking for. It also sounds like they are not looking in the right places.

"Just paying people more won't be the answer. They really need to be treating the talent market as a customer market more than they ever have before."

Maybe it's because you are not willing to consider offering more money for the skill sets you are looking for. Have you ever considered that said skills are worth more money? I have to confess, however, that I don't understand the second sentence and how it relates to the "labor shortage."

Have you also noticed they never mention what those skills are? I am thinking that it's deliberate on their part. I would sure like to see the specifics.

The Entitlement Mentality?

In the book Why We Want You to be Rich, Robert Kiyosaki follows up Donald Trump's statement

"I'm afraid we have developed an entitlement mentality as a nation. And I'm not talking about just poor people. Too many people, from the president and senators on down, expect a pension from the government. I really wish we could afford to solve their problems, but to do that would bankrupt our nation. We could ask the rich to pay for everyone, but would it solve the problem? And for how long would it even solve the problem?"

with the statement:

"I agreed. Donald and I want people to let go of the entitlement mentality and become rich so they can solve the problem ... their own problem."

"The best way to solve the problem of bad financial results is to change our thoughts -- to start thinking like rich people rather than poor and middle-class people. That means losing the entitlement mentality -- whether you are a military officer, government worker, schoolteacher, employee or just poor. If we do not stop expecting the government to take care of us, we will continue to have the same results -- a bankrupt nation filled with well-educated but financially needy people.

"Albert Einstein defined insanity as 'doing the same thing over and over again and expecting different results.' In this case, it is my opinion that it is insanity to keep sending kids to school and not teaching them about money."

From pages 40-41.

OK, first of all, many of the reasons why people like myself are clamoring for guaranteed pensions and healthcare is because many corporations have mismanaged worker's contractually promised benefits like pensions and healthcare to the point that their actions should be considered criminal.

The book started out so well. It seemed like they understood the problem. Instead of proposing solutions that would end the erosion of the middle class, they go off on this Socially Darwinistic tirade that everyone should just fend for themselves. They want to shift the burden from themselves (and any taxes that they would have to pay) onto the very people who now cannot bear the burden because their wealth (via pensions and healthcare guarantees) have been stolen from them (by their corporate employers not funding those very guarantees). In a sense, the corporate owners have embezzled those funds.

I understand the distinction: there was no legal obligation (other than a weak contractual one that can be eradicated in Chapter 11 bankruptcy) to fund these obligations for the benefit of the workers. But if a worker had taken the employer's money and used it for a purpose other than what the employer had designated it, he would be guilty of embezzlement.

Advice to young Chiropractor: Just Make More Money

Unbelievable. Do these financial advisors really believe that money grows on trees?

From the article:

•Earn more money.

Schopp simply has too much debt, Cook says, for how much money she makes. She works full time as a chiropractor and part time as a personal trainer at a local gym, earning about $44,000.

"Her ability to generate more income from her W-2 job (as a chiropractor) probably isn't here," he says. But she could add personal-training clients. Schopp agrees that's a good idea.

But Cook warns that to cut expenses and increase her income, Schopp must stay focused for several years to dig herself out of her debt.

"Heather needs to be a 'no' person," Cook says. " 'Want to go out to dinner?' 'No.' 'Want to go shopping?' 'No.' She needs to have two things burned into her brain every day: watch my spending, and get a new customer. Don't spend. Get a customer. Don't spend. Get a customer."

Now get this: this is in response to a woman who works two jobs to pay her basic living expenses. TWO JOBS! Why is she in such financial trouble?

Chiropractor works 2 jobs to chip away at $165,000 in school debt.

Yea, that's living extravagantly. NOT. (Remember, this is southern California -- where living expenses are much higher.)

Has anyone ever thought about the fact that we are creating too many Barriers to Entry for the middle and lower classes to achieve financial success in life? Isn't the whole American ethos supposed to be "work hard and you will succeed?" I almost get the feeling that the amount of student loan debt that is required to get through college is becoming a kind of debt peonage system whereby here in America, the land of the free, we are devolving back to the days of slavery, but simply in a new form. We seem to be raising the cost of a degree so high that middle and lower class people cannot afford to take the risk. Ultimately, this will lead to a society that will be less competitive.

Also, has anyone thought about the policy of not allowing student loan debts to be dischargeable in bankruptcy? This also adds to the argument that student loans are becoming America's debt bondage. People are stuck owing a debt they can never hope to pay back, and yet unable to earn enough money, without some great deal of luck, to get past it.

Is this really the America that we want?

An Exercise in Poverty

Hat Tip to one of my regulars, Teri Pittman, for the link.

From the article:

Recently, I attended a local conference regarding Financial Literacy in Oklahoma . As part of the conference they had a “poverty simulation.” The purpose was to give us some idea of what it would be like to live in poverty. I can’t say that I know what it really feels like to live in poverty because I got to end the simulation whenever I wanted. But, I can say that I learned a lot during the experience.

We were assigned an identity and given a summary of our current life situation. Stations were set up to represent the utility company, the mortgage company, a pawn shop, check cashing loan store, grocery store, and public assistance. During the simulation, I became a 19 year old, unemployed, high school drop out, single mother with a live-in boyfriend. Our bills totaled $555 per month including a mortgage on our mobile home, lot rent, utilities, food, and a car title loan that we had taken out. We also had to give transportation passes at every stop to account for the gas or the bus to get us there. Our monthly take home pay was $794.00 per month including $234 in TANF (Temporary Assistance for Needy Families) benefits and $120 in food stamps. That left us with $239 per month for everything else. Trust me $60 per week for a family of three for everything else (such as gasoline for the car, medicine, car repairs, diapers, toiletries, and other items) does not go far. Just to make it interesting we were also given several items of value to pawn if we got desperate.

Before the simulations started, I told my partner (a.k.a. my live-in boyfriend) that I knew exactly what we were going to do. We would pay our bills by priority in order of importance (housing, food, car, utilities and then the car title loan). In my real life as a credit counselor, that’s exactly what we teach people to do. I also informed him that we would not go to the pawn shop at all. I knew that I was going to fly through this exercise with no problems. I am a money management expert, right?

It was amazing to me how quickly my priorities changed. In a matter of minutes I transformed from the calm budgeting expert who had it all figured out to someone who was just living in survival mode. Much of my reason and logic went out the window. I could not pay the mortgage first as planned because we only took home $110 per week from my boyfriend’s job. It was 3 weeks before we had enough to pay the mortgage. In real life, I tell people to pay their mortgage first since we want them to avoid homelessness. In the simulation, we paid the mortgage next to last and had been evicted by the time we came up with enough money to pay it.

In real life I advise people to avoid paying high fees for services such as check cashing and to stay away from the pawn shop. Logic would tell you that it is much cheaper to open a checking account at the local bank or credit union than to pay fees for check cashing services. In the simulation, we did not have a bank account and could not obtain one. In order to cash my boyfriend’s check to get money to pay the bills, we had to pay a $10.00 fee for every check we cashed. When we got a cut off notice for the utilities, I found myself in line at the pawn shop to hock my stereo. I took the money from hocking the stereo to pay the gas bill just before they cut it off. I also had to stand in a long line at the public assistance office just to confirm my TANF benefits. I had to take my baby with me since I could not afford daycare. I stood in line for so long that the office closed and I had to come back the next day. I witnessed another single mom making her sick child stand in line with her because she had no other choice. She could not afford daycare and the child could not go to school when she was sick.

It was so amazing to me how quickly I changed my priorities during this exercise. In reality, it is pretty easy to sit behind a desk and tell people what they “should” do with their money. When you have extra money, it’s easy to talk about all of the responsible things you should do with it. I guess it’s the financial equivalent of armchair quarterbacking. In my job, I recommend the logical, money saving way to live. However, when I found myself in the situation of not having enough money to take care of my family and keep from getting evicted, I just did what I could to survive. If a station forgot to ask for my transportation pass (we were required to give them at every station) I didn’t offer it. I just kept it and hoped to get through the transaction without having to give it up. When the gas bill was due and payday was days away, the pawn shop looked like a pretty good option. When the problem of no checking account stood between me and getting money, I did not care that I had to pay the $10 fee for every check. I just needed the money.

Read the rest of the story at the title link. It should make you think twice about our public policy of purely letting "the free hand of the market" set wages.