Monday, November 1, 2010
Tuesday, October 19, 2010
Alzheimer's: Care, Costs and a Cure
by Lora Gann
Last year my mother passed away after a relatively short battle with Alzheimer's disease. I say that it was relatively short, because in the grand scheme of things from diagnosis to death it was four years. The first two years we dealt with the slowing down of her mind and body, but she still remained the person whom we knew. There were many moments of frustration and fear, but for the most part we were able to deal with living with her new "normal" and enjoy each other.
Then, it got to the point when there was no more hiding. The family was in a constant state of high alert and crisis. We were helping to manage her care and trying to keep her in the house for as long as possible. A big concern was making sure that my father remained healthy, too. A new vocabulary replaced our old one: care givers, elder-care lawyers, shower seats, chair-lifts, ramps, long term care insurance, in-home visits, day care, companions, cognitive assessments, rehab, physical therapy, drug therapy, and more.
This disease is tragic and robs you of your dignity. My mother was a very proud woman who never wanted to live in an incapacitated way. She never wanted to burden her family and she wanted the end of her life to be as she lived - full of spirit, generosity, love and laughter. Unfortunately, that was not to be the case. It was a very sad end to her very vibrant life.
Ours was a very private battle. But, today, this disease affects 35 million people around the world and by the year 2050 it is predicted that 115 million people will have Alzheimer's, making this disease an enormous, world-wide public crisis. According to the World Alzheimer Report 2010* that was just published in September, the costs of caring for people affected by dementia have risen at an alarming rate and have impacted every health and social system in the world. This has dramatically affected the global economy; the total estimated worldwide costs of dementia are $604 billion in 2010 - 1% of world's gross domestic product.
Here are a few findings from this report and other recent research:
The likelihood of developing Alzheimer's doubles about every 5 years after age 65.
About 1 out of every 2 people over the age of 85 has Alzheimer's.
About 70% of the costs occur in Western Europe and North America.
In North America it is estimated that the annual cost of care per person is $48,605. And, in places in Latin America costs are estimated to be around $5,500 per person and in South Asia it is $903.
As population ages and life expectancy increases, we can expect these costs to rise sharply.
Costs include:
1. care giving by family and friends -- time family spend caring and helping with eating, dressing, bathing, toileting and grooming and shopping, preparing food, transporting and managing the household including finances
2. support provided by community care professionals - formal services provided outside the medical care system, including community services such as home care, food supply and transport and residential or nursing care
3. medical care - hospital care, medication and clinical care
Low and middle income countries are expected to have the sharpest increases. By 2050 2/3 of the people who have Alzheimer's will be from low and middle income countries.
In some high income countries between 1/3 and 1/2 of all people with dementia live in residential or nursing care facilities.
The report urges the international community to coordinate research and cost-effective approaches in order to manage these escalating costs, the societal burden and medical advances.
The risk factors of developing Alzheimer's disease are detailed as follows:
Advancing age.
Family history. People who have a parent or sibling that have developed Alzheimer's are 2-3 times more likely to develop Alzheimer's. Risk factor increases if more than one close relative has been affected.
Tobacco usage, poor diet, lack of exercise, alcohol consumption and social isolation all contribute.
High blood pressure, heart disease, stroke, diabetes and high cholesterol.
Head-injury.
Research shows that there is a connection between heart health and brain health. Jean Carper's new book, "100 Simple Things You Can Do To Prevent Alzheimer's" offers the reader a comprehensive "to-do" list backed by medical studies. It is written with a tone that is both helpful and optimistic. She is an active 78 year old writer who, being at higher risk for Alzheimer's because she carries the gene,
ApoE4, decided to teach us all that the cure for Alzheimer's is prevention.
Much of what she reports is common sense and advice we have heard over and over again by our medical practitioners: Don't eat processed foods, cut back on saturated fats, exercise, eat brightly colored fruits and vegetables, watch your sugar in-take, and eat fish a couple of times a week.
But some of what she tells us may be surprising. Among them are: Being lonely can escalate Alzheimer's. Eating a lot of red meat can cause inflammation which can cause Alzheimer's. Lifting weights and strength training can limit loss of muscle mass which can in turn increase cognitive functions. A compound found in olive oil which contains antioxidants can help prevent the destruction of brain cells. Limit your usage of pesticides. Caffeine may actually help reverse some of the damage done by Alzheimer's. Cutting down your calorie intake can reduce factors that promote the disease. By keeping your brain busy your whole life, neuroscientists say your brain can actually ignore the symptoms of Alzheimer's, even though the pathology shows you should have the disease.
She sites research studies and doctors for each item on her list. It is a very interesting and easy read. Incorporating much of what she advises will not only help our mental health, but it will help us fight numerous other diseases as well.
Since some people live up to 15 years after diagnosis with this disease, we can see how families can become financially and emotionally devastated. So, what should we do? We know we can't hide from the threat of this disease, it is all around us. But, we can try to strengthen our heart health and mind health. We can make sure that our resources are protected by having a sound financial plan and long term care insurance. And, we should have very candid and open discussions with our loved ones about our wishes.
Though medical advances are being discovered all the time, it is time to take matters in our own hands and act on the idea that prevention can be a cure.
* World Alzheimer Report 2010, The Global impact of Dementia. Published by Alzheimer's Disease International, September 2010
The opinoions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, you should consult a financial advisor prior to investing.
This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Last year my mother passed away after a relatively short battle with Alzheimer's disease. I say that it was relatively short, because in the grand scheme of things from diagnosis to death it was four years. The first two years we dealt with the slowing down of her mind and body, but she still remained the person whom we knew. There were many moments of frustration and fear, but for the most part we were able to deal with living with her new "normal" and enjoy each other.
Then, it got to the point when there was no more hiding. The family was in a constant state of high alert and crisis. We were helping to manage her care and trying to keep her in the house for as long as possible. A big concern was making sure that my father remained healthy, too. A new vocabulary replaced our old one: care givers, elder-care lawyers, shower seats, chair-lifts, ramps, long term care insurance, in-home visits, day care, companions, cognitive assessments, rehab, physical therapy, drug therapy, and more.
This disease is tragic and robs you of your dignity. My mother was a very proud woman who never wanted to live in an incapacitated way. She never wanted to burden her family and she wanted the end of her life to be as she lived - full of spirit, generosity, love and laughter. Unfortunately, that was not to be the case. It was a very sad end to her very vibrant life.
Ours was a very private battle. But, today, this disease affects 35 million people around the world and by the year 2050 it is predicted that 115 million people will have Alzheimer's, making this disease an enormous, world-wide public crisis. According to the World Alzheimer Report 2010* that was just published in September, the costs of caring for people affected by dementia have risen at an alarming rate and have impacted every health and social system in the world. This has dramatically affected the global economy; the total estimated worldwide costs of dementia are $604 billion in 2010 - 1% of world's gross domestic product.
Here are a few findings from this report and other recent research:
The likelihood of developing Alzheimer's doubles about every 5 years after age 65.
About 1 out of every 2 people over the age of 85 has Alzheimer's.
About 70% of the costs occur in Western Europe and North America.
In North America it is estimated that the annual cost of care per person is $48,605. And, in places in Latin America costs are estimated to be around $5,500 per person and in South Asia it is $903.
As population ages and life expectancy increases, we can expect these costs to rise sharply.
Costs include:
1. care giving by family and friends -- time family spend caring and helping with eating, dressing, bathing, toileting and grooming and shopping, preparing food, transporting and managing the household including finances
2. support provided by community care professionals - formal services provided outside the medical care system, including community services such as home care, food supply and transport and residential or nursing care
3. medical care - hospital care, medication and clinical care
Low and middle income countries are expected to have the sharpest increases. By 2050 2/3 of the people who have Alzheimer's will be from low and middle income countries.
In some high income countries between 1/3 and 1/2 of all people with dementia live in residential or nursing care facilities.
The report urges the international community to coordinate research and cost-effective approaches in order to manage these escalating costs, the societal burden and medical advances.
The risk factors of developing Alzheimer's disease are detailed as follows:
Advancing age.
Family history. People who have a parent or sibling that have developed Alzheimer's are 2-3 times more likely to develop Alzheimer's. Risk factor increases if more than one close relative has been affected.
Tobacco usage, poor diet, lack of exercise, alcohol consumption and social isolation all contribute.
High blood pressure, heart disease, stroke, diabetes and high cholesterol.
Head-injury.
Research shows that there is a connection between heart health and brain health. Jean Carper's new book, "100 Simple Things You Can Do To Prevent Alzheimer's" offers the reader a comprehensive "to-do" list backed by medical studies. It is written with a tone that is both helpful and optimistic. She is an active 78 year old writer who, being at higher risk for Alzheimer's because she carries the gene,
ApoE4, decided to teach us all that the cure for Alzheimer's is prevention.
Much of what she reports is common sense and advice we have heard over and over again by our medical practitioners: Don't eat processed foods, cut back on saturated fats, exercise, eat brightly colored fruits and vegetables, watch your sugar in-take, and eat fish a couple of times a week.
But some of what she tells us may be surprising. Among them are: Being lonely can escalate Alzheimer's. Eating a lot of red meat can cause inflammation which can cause Alzheimer's. Lifting weights and strength training can limit loss of muscle mass which can in turn increase cognitive functions. A compound found in olive oil which contains antioxidants can help prevent the destruction of brain cells. Limit your usage of pesticides. Caffeine may actually help reverse some of the damage done by Alzheimer's. Cutting down your calorie intake can reduce factors that promote the disease. By keeping your brain busy your whole life, neuroscientists say your brain can actually ignore the symptoms of Alzheimer's, even though the pathology shows you should have the disease.
She sites research studies and doctors for each item on her list. It is a very interesting and easy read. Incorporating much of what she advises will not only help our mental health, but it will help us fight numerous other diseases as well.
Since some people live up to 15 years after diagnosis with this disease, we can see how families can become financially and emotionally devastated. So, what should we do? We know we can't hide from the threat of this disease, it is all around us. But, we can try to strengthen our heart health and mind health. We can make sure that our resources are protected by having a sound financial plan and long term care insurance. And, we should have very candid and open discussions with our loved ones about our wishes.
Though medical advances are being discovered all the time, it is time to take matters in our own hands and act on the idea that prevention can be a cure.
* World Alzheimer Report 2010, The Global impact of Dementia. Published by Alzheimer's Disease International, September 2010
The opinoions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, you should consult a financial advisor prior to investing.
This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Friday, October 15, 2010
Unsustainable
The word, "unsustainable" is defined as something that cannot be continued or maintained.
James Macdougald is the author of Unsustainable: How Big Government Taxes And Debt Are Wrecking America. It is easy to discredit the messenger, but the points raised in this book, which I will summarize below, are both mind-boggling and essential for all Americans to grasp.
Here are some of the essential details:
A) Facts and Conditions Which Have Created What Is Unsustainable:
There are 89,000 public sector entities employing 22 million people who are supported by taxes, fees and tolls. Macdougald argues that America currently has federal, state, and local governments which have redistributed so much income to themselves that tax revenues are no longer adequate to support the wages, pensions, and other benefits that they have promised themselves. The book points out that there are specific conditions which set the stage for growth and power of government. The first contributor is a serious economic crisis. The second condition is that the portion of the population either employed by or dependent on the government must be growing and vulnerable. Interestingly, approximately 47% of working American tax-filers pay zero income taxes today. That means 53% of working Americans have to fully support aid and services for all non-working citizens as well as all of the non-taxpaying citizens. The third condition is that scapegoats must be identified as the cause of the problems, motivating unification of the majority of voters.
B) Conflicts Between Public and Private Sectors:
Macdougald points out in blunt terms that the private sector is dying while the public sector is thriving. Within the ten years prior to 2009, the private sector lost 1.5 million jobs, and the public sector grew by 2 million within this same time period. While the private sector has been plagued with bankruptcies, lost wages, decreases in benefits and huge unemployment, the public sector has enjoyed job security, high pay, unparalleled health insurance and pensions that are payable as early as age 40, and routinely payable at age 50 or 55. The Bureau of Economic Analysis reported that in the first quarter of 2010, private sector workers earned $300 BILLION less than their counterparts did in the last quarter of 2007.
The private sector workers are squeezed because notwithstanding the fact that they are experiencing income deflation, they have to support the expenditure of a growing population and a growing government, whose benefits are richer than their own. This same Bureau conducted a study that showed that as of 2008, the average federal worker received $119,982 in compensation and benefits compared with the private sector average of $59,909. For public employees, the "benefits" component was $40,785, as opposed to the private wage earner whose benefits component only averaged $9881. With a total of 1.9 million federal workers, the difference in annual compensation was $114 Billion a year, and is supported by private sector businesses and their employees. Despite the impact of near record unemployment in the private sector in 2009, and massive increases in government debt, the government workers still received raises in terms of incomes and pensions for the year.
C) Uneven Accounting Standards:
Even more revealing is the fact that federal, state, and local governments and school districts are able to hide the actual costs of benefits that private citizens actually pay to them. For the private sector, the Federal Accounting Standards Board (FASB) recognized in the mid 1980's that corporations had pension plans that carried with them significant liabilities which were not shown on their balance sheets. The concern was that these future liabilities would impose financial strain on these corporations, a fact that was not readily discernable to investors. In reaction, the law was mandated requiring corporations to report these future liabilities on their balance sheets. This makes perfectly good sense to me. The problem and inconsistency is that the federal government is not subject to the FASB accounting and disclosure rules. The Government Accounting Standards Board (GASB) allows for off balance sheet accounting for government pension liabilities. This is a classic example of the golden rule. "He who has the gold rules".
D) Special Public Sector Retirement Goodies:
Many public sector pension plans permit the aggregation of unused sick pay or vacation pay or overtime to be paid during the final year before retirement. This policy known as spiking results in inflated earnings in the last years of employment, causing significantly larger pension payments throughout retirement. In Baltimore, the cost of paying pensions for firefighters and police could more than double in the year 2010 from the prior year. City officials predict an 11% increase in property taxes and cuts in services just to pay the pension bill.
E) The Social Security Crisis:
When Social Security was enacted in 1935, it was never perceived that life expectancy would extend from age 68 to age 80. As a result, it was never contemplated that the number of retirees would exceed the number of workers. In reaction to increased life expectancy and the diminishing population of workers to support the growing population of retirees, since 1983, the government has collected $2.5 trillion more in Social Security taxes than what was required to support current retirees. In essence, workers have paid social security taxes twice since 1983, once to provide benefits to existing retirees and a second time to pre-fund a significant portion of their own retirement benefits. Instead of putting our Social Security taxes in a trust which was to be spent only for future retirement benefits, the government spent the money elsewhere through massive government spending programs. It did this through depositing U.S. Treasuries, not real money, into the Social Security trust fund. Treasuries are IOU's. The government uses Treasuries to borrow from taxpayers and other governments. The government spent our social security savings knowing that there were only IOU's on the other side. This has resulted in the greatest Ponzi scheme of all time. Congress has "stolen" from the trust fund by issuing promises to repay though IOU's, and now after spending recklessly for decades, we learn that there is no money in the trust. Congress' proposed solution is to impose more taxes. Evidently twice was not enough. If these kinds of shenanigans occurred in the private sector, there would definitely be jail time.
F) Unions and the Public Sector:
Public sector employees, hired by taxpayers, have a monopoly on the services that they are paid to provide. Unions collect as dues about 1% of public sector's salaries. The unions use the income derived from these dues to provide financial support to politicians who support their agenda. This is a classic conflict of interest. As taxpayers, we are funding the salaries of public sector employees. And these public sector employees are using the income we paid to them to support their agendas which are in conflict to the interests of us the taxpayers, who are after all their employers. Public sector unions have tremendous clout because they operate in a non-competitive environment. We cannot buy police or fire protection elsewhere even if the costs that the unions negotiate is too high.
G) Unsustainable Realities:
I was so moved by his findings that I telephoned Jim MacDougald. We had a lengthy conversation. His basic position is, as taxpayers, we should know for what we are paying. There is no true accounting for the real unfunded pension liabilities. When we go to the polls and support programs, we don't know what our current expenses are, and therefore the true budgetary impact of legislating programs. I asked Jim about our military spending, and what percentage the military comprises of GDP. Jim informed me that no one really knows because there is no accounting or accountability for weapons or aircraft versus pension costs. Everything is lumped together, and there is very little transparency. What he did say is that the "best guess" is that the federal debt is $120 trillion. This equates to the average worker in the U.S. owing $1.2 million today. If the interest rate to service this debt were just 5%, it would cost each worker $60,000 just to cover interest costs without ever reducing principal. And this is utterly UNSUSTAINABLE.
H) My Takeaways:
Last year Jim helped to found The Free Enterprise Nation to rectify these disparities. The organization has no political affiliation. The unsustainable situation was fostered by both Republicans and Democrats, and the solutions to the plight are education, advocacy, and cooperation of all Americans to end politics as usual and to accept compromises and sacrifices. As a nation, we are at a philosophical crossroads. It is too easy to pigeonhole Democrats as being for the little guy and the underprivileged, and Republicans as heartless and only caring about their wallets. However, I believe that today the debate has moved much deeper than these stereotypes. The real philosophical tug of war is whether we should look towards the government to make lives better, or whether private citizens should be most empowered. I believe that being Republican or a fiscal conservative and having a bleeding heart and caring for the underprivileged are not mutually exclusive. In fact, though I am really an Independent, I have come philosophically to abhor big government. I think its effect is to keep the underprivileged, well, underprivileged. When governments get too much power, historically bad results follow. This has been true for World War Two Germany, Russia, China, African nations, etc., etc., etc. I am not comparing the current U.S. government with any of these regimes. I am just saying that too much power and control, militarily and/or economically, scares me.
I believe in the genius of mankind manifested through true entrepreneurial spirit. Furthermore, our government gets a big "F" for energy policies, public schools, postal service, railway systems and ethics. Therefore, I want them out of healthcare and anywhere else they seek to exert and overextend themselves. This is far deeper and wider than a liberal or conservative sound bite. Governments hired by us have forgotten for whom they work. They have demonstrated absolutely no fiscal responsibility, and I have come to agree with MacDougald that big government has made our nation's optimism for a brighter tomorrow unsustainable.
I) Conclusion:
Last year Jim helped to found The Free Enterprise Nation to rectify these disparities. The organization has no political affiliation. The unsustainable situation was created by both Republicans and Democrats, and the solutions to the plight are education, advocacy, and cooperation of all Americans to end politics as usual and to accept compromises and sacrifices.
I asked Jim if he would consider speaking to a group of our clients and friends. He said that he would. So, if you would be interested in getting more facts on these matters and being able to speak directly with the author, please let us know. These facts are crucial for all Americans to appreciate. Therefore, I encourage you to forward this letter to anyone who should also be in the know.
The opinions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, you should consult a financial advisor prior to investing.
This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. We suggest that you discuss your specific tax issues with a qualified tax advisor
James Macdougald is the author of Unsustainable: How Big Government Taxes And Debt Are Wrecking America. It is easy to discredit the messenger, but the points raised in this book, which I will summarize below, are both mind-boggling and essential for all Americans to grasp.
Here are some of the essential details:
A) Facts and Conditions Which Have Created What Is Unsustainable:
There are 89,000 public sector entities employing 22 million people who are supported by taxes, fees and tolls. Macdougald argues that America currently has federal, state, and local governments which have redistributed so much income to themselves that tax revenues are no longer adequate to support the wages, pensions, and other benefits that they have promised themselves. The book points out that there are specific conditions which set the stage for growth and power of government. The first contributor is a serious economic crisis. The second condition is that the portion of the population either employed by or dependent on the government must be growing and vulnerable. Interestingly, approximately 47% of working American tax-filers pay zero income taxes today. That means 53% of working Americans have to fully support aid and services for all non-working citizens as well as all of the non-taxpaying citizens. The third condition is that scapegoats must be identified as the cause of the problems, motivating unification of the majority of voters.
B) Conflicts Between Public and Private Sectors:
Macdougald points out in blunt terms that the private sector is dying while the public sector is thriving. Within the ten years prior to 2009, the private sector lost 1.5 million jobs, and the public sector grew by 2 million within this same time period. While the private sector has been plagued with bankruptcies, lost wages, decreases in benefits and huge unemployment, the public sector has enjoyed job security, high pay, unparalleled health insurance and pensions that are payable as early as age 40, and routinely payable at age 50 or 55. The Bureau of Economic Analysis reported that in the first quarter of 2010, private sector workers earned $300 BILLION less than their counterparts did in the last quarter of 2007.
The private sector workers are squeezed because notwithstanding the fact that they are experiencing income deflation, they have to support the expenditure of a growing population and a growing government, whose benefits are richer than their own. This same Bureau conducted a study that showed that as of 2008, the average federal worker received $119,982 in compensation and benefits compared with the private sector average of $59,909. For public employees, the "benefits" component was $40,785, as opposed to the private wage earner whose benefits component only averaged $9881. With a total of 1.9 million federal workers, the difference in annual compensation was $114 Billion a year, and is supported by private sector businesses and their employees. Despite the impact of near record unemployment in the private sector in 2009, and massive increases in government debt, the government workers still received raises in terms of incomes and pensions for the year.
C) Uneven Accounting Standards:
Even more revealing is the fact that federal, state, and local governments and school districts are able to hide the actual costs of benefits that private citizens actually pay to them. For the private sector, the Federal Accounting Standards Board (FASB) recognized in the mid 1980's that corporations had pension plans that carried with them significant liabilities which were not shown on their balance sheets. The concern was that these future liabilities would impose financial strain on these corporations, a fact that was not readily discernable to investors. In reaction, the law was mandated requiring corporations to report these future liabilities on their balance sheets. This makes perfectly good sense to me. The problem and inconsistency is that the federal government is not subject to the FASB accounting and disclosure rules. The Government Accounting Standards Board (GASB) allows for off balance sheet accounting for government pension liabilities. This is a classic example of the golden rule. "He who has the gold rules".
D) Special Public Sector Retirement Goodies:
Many public sector pension plans permit the aggregation of unused sick pay or vacation pay or overtime to be paid during the final year before retirement. This policy known as spiking results in inflated earnings in the last years of employment, causing significantly larger pension payments throughout retirement. In Baltimore, the cost of paying pensions for firefighters and police could more than double in the year 2010 from the prior year. City officials predict an 11% increase in property taxes and cuts in services just to pay the pension bill.
E) The Social Security Crisis:
When Social Security was enacted in 1935, it was never perceived that life expectancy would extend from age 68 to age 80. As a result, it was never contemplated that the number of retirees would exceed the number of workers. In reaction to increased life expectancy and the diminishing population of workers to support the growing population of retirees, since 1983, the government has collected $2.5 trillion more in Social Security taxes than what was required to support current retirees. In essence, workers have paid social security taxes twice since 1983, once to provide benefits to existing retirees and a second time to pre-fund a significant portion of their own retirement benefits. Instead of putting our Social Security taxes in a trust which was to be spent only for future retirement benefits, the government spent the money elsewhere through massive government spending programs. It did this through depositing U.S. Treasuries, not real money, into the Social Security trust fund. Treasuries are IOU's. The government uses Treasuries to borrow from taxpayers and other governments. The government spent our social security savings knowing that there were only IOU's on the other side. This has resulted in the greatest Ponzi scheme of all time. Congress has "stolen" from the trust fund by issuing promises to repay though IOU's, and now after spending recklessly for decades, we learn that there is no money in the trust. Congress' proposed solution is to impose more taxes. Evidently twice was not enough. If these kinds of shenanigans occurred in the private sector, there would definitely be jail time.
F) Unions and the Public Sector:
Public sector employees, hired by taxpayers, have a monopoly on the services that they are paid to provide. Unions collect as dues about 1% of public sector's salaries. The unions use the income derived from these dues to provide financial support to politicians who support their agenda. This is a classic conflict of interest. As taxpayers, we are funding the salaries of public sector employees. And these public sector employees are using the income we paid to them to support their agendas which are in conflict to the interests of us the taxpayers, who are after all their employers. Public sector unions have tremendous clout because they operate in a non-competitive environment. We cannot buy police or fire protection elsewhere even if the costs that the unions negotiate is too high.
G) Unsustainable Realities:
I was so moved by his findings that I telephoned Jim MacDougald. We had a lengthy conversation. His basic position is, as taxpayers, we should know for what we are paying. There is no true accounting for the real unfunded pension liabilities. When we go to the polls and support programs, we don't know what our current expenses are, and therefore the true budgetary impact of legislating programs. I asked Jim about our military spending, and what percentage the military comprises of GDP. Jim informed me that no one really knows because there is no accounting or accountability for weapons or aircraft versus pension costs. Everything is lumped together, and there is very little transparency. What he did say is that the "best guess" is that the federal debt is $120 trillion. This equates to the average worker in the U.S. owing $1.2 million today. If the interest rate to service this debt were just 5%, it would cost each worker $60,000 just to cover interest costs without ever reducing principal. And this is utterly UNSUSTAINABLE.
H) My Takeaways:
Last year Jim helped to found The Free Enterprise Nation to rectify these disparities. The organization has no political affiliation. The unsustainable situation was fostered by both Republicans and Democrats, and the solutions to the plight are education, advocacy, and cooperation of all Americans to end politics as usual and to accept compromises and sacrifices. As a nation, we are at a philosophical crossroads. It is too easy to pigeonhole Democrats as being for the little guy and the underprivileged, and Republicans as heartless and only caring about their wallets. However, I believe that today the debate has moved much deeper than these stereotypes. The real philosophical tug of war is whether we should look towards the government to make lives better, or whether private citizens should be most empowered. I believe that being Republican or a fiscal conservative and having a bleeding heart and caring for the underprivileged are not mutually exclusive. In fact, though I am really an Independent, I have come philosophically to abhor big government. I think its effect is to keep the underprivileged, well, underprivileged. When governments get too much power, historically bad results follow. This has been true for World War Two Germany, Russia, China, African nations, etc., etc., etc. I am not comparing the current U.S. government with any of these regimes. I am just saying that too much power and control, militarily and/or economically, scares me.
I believe in the genius of mankind manifested through true entrepreneurial spirit. Furthermore, our government gets a big "F" for energy policies, public schools, postal service, railway systems and ethics. Therefore, I want them out of healthcare and anywhere else they seek to exert and overextend themselves. This is far deeper and wider than a liberal or conservative sound bite. Governments hired by us have forgotten for whom they work. They have demonstrated absolutely no fiscal responsibility, and I have come to agree with MacDougald that big government has made our nation's optimism for a brighter tomorrow unsustainable.
I) Conclusion:
Last year Jim helped to found The Free Enterprise Nation to rectify these disparities. The organization has no political affiliation. The unsustainable situation was created by both Republicans and Democrats, and the solutions to the plight are education, advocacy, and cooperation of all Americans to end politics as usual and to accept compromises and sacrifices.
I asked Jim if he would consider speaking to a group of our clients and friends. He said that he would. So, if you would be interested in getting more facts on these matters and being able to speak directly with the author, please let us know. These facts are crucial for all Americans to appreciate. Therefore, I encourage you to forward this letter to anyone who should also be in the know.
The opinions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, you should consult a financial advisor prior to investing.
This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. We suggest that you discuss your specific tax issues with a qualified tax advisor
Thursday, September 16, 2010
Jobs, Jobs, Jobs: From Where Will They Come?
Contrary to common perceptions, it is not the big companies, such as IBM, or Microsoft, or even Apple or Google that create jobs or even revolutionary technology revolutions. While this may sound suspect, it was proven by the Kauffman Foundation of Entrepreneurship Research Series: Firm Formation and Economic Growth. The Kauffman report cited a relatively new dataset from the U.S. government called Business Dynamics Statistics (BDS), which revealed that firms in their first year of existence add an average of three million jobs per year. Because so many firms go out of business within the first five years of their existence, firms that already exist actually lose more jobs per year than they create. In fact, the report indicated that from 1977 to 2005, existing companies were net job destroyers, losing one million net jobs per year. While the startup company may not survive after the first year or beyond year five, during its startup year, this sector of the economy is responsible for creating one million new jobs. Startups lead the way in terms of job creation. So while the behemoths like Google and IBM acquire small companies who were recent startups, it is important to appreciate that it is the startups which assume the initial risks and prove the viability of their business, and are responsible for the surge in job growth.
Vivek Wadhwa is an entrepreneur turned scholar. He is Visiting Scholar at the School of Information at UC-Berkeley, Senior Research Associate at Harvard Law School and Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University. In reporting about the Kauffman findings, he concludes that since we cannot count on the Intels or the Microsofts to create employment, business incentives such as tax benefits to remain operational in a state should favor startups over large multi-nationals. His recipe for creating new jobs is to focus attention on helping the small entrepreneur.
There is great debate raging as to whether the U.S. should have bailed out the big banks and automobile manufacturers. Wadhwa provides a thought provoking argument to gear public policy towards startups. Examples of such public policy include patent protection laws, seed financing, tax breaks, education and infrastructure all aimed to help the little guy.
To piggy back arguments to encourage public policies to support the little guy, William Dunkelberg, Chief Economist for the National Federation of Independent Business, takes exception to economic arguments being made to legislate greater policies to encourage more spending. An argument being made by some today is that the “rich” deserve to have their taxes increase, and furthermore, if they pay less in taxes, they will save it, which will not jump-start the economy. The argument is that “poorer” people spend more, and spending greases the wheels of the economy better than savings do. What Dunkelberg points out is that for banks to lend, someone on the other side must be saving and deploying funds into the financial system. Also, most startup businesses are financed through hard-earned savings of the entrepreneur. So, the seeds for job creation which will come from startups and small entrepreneurs, stem from savings.
Let’s hope and vote for public policies that promote savings and fiscal responsibility, especially for the little guy who is the driver of the economy, yet ironically so often and easily overlooked.
The opinions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, you should consult a financial advisor prior to investing.
This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Vivek Wadhwa is an entrepreneur turned scholar. He is Visiting Scholar at the School of Information at UC-Berkeley, Senior Research Associate at Harvard Law School and Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University. In reporting about the Kauffman findings, he concludes that since we cannot count on the Intels or the Microsofts to create employment, business incentives such as tax benefits to remain operational in a state should favor startups over large multi-nationals. His recipe for creating new jobs is to focus attention on helping the small entrepreneur.
There is great debate raging as to whether the U.S. should have bailed out the big banks and automobile manufacturers. Wadhwa provides a thought provoking argument to gear public policy towards startups. Examples of such public policy include patent protection laws, seed financing, tax breaks, education and infrastructure all aimed to help the little guy.
To piggy back arguments to encourage public policies to support the little guy, William Dunkelberg, Chief Economist for the National Federation of Independent Business, takes exception to economic arguments being made to legislate greater policies to encourage more spending. An argument being made by some today is that the “rich” deserve to have their taxes increase, and furthermore, if they pay less in taxes, they will save it, which will not jump-start the economy. The argument is that “poorer” people spend more, and spending greases the wheels of the economy better than savings do. What Dunkelberg points out is that for banks to lend, someone on the other side must be saving and deploying funds into the financial system. Also, most startup businesses are financed through hard-earned savings of the entrepreneur. So, the seeds for job creation which will come from startups and small entrepreneurs, stem from savings.
Let’s hope and vote for public policies that promote savings and fiscal responsibility, especially for the little guy who is the driver of the economy, yet ironically so often and easily overlooked.
The opinions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, you should consult a financial advisor prior to investing.
This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Friday, August 20, 2010
Sobering Statistics
In its August 9, 2010 edition, The Wall Street Journal cited the following facts about the current state of the job market in the United States:
a) The number of 35-44 year old men out of work for at least a year totals 432,000.
b) The number of 45-54 year old men out of work for at least a year totals 608,000.
c) The number of 55-64 year old men out of work for at least a year totals 369,000.
d) The number of 55-64 year old women out of work for at least a year totals 267,000.
e) The median duration of unemployment is 25.4 weeks.
f) If the job openings were being filled as they have traditionally been, the U.S. would have approximately five million more gainfully employed people, according to David Altig, research director at the Federal Reserve Bank of Atlanta.
One other major concern and long term drag on the economy relates to the fact that many of those formerly unemployed are desperate to work that they are accepting positions and wages far below their previous earnings. They are no longer unemployed, but they are financially strapped, and are not in a position to exercise the form of patriotism desired by the federal government known as spending. One of the many examples of this phenomenon is Mary Lou Belmont, who was featured in the article. Mary Lou is a 56 year old married Florida resident who lost her job providing an annual salary of $117,000 as a compliance manager with GMAC Home Services, LLC in November, 2008. She just accepted a part-time job involving clerical work with a non-profit earning slightly better than minimum wage. While it’s great that she is productive and active again, the problem is that during her period of unemployment, she racked up over $100,000 in debt. In addition, she owns a five-bedroom, five-bathroom house which she is trying to sell for $929,000. And, there are many other choices in Florida. How many others are out there just like Mary Lou? She is no longer unemployed; yet she is unable to sustain her lifestyle. In fact, here is her quote: “Looking at what I’ll make per day now, I have to laugh. I used to spend that much in a day without thinking about it. It puts things into perspective.”
The cornerstone of any financial plan is a contingency plan and an emergency cushion and a commitment to live within your means. Too bad Mary Lou and so many others in their wise “golden years” never learned these basic lessons. And, too bad for the many of us who have been responsible and disciplined and have lived within our means who are now expected to rescue the thousands of folks like Mary Lou. Had they heeded these basic lessons, our entire economy might have well healed by now.
The opinions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, you should consult a financial advisor prior to investing.
This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
a) The number of 35-44 year old men out of work for at least a year totals 432,000.
b) The number of 45-54 year old men out of work for at least a year totals 608,000.
c) The number of 55-64 year old men out of work for at least a year totals 369,000.
d) The number of 55-64 year old women out of work for at least a year totals 267,000.
e) The median duration of unemployment is 25.4 weeks.
f) If the job openings were being filled as they have traditionally been, the U.S. would have approximately five million more gainfully employed people, according to David Altig, research director at the Federal Reserve Bank of Atlanta.
One other major concern and long term drag on the economy relates to the fact that many of those formerly unemployed are desperate to work that they are accepting positions and wages far below their previous earnings. They are no longer unemployed, but they are financially strapped, and are not in a position to exercise the form of patriotism desired by the federal government known as spending. One of the many examples of this phenomenon is Mary Lou Belmont, who was featured in the article. Mary Lou is a 56 year old married Florida resident who lost her job providing an annual salary of $117,000 as a compliance manager with GMAC Home Services, LLC in November, 2008. She just accepted a part-time job involving clerical work with a non-profit earning slightly better than minimum wage. While it’s great that she is productive and active again, the problem is that during her period of unemployment, she racked up over $100,000 in debt. In addition, she owns a five-bedroom, five-bathroom house which she is trying to sell for $929,000. And, there are many other choices in Florida. How many others are out there just like Mary Lou? She is no longer unemployed; yet she is unable to sustain her lifestyle. In fact, here is her quote: “Looking at what I’ll make per day now, I have to laugh. I used to spend that much in a day without thinking about it. It puts things into perspective.”
The cornerstone of any financial plan is a contingency plan and an emergency cushion and a commitment to live within your means. Too bad Mary Lou and so many others in their wise “golden years” never learned these basic lessons. And, too bad for the many of us who have been responsible and disciplined and have lived within our means who are now expected to rescue the thousands of folks like Mary Lou. Had they heeded these basic lessons, our entire economy might have well healed by now.
The opinions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, you should consult a financial advisor prior to investing.
This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Wednesday, July 28, 2010
Get Ready to Issue Staples Tax Form 1099 for Office Supplies
Section 9006 of the 2409 page new health care bill creates mandates for businesses that have nothing to do specifically with health care delivery, but everything to do with ways to pay for it.
Currently, IRS Form 1099 is issued by businesses to freelancers and independent contractors with whom they do business because independent contractors are not on the business’s payroll. As a result of the new law, beginning in 2012, businesses will be required to issue 1099 tax forms from any vendor from whom they purchase more than $ 600 per year. The new law makes two sweeping changes with respect to the issuance of 1099 tax forms. First, it expands their scope to track payments not just for services, as is currently the case, but also for tangible goods. Second, it requires 1099s to be issued not just to individuals, but to corporations as well.
Consequently, beginning January 1, 2012, if we purchase a copy machine and paper from Staples costing $601, we will be required to issue Staples, Inc. a 1099 at the end of the year. For businesses that do a lot of commerce with multiple vendors throughout the year, this will present quite a burden and expense because names and taxpayer identification numbers for each vendor as well as aggregate purchases per vendor will have to be submitted. The National Taxpayers Advocacy Office, which operates independently within the IRS, has expressed concern that these burdens will create incentives for businesses to limit the number of vendors with whom they work. The impact of the law will also create a huge advantage for big business at the expense of small companies. The reason is that larger companies will have better infrastructure to keep track of these payments for their customers as a means for staying compliant with the new IRS rules. Bill Rys, tax counsel for the National Federation of Independent Businesses, said of the new law, “It’s a pretty heavy administrative burden”, and this is particularly the case for small businesses without large in-house accounting staffs.
I think that credit card companies must pay a lot to lobbyists because a provision in the law excludes the burdens of filing 1099s when vendors are paid via credit cards. Wow, that’s a huge incentive for companies to charge more to credit. Parenthetically, I thought debt was the cause for the financial meltdown, and this law encourages more, not less. Also, many business owners can negotiate better finance terms from vendors directly than they can from Visa or Mastercard.
Government bureaucrats who have never run a small business are in charge of creating laws with the guise of helping small business without fully appreciating all the unintended consequences. The bureaucrats will get one thing correct. This new law will undoubtedly create jobs, probably not in the private sector, but most assuredly, it will result in more auditors hired by the IRS. As a small business owner myself, and one of some estimated 30 million sole proprietorships and subchapter S corporations, as well as two million farms and one million charities and other tax-exempt entities affected by this law, I’d like to say to Congress, thanks for your efforts, but no thanks for your so-called help.
The opinions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, you should consult a financial advisor prior to investing.
This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Currently, IRS Form 1099 is issued by businesses to freelancers and independent contractors with whom they do business because independent contractors are not on the business’s payroll. As a result of the new law, beginning in 2012, businesses will be required to issue 1099 tax forms from any vendor from whom they purchase more than $ 600 per year. The new law makes two sweeping changes with respect to the issuance of 1099 tax forms. First, it expands their scope to track payments not just for services, as is currently the case, but also for tangible goods. Second, it requires 1099s to be issued not just to individuals, but to corporations as well.
Consequently, beginning January 1, 2012, if we purchase a copy machine and paper from Staples costing $601, we will be required to issue Staples, Inc. a 1099 at the end of the year. For businesses that do a lot of commerce with multiple vendors throughout the year, this will present quite a burden and expense because names and taxpayer identification numbers for each vendor as well as aggregate purchases per vendor will have to be submitted. The National Taxpayers Advocacy Office, which operates independently within the IRS, has expressed concern that these burdens will create incentives for businesses to limit the number of vendors with whom they work. The impact of the law will also create a huge advantage for big business at the expense of small companies. The reason is that larger companies will have better infrastructure to keep track of these payments for their customers as a means for staying compliant with the new IRS rules. Bill Rys, tax counsel for the National Federation of Independent Businesses, said of the new law, “It’s a pretty heavy administrative burden”, and this is particularly the case for small businesses without large in-house accounting staffs.
I think that credit card companies must pay a lot to lobbyists because a provision in the law excludes the burdens of filing 1099s when vendors are paid via credit cards. Wow, that’s a huge incentive for companies to charge more to credit. Parenthetically, I thought debt was the cause for the financial meltdown, and this law encourages more, not less. Also, many business owners can negotiate better finance terms from vendors directly than they can from Visa or Mastercard.
Government bureaucrats who have never run a small business are in charge of creating laws with the guise of helping small business without fully appreciating all the unintended consequences. The bureaucrats will get one thing correct. This new law will undoubtedly create jobs, probably not in the private sector, but most assuredly, it will result in more auditors hired by the IRS. As a small business owner myself, and one of some estimated 30 million sole proprietorships and subchapter S corporations, as well as two million farms and one million charities and other tax-exempt entities affected by this law, I’d like to say to Congress, thanks for your efforts, but no thanks for your so-called help.
The opinions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, you should consult a financial advisor prior to investing.
This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Tuesday, June 29, 2010
Summary of Bank Regulation Bill in Plain English
A) Oversight:
Banks which are deemed so big or interconnected that their failures could present systemic risks for the overall economy will be monitored by a ten member council.
B) Credit Rating Agencies:
Agencies such as Moody’s Corp, Standard & Poor’s and Fitch Ratings could be sued if they “recklessly” fail to review key information in establishing a rating.
C) Capital Requirements:
The term “tier one capital” is often referred to in the news, but never defined. It is the core measure of a bank’s financial strength from a regulator’s point of view. It consists primarily of common stock and retained earnings of a bank. The Bill requires large banks to increase the amount of capital that they hold in reserves against possible loan losses. This will of course limit banks’ leverage and potential earnings. This provision however does not become effective for the first five years.
D) Limitations on Derivatives:
After a great deal of bargaining into the wee hours of the morning, a compromise was struck whereby banks get to retain derivative trading in house with respect to interest rates, foreign exchanges, gold and silver. Other types of derivative trades would have to be spun off to a securities broker-dealer division of the bank, separate and distinct from their traditional deposit-taking divisions. FDIC insurance will continue to protect the deposit-taking entity of banks, but it would not protect the broker-dealer affiliates created for the other derivatives trades. Government agencies will have new authority to regulate these trades, which heretofore have been largely unregulated. According to the Office of the Comptroller of the Currency, five banks control 97% of the total derivatives market, and 92% of their derivative trades relate to interest rate or foreign exchange. Therefore, the Bill will have little real impact on derivative trading, which was designed to be a monumental linchpin.
E) Volker Rule:
Paul Volker, the former Federal Reserve chairman, sought to prevent banks from engaging in any proprietary trading, or bets with its own money, including investments made to hedge funds and private equity funds. Bloomberg reports that Goldman Sachs executives estimate that 10% of the firm’s annual revenues come from proprietary trading. The final version of the Bill allows banks to invest in hedge funds and private equity, however, they cannot invest more than 3% of a fund’s equity and only up to 3% of the bank’s tier 1 capital can be invested into hedge funds or private equity. In addition, the Bill prevents firms which underwrite asset-backed securities from placing bets against the investment.
F) Limitations/ Costs/ Results:
The government, which took over Fannie Mae and Freddie Mac in 2008 after they suffered huge loan losses due to the housing crash, has already spent $ 145,000 billion and has pledged to cover unlimited Fannie and Freddie losses through 2012. The Bill does not address these loans at all. Even though auto dealers assemble loans for millions of car buyers, they will continue to be regulated by states or the Federal Trade Commission. They will not fall within the purview of the new consumer bureau.
Banks with assets of more than $50 billion and hedge funds with more than $10 billion in assets will be assessed a fee which is deemed to raise $19 billion over 10 years. Lending will continue to be more restricted and banks will pass on the additional fees to their customers. Wealth may or may not trickle down, but costs and regulations almost always do.
Respectfully submitted,
Greg Gann
The opinions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, you should consult a financial advisor prior to investing.
Banks which are deemed so big or interconnected that their failures could present systemic risks for the overall economy will be monitored by a ten member council.
B) Credit Rating Agencies:
Agencies such as Moody’s Corp, Standard & Poor’s and Fitch Ratings could be sued if they “recklessly” fail to review key information in establishing a rating.
C) Capital Requirements:
The term “tier one capital” is often referred to in the news, but never defined. It is the core measure of a bank’s financial strength from a regulator’s point of view. It consists primarily of common stock and retained earnings of a bank. The Bill requires large banks to increase the amount of capital that they hold in reserves against possible loan losses. This will of course limit banks’ leverage and potential earnings. This provision however does not become effective for the first five years.
D) Limitations on Derivatives:
After a great deal of bargaining into the wee hours of the morning, a compromise was struck whereby banks get to retain derivative trading in house with respect to interest rates, foreign exchanges, gold and silver. Other types of derivative trades would have to be spun off to a securities broker-dealer division of the bank, separate and distinct from their traditional deposit-taking divisions. FDIC insurance will continue to protect the deposit-taking entity of banks, but it would not protect the broker-dealer affiliates created for the other derivatives trades. Government agencies will have new authority to regulate these trades, which heretofore have been largely unregulated. According to the Office of the Comptroller of the Currency, five banks control 97% of the total derivatives market, and 92% of their derivative trades relate to interest rate or foreign exchange. Therefore, the Bill will have little real impact on derivative trading, which was designed to be a monumental linchpin.
E) Volker Rule:
Paul Volker, the former Federal Reserve chairman, sought to prevent banks from engaging in any proprietary trading, or bets with its own money, including investments made to hedge funds and private equity funds. Bloomberg reports that Goldman Sachs executives estimate that 10% of the firm’s annual revenues come from proprietary trading. The final version of the Bill allows banks to invest in hedge funds and private equity, however, they cannot invest more than 3% of a fund’s equity and only up to 3% of the bank’s tier 1 capital can be invested into hedge funds or private equity. In addition, the Bill prevents firms which underwrite asset-backed securities from placing bets against the investment.
F) Limitations/ Costs/ Results:
The government, which took over Fannie Mae and Freddie Mac in 2008 after they suffered huge loan losses due to the housing crash, has already spent $ 145,000 billion and has pledged to cover unlimited Fannie and Freddie losses through 2012. The Bill does not address these loans at all. Even though auto dealers assemble loans for millions of car buyers, they will continue to be regulated by states or the Federal Trade Commission. They will not fall within the purview of the new consumer bureau.
Banks with assets of more than $50 billion and hedge funds with more than $10 billion in assets will be assessed a fee which is deemed to raise $19 billion over 10 years. Lending will continue to be more restricted and banks will pass on the additional fees to their customers. Wealth may or may not trickle down, but costs and regulations almost always do.
Respectfully submitted,
Greg Gann
The opinions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, you should consult a financial advisor prior to investing.
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