Entries Tagged 'United States' ↓

I am sort of a documentary junkie and I like watching them on Netflix’s instant play. Two documentaries I have reviewed on this blog include Maxed Out and The Business of Being Born. Today I heard about an interesting documentary called I.O.U.S.A. documenting the threat of America’s ever growing national debt. Yahoo has an article that talks about billionaires Warren Buffet and Pete Peterson endorsing this documentary and speaking out about how the government should work on borrowing less, and encourage the citizens to save more, but will anyone listen?

A few days ago I wrote an article called We Are Our Own Worst Enemy on Wise Bread and it was a comment on Knight Kiplinger’s article about how Americans themselves are the culprits for the nation’s economic problems. The American people like lower taxes, and more services. The politicians get elected by making expensive promises, and they fulfill their promises by borrowing money. This has been going on for quite a while. One of the commenters on my article wrote an extremely long comment that ended with,

“Fed a steady diet of corporate-controlled advertising which manipulates quirks of the human brain (read Jerry Mander’s “4 Arguments for the Elimination of Television“) to increase consumer spending and pro-corporate news, is it any wonder the average American is a mess? Sure, they’re stupid for continuing to stare at the boob-tube and not noticing that they get the urge to order out a pizza after the TV ad, but hey, most people just don’t have as high IQ’s as the average tightwad (read “The Bell Curve“), especially as many of today’s consumers are from the post-Reagan/cut-education-to-the-bone generation. It’s not that the more aware people aren’t writing to their Congressman demanding solutions, the problem is that those Congressmen aren’t listening because they’re beholden to their corporate sponsors.

STOP telling people they’re stupid and it’s all their own fault. A) it’s only 25%-30% their fault; B) the minute you tell someone it’s all their fault they stop listening to you; and C), the originator of this article is quoting a non-credible source. If you want to change things, take clueless consumers by the hand, gently explain the situation to them and what they can do to fix it in a non-blaming way, then unleash them on Congress to throw the bastards out of office. Educate people that they have been brainwashed and teach them there is another way to live.”

I think this commenter is pretty blunt and cuts to the heart of the problem. Most people don’t care or know enough to learn about the national debt. Most people keep on electing the officials that promise the most to them. How does a politician make “reduce the national debt” sound more sexy than “tax cuts for the middle class”? Sure, I.O.U.S.A may be a great documentary, but how many people will watch it? Now that billionaire endorsed it, I am sure that those in the government who love class warfare and spending all they can would dismiss it as another piece of propaganda from “the rich”.

Here is what I find absolutely fall-off-my-chair hilarious. China is one of the biggest creditors to the USA. Actually according to the Treasury, China currently holds around half a trillion dollars of US treasuries. So basically the $40 billion extravaganza of an Olympics could be just funded by the interest payments America is sending to China. I am sure some of you Americans might be calling China evil now, but if China didn’t loan the money to the United States then your lives may be a lot worse. Treasuries carry a fairly low yield, and that’s what kept inflation low in the United States for decades. However, if China stops buying so many treasuries from the United States sometime in the future or demand higher rates then that would affect government funds in a significant manner.

I really don’t know how Americans can fix this because there doesn’t seem to be a politician that doesn’t love to spend and get more debt. I guess they’re not spending their own money so it doesn’t matter to them. Young sensible professionals are not the majority in America, and most people who vote are baby boomers and seniors who love the government sponsored freebies so politicians pander to them. One prime example is that Obama is proposing no taxes for seniors making $50,000 a year and below. It makes sense for the more elderly because the debts incurred by the government will be paid by generations to come, so they’re not spending their money either. I’m not saying that all elderly people are leeches, but selfishness tend to lead people to vote a certain way especially when the incentives are so large.

Finally, here is another funny and ironic fact. When people who work in the government apply for Top Secret or Secret clearance they will be screened for the amount of debt they have. If they have too much debt they may not get clearance because they are more likely to be blackmailed or accept bribes. Right now, the United States Government’s national debt is so large and owned by so many foreign nations that it may not pass for its own security clearance if it applied. I think the Department of Homeland Security should probably get involved as soon as possible because the United States Government’s finances is a valid security risk.

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I read Laura Rowley’s Yahoo Finance column pretty regularly, and this week she wrote about college debt and how many young adults with large student loans and small wages are basically debt slaves doomed to pay for their education for decades. I have also written a little bit about college finance before. In “Not rich enough, not poor enough” I wrote about how many middle class families do not qualify for financial aid or even scholarships at expensive private colleges and that drew many different responses. Some say that kids should pay for their own college expenses and others say that the financial aid system needs to be reformed. Either way, most people agree that there is a problem with having to take out huge loans to fund college. Here are some things I think parents and college bound teens should consider before signing on to a generation of debt.

1. Consider attending a state public school with in state tuition- I went to the University of California at Berkeley and all four years of tuition plus room and board cost less than one year at any private university. My parents paid for it, but if I could have paid off the entire amount with less than a year of income after I graduated. Recently an article in Forbes ranked UC Berkeley as one of the top colleges for getting rich. The study was done by PayScale.com and the schools were ranked on the median salary of alumni with 10 to 20 years of experience. I think if they gathered data on the amount of student loans some of the private school alumni are still paying, then they will probably find that Berkeley grads keep more of what they earn and pay less to the loansharks. There are plenty of great state college in this country, and I think they are the best bang for the buck.

2. Consider graduating early - If you could shave one semester,term, or even year off your college education then you would save quite a bit of money. It involves a lot of hard work and creative class scheduling, but it is worth it. I took classes that could fulfill multiple graduation requirements and also took classes in the summer session and I finished about a year early. I used the year to work at a couple internships and took one class in my last semester of senior year.

3 . Try  going to a cheap school for the first couple years and then transfer - I know quite a few people that went to community colleges and then transferred to Berkeley or other schools during their junior year. Their final degree is still from the more expensive school and no one can tell that the first two years were spent in a cheaper school.

4. Work before college - I know some people who worked for a year or two before college to save money for college. Many colleges allow you to defer enrollment for a year so you can have the opportunity to do something. 

5. Start saving early in tax advantaged accounts  - Right now I do not have kids yet, but I am putting $100 a month into a 529 education savings plan under my name.  I don’t think parents and children could save too early for a college education.  A 529 allows you to withdraw the savings for education and any gains on the investments are tax free.

Finally, I totally agree with the advice given in the Yahoo Finance article that you shouldn’t borrow a lot more than what you would earn after college.  However,  it is hard to look at the financial impacts of college loans when you are a young idealistic teenager who wants to do the things you love regardless of money.  There needs to be a balance between idealism and practicality, and perhaps more high school counselors should teach students about the effect of massive student loans.

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Well, it’s finally 8/8/8 and the Olympics started in China with a grand show of fireworks, weddings, and babies.  A few months ago I wrote an article supporting the Olympics and drew a slew of mixed and highly polarized reactions.  Honestly, I was surprised that it bothered me so much that people were so against the Olympics in China since I have been so far removed from China for so long.  I guess I was swept up by what the San Jose Mercury News calls a “racial chauvinism and raw nationalism reminiscent of Italy and Germany in the 1930s“. Hah!

A couple days ago I asked a friend if he was proud that China is hosting the Olympics, but he is Taiwanese American so I expected he would say no.  He said that he identified himself as an American and he just didn’t care about the Olympics that much and he wasn’t even proud when America hosted it.  He reads my blog so he knew that I actually cared about the Olympics being in China and I consider myself Chinese.  Then he said that  I  have  a lot of  American values  and  a lot of  Chinese values and it is about 60/40.  At first  I said to him, “what American values do I have besides eating burgers and getting fat?”  He laughed at me and said that is a big part of American culture for better or worse.  Then he said that I believe a lot of things that are “American”.  For example, I think that compensation should be merit based and that I am a Christian.  I suppose I did pick up those traits in America, but it is hard to say what is truly American because this country is like a mosaic of so many ideas and cultures.  That is one thing I truly love about America.

It is hard to deny that America is a country with incredible opportunities, freedoms, and diversity.  There is really no other place like this in the world and every single day I am still amazed by this country’s creations, influence, and wealth. When I was younger I actually wished that I was born in America and I was an actual American citizen because I would be granted everything this country had to offer.  I hated that  so many Americans have had so much for so long and  they didn’t appreciate it and I envied them for being so lucky to have been born in this country.  Very few people knew how I felt because everyone thought that I was an American by the way I spoke and acted.  I am actually eligible to apply for American citizenship in a few years, but I am thinking twice about it because I no longer  want to give up my Chinese citizenship.   I have grown to see the value in being Chinese as China is becoming more free and economically developed.

The greatest problem with America now besides the ever escalating debt is that it is so very disjoint and everyone bickers all the time.  It is no longer the United States; it’s the Blue States and the Red States.   The representatives that make the laws no longer belong to the people, but to corporations with lobbyists.  There is just so much discord and dissatisfaction within United States now that it is hard to love this country that taught me so much.  At this pace, the United States’ growth  cannot match what can be accomplished by more than one billion people united in China and it makes me sad that this  brilliant country is doing so little with so much.

As I have said before in my first article about the Olympics, China still has a deluge of problems that it needs to work out, but I am definitely proud of how far it has come.  I am so glad that this event is happening in spite of so many naysayers and attacks.  Just yesterday I heard a couple coworkers say that they’re surprised that China pulled it off and the Olympics actually started despite a gigantic earthquake and years of international disapproval.  I chuckled a bit in my cube because I thought it was funny how Americans generally underestimate the Chinese.  Anyway, this Olympics will be fun to watch, and I will be rooting for China.

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Recently I just read this list of “recession-proof” jobs on CNN. They list the following sectors as still growing in the current economy:

1. Education
2. Energy
3. Environmental sector
4. Health care
5. Security

Looking at this, it seems that my family has the bases covered. I am in a software security firm, my mom is in education, and my dad is in the non-profit environmental sector. We all switched jobs in the last two years to our current positions and I don’t think it’s a coincidence.

I used to work for a company that focused on retail shopping and mortgage leads. Last year everyone’s bonuses were cut drastically because of the mortgage fall out and I sort of knew that it was going to get worse. So I looked for a new job, and I specifically looked for companies that I thought wouldn’t be affected by real estate very much and ended up in this software security firm last November. I think it has been a good move because this company is doing well despite the current economic atmosphere.

My mom used to be in commercial real estate, and all of the properties managed by her company were sold by the owners and her management company basically shut down completely. She was given an extremely generous severance package and after looking for a couple months she landed a lower paying job in a university this January. She complains about the bureaucracy sometimes, but she seems to be adjusting to her new job.

My dad has always worked in non-profits, and decided to take a new job after working at the same place for almost 10 years. He seems to be very enamored with his new organization’s goal of combating global warming around the world, and I think that’s pretty awesome.

The fact that we have jobs in these sectors now shows that these types of companies are still hiring in a downturn. I think if you are working in an industry that is suffering the effects of the economy now you could still move into the better sectors as long as your skills are fairly transferable. You do not have to wait for a layoff to start looking because the job seekers who have a job already usually have better bargaining power and have a better chance at landing a new job. As long as you have a job throughout a recession life should go on normally, and it doesn’t hurt to be prepared for a recession by moving into a growing sector.

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The New York Times recently published an interactive calculator that allows you to compare your debt situation to a group of more than 360 American families that were surveyed in 2004. After playing with it for a little bit, it was pretty clear that this survey indicates that those with more income are more likely to have debt. This led to me to ask, why is that those with more means seem to borrow more?

The calculator allows you to input your mortgage debt, credit card debt, automobile debt, and educational debt.  Then you can choose your income and age group on the bottom and it tells you how many percent of the families they surveyed are like you. So I put in $0 and less than 35 year old.  In my age bracket, 39% of families making less than $20,000 per year had no debt, and only 3% of families making more than $150,000 per year had no debt.  This is a very stark difference.  When I changed the age bracket to all age groups, 47% of families making under $20,000 had no debt while only 14% of families making more than $150,000 had no debt. That is still a very big difference.

I noticed that regardless of income, most of the debt of these families came in the form of mortgage. The average amount of mortgage debt goes up as you scroll up in income. This makes sense because more income allows people to qualify for larger mortgages.  Higher income families also tend to live in areas with high costs of living so housing is more expensive to begin with. Some would argue that mortgage is a type of “good” debt because it allows people to have a piece of real estate after it is paid off, but that alone  does not change the fact that it is a debt.

In all the other categories of debt, higher income families still owed more than lower income families on average.  The average automobile debt of families making over $150k  is nearly 9 times the automobile debt of a family making less than $20k.  All of this just shows that those with higher income spends much more on the same goods and services.

Personally I have lived in both ends of the income spectrum presented in this survey.  When we just moved to America we were living on one graduate stipend.  All three of us lived on less than $1000 a month and we watched our expenses day to day.  Nothing was bought without a coupon, and the damaged foods section is where we shopped first. When my family was at that income level, frugality was necessary for survival  and  there is no room for debt because one credit card interest charge could mean a week’s worth of groceries.

Later, my parents graduated and we moved to the San Francisco Bay Area.  They both had well paying jobs after a few years, and they took on a mortgage. A big change I noticed is that we no longer cut out every coupon we found for food and we ate out much more.  It was much easier to spend money because we had more income than before.  The rationale was that coupons were no longer worth the time and effort to redeem, and paying for good food was great because we can’t cook like that anyway. Being frugal is just harder when you have the means to spend your money and justify it later as only 0.25% of your salary.

Though, having said this, I would like to clarify that my family was never that extravagant and got in any debt other than their mortgages. Also, I think it would more interesting if the NY Times reported the amount of assets these families had and see if these families could cover the amount of the debt they have.  If the higher income families had enough assets to make their net worths positive, then they are not too badly off.  If they had the most debt and least assets, then they are really in trouble.

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