Obama Saves Economy with Pension Reform

Pension Plans are finally getting reformed, which is a wonderful thing to the American economy. Pension plans were a huge drain on many big businesses in America forcing companies to declare bankruptcy. Ford Motor Company, Delta, and GM are having huge problems making a profit when they have to give away almost a billion dollars a year to pension retirees. The old pension system would force companies to increase their revenues so they would be able to pay pension benefits. This would force businesses to re-evaluate their businesses plans and try to cut costs just to try to break even. What did businesses do to cut costs? Terminate thousands of good employees, purchase lower cost goods making their products have inferior quality, and a whole lot of out sourcing. Realistically, before the year even starts a lot of big businesses were one billion dollars in the hole. Big American businesses were almost doomed right from the start.

Example: Why is AirTran much more profitable then Delta? Before cutting cost Delta was a wonderful company. They were always ranked highest in customer satisfaction, and had a loyal customer base. Did poor management really destroy the company? I doubt it. After September 11^th, their sales decreased, and their pension plan inflated because there were more people about to retire.

America was in a catch 22 system before the pension plan reform. American companies have to cut cost, and reduce prices just to compete with foreign companies (that still might be producing a better product). Foreign companies can increase spending in advertising, quality management, and research and development to improve their product and sales, while American companies have to cut that out of their budget to fund pension plans of present and future retirees.

A lot of Americans rely on big businesses for jobs, community development, and competitive prices. I am not saying that pension plans should be cut for present retirees, or people currently contributing, but the pension reform plan will enable big American businesses to be competitive again.

*Next post will be about the financial side of the pension reform. Read this article to see what will be talked about next week*

Tags: Reform, Retirement

Are High School Students Learning About Life?

Going to high school and graduating is essential for every child’s life so they can thrive in the future. It’s a cornerstone of the educational experience, and without those four years, it is much more difficult to be successful in life. But are all the classes really important? The even better question is: are high school students missing one of the most important keys to life?

When I went through high school I always thought to myself, “When am I ever going to use an equation to measure the volume of a pyramid, or how will knowing the classes of bacteria benefit my life.” There are so many important things that I wish I knew before leaving high school that would have really helped me in my college career. It is almost like 20% of the educational fluff you learn in high school will only help you in random bar trivia. Why doesn’t school teach you ways to become knowledgeable in finance instead of dissecting a frog? The last job application I saw didn�t have a question on whether or not you know how to dissect a frog, and I’m pretty sure I’ve never had to do it again. What I didn’t know is that when I left high school I would get bombarded with credit cards and student loan packages. I basically thought that all this money that is being given to me is free. Wrong. Extremely wrong.

What happens when you don’t pay your bills, credit cards, or default on your student loans? Many freshmen in college go through this process. Right when they turn 18 they receive a pre-approval in the mail with a $1000.0 credit limit. Like I discussed in a previous post (Social inSecurity), should we leave this heavy burden of how teach our kids financial advice up to parents that also need to be taught the simple rules of saving? I don’t think so. High school juniors and seniors need to be taught why personal finance is going to be one of the most important parts of their lives.

There is a simple curriculum that needs to be introduced to the upper level high school students to handle the college lifestyle, and a key to financial freedom.

Budget & Banking
Making a healthy and fun budget
Good spending and bad spending
Paying yourself first and automation

Loans & Interest
Student loans and consolidations
Credit Cards
Car Loans
Mortgages/Home Loans/Equity Loans

FICO/Credit Score
Why its so important
Do’s and Don’ts
How to improve

Investments & Planning
Buying a House
IRA
401(k) and 403(b)
Insurance
Wills and Trusts

This set of courses would prepare students for the real world. Our country would no longer look like a financial mess if the younger generation wouldn’t have to worry about Social Security, or pension plans. They would learn why it is important to be proactive in politics, and in personal finance. It would empower the youth and give them the ability to live life the way they want.

*Do you think there are classes that need to be introduced in high school? Do you like the idea of a personal finance class introduced in high school? Please feel free to comment on this post*

Tags: Education, Reform

Illegal Immigrants. Friends or Foes?

Every news station you watch these days will always have something new about illegal immigrants. On Fox News you will always hear how illegals are ruining America because they are not paying taxes, yet they are using our health care facilities, America’s oil, and stealing lower class jobs. Have you heard any real positives about illegal immigrants?

Let me tell you a quick lesson in history. Ever since the beginning of civilization, societies with the most power were able to use cheap labor efficiently which gave them a huge advantage when it came to their economics. Egypt had slaves, Rome had the lower class and slaves, England had the Irish and Scottish, and early America had immigrants in the North and slaves in the South.

Now that most civilized nations have made the use of slaves illegal, how are developed countries able to survive against growing countries like India, China, and Indonesia without exploiting cheap labor? Lower class? I think not. There are too many labor laws which make it harder for businesses to decrease their prices for goods and services. What about outsourcing? This scenario can sometimes work for big businesses, but for small and medium businesses it just isn’t cost efficient. Illegal immigrants? They aren’t “technically” protected by any labor laws, they are in desperate need of work, and they increase the margin of profit for businesses by lowering down wage expenses.

I think that exploiting illegal immigrants as sub-human, paying them much less then the average day laborer, and not giving them any kind of benefits is immoral. On the other hand, letting illegal immigrants live in the U.S. without paying taxes, living the American lifestyle (best medicine, better neighborhoods, cheap energy, ect.), and letting their children go to public schools on the taxpayer dollar is also extremely wrong.

I do believe that President Obama ’s Immigration Plan is a positive step to control immigration. But how can we make the “‘they don’t pay any taxes’ people” happy? Well, I am a strong believer in tax reform and the Fair Tax Plan is a great way to make most people content. The tax plan (in summary) makes any one, whether they are Americans, illegal immigrants, or just people visiting America, pay the same amount of taxes.

Immigration will have a serious affect if America wants to be number one in the global market. Many other developing nations do not have the same labor laws as the U.S. and Canada which makes it a struggle to compete. Hopefully, in the future India and China will have the same labor laws which will make the world a level playing field.

Please read the Fair Tax Plan and if you think it will benefit America get involved by learning more about the plan, writing your representative, and signing the petition.



Tags: Economy, Fair Tax, Immigration, Reform

Social inSecurity

Even though this topic applies to an older audience, this will be heavily debated subject in the next two decades. As a young man I know that this social program will probably be depleted by the time I retire, but most people my age that do not save for their retirement still believe the government will support them in the years they can no longer work.

According to USA Today, “Last year, that rate sank to -0.5%. Households spent $41.6 billion more than they earned. The rate’s last dip into negative territory was in 1933, when banks were closed and breadlines were long. In January, the savings rate fell further, to -0.7%.” This seems like a scary statement, but it draws a vivid picture of our future. How is the younger generation supposed to save when our parents spend more than what they make?

Another scary statistic is that the percentage of households putting money into their savings fell to 56.1% in 2004, down from 59.2% in 2001. It gives me shivers down my spine thinking about what long-term effects this will have on America. Unless this cycle is broken, and our generation starts to save, our country will be in financial ruin.

This program was created to help the retirees have financial benefits post retirement. The big problem is that the government did not predict some huge factors contributing to the downfall of the plan such as: women in the workplace lowering the birth rate (the biggest factor), men and woman living past the age of 60, inflation, and the rapid development of foreign countries. President Bush tried to put together a plan to reform Social Security that would update the program, but of course was shot down. This program MUST be reformed so that our generation of non-savers will still have a forced savings plan.

Even though I personally think the government should not have a huge role in our retirement, many people do. I also think that when you look at the program itself it looks like an illegal Pyramid Scheme. That is just my opinion. Read what the SEC describes as a pyramid scheme and then you cannot tell me there aren’t any similarities between both programs. In conclusion, I think that we need to save for ourselves and hope others will catch on before they have to retire. Finish rich by early saving and let the wonder of compound interest take its course.

I will address how to save for retirement correctly in a future financial post.

Tags: Fair Tax, Reform