RPF-0034-Monday

00:00:00.000 | Are you ready to make your next pro basketball, football, hockey, concert or live event unforgettable?

00:00:05.500 | Let Sweet Hop take your game to the next level.

00:00:08.100 | Sweet Hop is an online marketplace curating the best premium tickets at stadiums, arenas and amphitheaters nationwide.

00:00:14.800 | Sweet Hop's online marketplace makes it easy to browse and book the best seats.

00:00:19.400 | With no hidden fees and a 100% purchase guarantee, you can feel confident when you book your premium LA tickets with Sweet Hop.

00:00:26.500 | Visit Swithop.com today.

00:00:31.900 | Radical Personal Finance, episode 34.

00:00:52.500 | Welcome to the Radical Personal Finance podcast for today, Monday, August 4th, 2014.

00:00:59.500 | Today's show is a Monday variety show, a roundup of this week's news articles.

00:01:04.700 | And we're going to especially focus on the interplay between economics, government, reality and spin.

00:01:24.600 | Today's episode is a special late night edition of the Radical Personal Finance podcast.

00:01:29.200 | I don't like to do late night additions, but that's how today turned out.

00:01:33.300 | So it's 1025 as I hit the record button.

00:01:36.100 | And hopefully we'll get this out before the midnight breaks.

00:01:38.700 | So far, I haven't ever missed publishing a show.

00:01:41.900 | And I don't plan to miss publishing a show, although I'm sure in the future I'll take some breaks.

00:01:46.900 | But I'd like to have the show here for you five days a week at least.

00:01:51.600 | And so I don't plan to to miss shows.

00:01:54.000 | And today was just busy, busy, busy and conducted an interview earlier this afternoon and just wasn't able to get to it until 1025 at night.

00:02:00.800 | But we're going to get it out to you, so I hope you enjoy.

00:02:03.800 | So Monday's show today is going to be a bunch of articles that I have found and some topics that I have found interesting.

00:02:11.200 | And basically my goal every day is to bring something to you that you will find thought-provoking and interesting and which will help you to learn something.

00:02:19.300 | I love to learn something new every day.

00:02:21.300 | And so I figure if you're listening to this show, you do as well.

00:02:24.200 | So we're going to start, however, not with an article or not with a news story from this last week.

00:02:30.200 | We're going to start with something that's a little bit older.

00:02:33.200 | We're actually going to begin here with a Planet Money report from NPR.

00:02:39.200 | And this was released on October 18, 2012.

00:02:43.700 | So this was released back during the election cycle of 2012, during the middle of politics.

00:02:53.200 | And I hope you enjoy this, and I think this will set a valuable, I guess, construct for today's show.

00:03:01.700 | And this is called, the story is called "A Tax Plan That Economists Love and Politicians Hate."

00:03:07.700 | It's four minutes and 16 seconds. Enjoy the audio.

00:03:11.700 | When you watch a presidential debate, it's easy to think that the nation is deeply divided over economic policy.

00:03:17.700 | But when you talk to the experts, to economists, it turns out they agree on an enormous number of issues.

00:03:23.200 | Our Planet Money team wondered what it would sound like if you could take some of those academic ideas about the economy

00:03:29.700 | and put them in a candidate's mouth.

00:03:31.700 | NPR's Robert Smith finds out.

00:03:33.700 | To create a dream candidate, you need a dream team.

00:03:37.200 | We took five leading economists of all different stripes, conservative, liberal.

00:03:41.200 | You could probably describe me as left of center, it'd be fair.

00:03:43.700 | Pro-market, but not necessarily pro-business.

00:03:45.700 | I'm a pretty hardcore free market guy.

00:03:48.200 | I'm a professor of health economics at the Harvard School of Public Health.

00:03:51.200 | I think of myself as a radical pragmatist.

00:03:54.200 | And we said to this team, put all your differences aside and tell us what can you actually agree on?

00:04:00.200 | In an ideal world, what should the presidential candidates be talking about?

00:04:04.200 | Luigi Zingales from the University of Chicago Booth School started off with something pretty uncontroversial.

00:04:10.200 | The United States tax code is a disaster.

00:04:13.200 | All the loopholes and differences and in particular, deductions.

00:04:17.200 | Now politicians say this all the time, and they rarely give a solution.

00:04:20.200 | But our economists all agreed on a pretty good way to fix it.

00:04:24.200 | The United States, they all said, needs to get rid of a giant tax deduction that unfortunately, millions of Americans love and enjoy.

00:04:32.200 | The mortgage interest deduction.

00:04:33.700 | The mortgage interest deduction.

00:04:35.200 | Mortgage interest is extremely perverse.

00:04:37.200 | If you own a home, pay a mortgage, you can write off the interest on your taxes.

00:04:41.200 | And if you're one of the lucky ones, it's awesome.

00:04:44.200 | A little help from Uncle Sam to live the American dream.

00:04:47.200 | But to an economist, a tax break is a multi-billion dollar gift to a very particular group.

00:04:53.200 | In this case, a group that doesn't always need the money.

00:04:57.200 | Here's Dean Baker. He's a liberal with the Center for Economic and Policy Research.

00:05:01.200 | And a conservative, Luigi Zingales.

00:05:03.200 | It just makes no sense that, you know, if we have Bill Gates or whoever, some very wealthy person,

00:05:08.200 | we're subsidizing them to get an expensive home.

00:05:11.200 | So, because rich people receive a much larger subsidy, the price of houses increase so much that it actually makes less affordable for the poor people.

00:05:21.200 | If you totally eliminate this deduction, the U.S. government would have an extra $100 billion a year to pay down the deficit or maybe lower overall taxes.

00:05:30.200 | Why wouldn't a politician at least float the idea?

00:05:33.200 | Well, we wanted to see how it would sound.

00:05:35.200 | So, we hired an actor, we wrote him a stump speech, and put him in front of a fake audience.

00:05:40.200 | That's why, when I'm elected President of the United States, I have a special plan for the middle class.

00:05:50.200 | All of you Americans who own your own homes, I promise to raise your tax bill by thousands of dollars a year.

00:05:59.200 | And that's why no one elects economists.

00:06:02.200 | Catherine Baker from Harvard says as painful and as unpopular as eliminating deductions would be, there is an upside.

00:06:09.200 | The system would be more fair, and it would bring in all this extra revenue to the government.

00:06:13.200 | So, I asked the panel, any chance with all that extra money you could maybe lower some tax rates too?

00:06:19.200 | Well, our economists did agree on one tax that has to go.

00:06:22.200 | Read my lips. No taxes for corporations. Zero, nada, nothing.

00:06:31.200 | This is not going to go over well with the middle class either.

00:06:34.200 | Right now, President Obama and Mitt Romney are advocating lower corporate taxes, but no one said get rid of them altogether.

00:06:40.200 | But our conservative and liberal economists agree, in principle at least.

00:06:44.200 | Here's Dean Baker.

00:06:45.200 | We don't want to prevent Microsoft or General Motors or whoever it might be from investing more and improving their product line.

00:06:51.200 | That's a good thing in my view.

00:06:53.200 | Our economists said if you want to tax rich people as part of public policy, tax rich people.

00:06:58.200 | Tax the owners of the corporation, but don't tax the profits from the corporation that are reinvested in creating jobs.

00:07:05.200 | Now, before you think that our economic dream team has nothing but unpopular ideas, there is more to the plan.

00:07:11.200 | Later today on All Things Considered, our economists say there might just be a way to get rid of income taxes altogether.

00:07:18.200 | And they unveil their big plan to combat illegal drugs.

00:07:21.200 | Make them legal.

00:07:22.200 | And other economic wisdom you won't hear in the debates.

00:07:25.200 | Robert Smith, NPR News, New York.

00:07:28.200 | So I bring you that bit of audio there as an introduction to today's show.

00:07:33.200 | And basically the point of the introduction is to illustrate that there's a difference between what is politically feasible versus economically desirable.

00:07:45.200 | And you're going to see that theme through all of these stories that I bring you today.

00:07:51.200 | And I want to point these stories out to you and share some of the current news.

00:07:55.200 | But there's always this balance when you're consuming economic news.

00:07:59.200 | There's always a balance that you're trying to figure out, are we talking about politics here or are we talking about economics?

00:08:05.200 | And as I've said in previous shows, I have no idea how to fix the massive macro problems.

00:08:14.200 | I've got ideas. I've got ideas that I would lobby for.

00:08:17.200 | I've got an economic point of view, but I'm not a trained economist.

00:08:21.200 | I'm just a layperson just watching and trying to figure out what makes sense to me.

00:08:24.200 | And I don't really expect to have any input or impact on the macroeconomic goings on.

00:08:31.200 | But I do know that I and you, all of us, we can choose what we want to do in our individual situations.

00:08:41.200 | And I'm going to come back to that at the end of the show, and I'm going to reference some articles with some information about where you might want to choose,

00:08:47.200 | where you might want to -- how you might want to go through thinking about where in the U.S. or where in the world you want to be.

00:08:59.200 | I'm going to commend another resource for you about corporate inversions, which I mentioned to you last week in last Monday's show,

00:09:07.200 | and it's a story about how some large corporations are considering moving overseas as a way to reduce their tax bill.

00:09:15.200 | And I'm going to share an article with you on that at the end.

00:09:18.200 | So first up, let us look at a story here about the number of Americans who are facing debts and unpaid bills,

00:09:28.200 | the number of Americans, the percentage of Americans who are facing debt collectors every day.

00:09:33.200 | So I've chosen to lead with the Yahoo Finance article.

00:09:37.200 | It's just kind of a mainstream finance article, but you could see this all over.

00:09:40.200 | And the headline is, "Study, 35% in the U.S. facing debt collectors."

00:09:46.200 | And the byline here, or the subheading is, "More than a third of Americans are reported to collection agencies for unpaid bills and debts."

00:09:57.200 | AP story.

00:09:59.200 | "More than 35% of Americans have debts and unpaid bills that have been reported to collection agencies,

00:10:04.200 | according to a study released Tuesday by the Urban Institute.

00:10:08.200 | These consumers fall behind on credit cards or hospital bills.

00:10:11.200 | Their mortgages, auto loans, or student debt pile up unpaid.

00:10:15.200 | Even past-due gym membership fees or cell phone contracts can end up with a collection agency,

00:10:20.200 | potentially hurting credit scores and job prospects," said Carolyn Ratcliffe, a senior fellow at the Washington-based Think Tank.

00:10:27.200 | "Roughly every third person you pass on the street is going to have debt in collections," Ratcliffe said.

00:10:34.200 | "It can tip employers' hiring decisions or whether or not you get that apartment."

00:10:38.200 | The study found that 35.1% of people with credit records had been reported to collections for debt that averaged $5,178,

00:10:47.200 | based on September 2013 records.

00:10:50.200 | The study points to a disturbing trend.

00:10:52.200 | The share of Americans in collections has remained relatively constant,

00:10:57.200 | even as the country as a whole has whittled down the size of its credit card debt since the official end of the Great Recession in the middle of 2009.

00:11:05.200 | As a share of people's income, credit card debt has reached its lowest level in more than a decade,

00:11:09.200 | according to the American Bankers Association.

00:11:12.200 | People increasingly pay off balances each month.

00:11:15.200 | Just 2.44% of card accounts are overdue by 30 days or more, versus the 15-year average of 3.82%.

00:11:22.200 | Yet roughly the same percentage of people are still getting reported for unpaid bills, according to the study.

00:11:28.200 | So I'll stop there.

00:11:30.200 | And the interesting thing about this -- I went and read the study, and I will link to it in the show notes.

00:11:34.200 | I'll link to both the Yahoo Finance article and to the actual study posted on the Urban Institute website.

00:11:42.200 | Here is the synopsis from the actual article, the one-paragraph synopsis.

00:11:51.200 | "Roughly 77 million Americans, or 35% of adults with a credit file, have a report of debt in collections.

00:11:58.200 | These adults owe an average of $5,178, with a median of $1,349.

00:12:06.200 | Debt in collections involves a non-mortgage bill, such as a credit card balance, medical utility bill,

00:12:11.200 | that is more than 180 days past due and has been placed in collections.

00:12:16.200 | 5.3% of people with a credit file have a report of past due debt,

00:12:21.200 | indicating they are between 30 and 180 days late on a non-mortgage payment.

00:12:26.200 | Both debt in collections and debt past due are concentrated in the South."

00:12:30.200 | So I find this to be an interesting study, and I'd encourage you to go and read it.

00:12:34.200 | It's not a very long study as far as there are actual results.

00:12:38.200 | But when you think about the fact that one out of three people has a debt that is in collections across the country,

00:12:46.200 | that's to me a really staggering statistic.

00:12:49.200 | And it's really puzzling to me because it just doesn't square with my own personal experience.

00:12:58.200 | Now, I don't know whether my personal experience is wrong or the data is wrong.

00:13:02.200 | I'm inclined to believe that my experience is simply not representative of the data.

00:13:08.200 | And I went through, and I can't find any major -- I can't find any problems in the number.

00:13:17.200 | They talk through -- if you read the study, they use 2013 Credit Bureau data from TransUnion,

00:13:22.200 | one of the big three credit reporting agencies.

00:13:25.200 | And so this data describes people with credit files and doesn't represent the roughly 22 million U.S. adults,

00:13:32.200 | or 9% of the population, that doesn't have a credit file.

00:13:36.200 | And then their analysis is adults without a credit file are more likely to be financially disadvantaged.

00:13:41.200 | So this data actually under-represents low-income consumers.

00:13:45.200 | And then this analysis excludes debt such as loans from friends or family or loans outside the financial mainstream,

00:13:51.200 | such as payday or pawnshop loans.

00:13:53.200 | Basically, this just reports data that is being reported to the Collections Bureau.

00:14:00.200 | So that's a staggering statistic to me, that one out of three Americans has a debt in collections.

00:14:07.200 | And they go through and they talk about some of the concentrations of data.

00:14:12.200 | So, for example, the South is over-represented as far as a higher number of people in the South

00:14:21.200 | have more debt that's in collection than in other places.

00:14:26.200 | Nevada tops the list of past due states.

00:14:30.200 | 47% of people with a credit file have a reported debt in collections in Nevada.

00:14:35.200 | Probably, you know, the analysis would be probably due to some of the housing bubble, especially in Las Vegas.

00:14:43.200 | District in Columbia and an additional 12 states, 11 of which are in the South,

00:14:47.200 | are over the 40% mark, including Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi,

00:14:54.200 | New Mexico, North Carolina, South Carolina, Texas, and West Virginia.

00:14:58.200 | And then at the low end are three Midwestern states, so Minnesota, North Dakota, and South Dakota,

00:15:03.200 | which have a substantially lower percentage of people with reported debt in collections, which is 20%, for them 20%.

00:15:11.200 | Then they go through metropolitan areas and kind of talk through those differences among metropolitan areas as well.

00:15:20.200 | So, that's just a surprising data to me.

00:15:23.200 | So, then you can see this being spun all of the ways over.

00:15:28.200 | And, you know, frankly, with some of these stories that I'm sharing with you, I don't actually, I can't actually,

00:15:34.200 | I'm not sure what the answer is.

00:15:37.200 | I'm just going to share some data with you that I found interesting, and I want you to be aware of the study.

00:15:42.200 | And then we'll have to figure out together what the solution is.

00:15:45.200 | So, the headline of how this is spun is, I'll read this one from a story on Zero Hedge.

00:15:54.200 | And this story is called "21 Ways to End the Phrase 'Americans are So Broke.'"

00:15:59.200 | Initial paragraph here.

00:16:01.200 | "Did you know that 77 million Americans have unpaid debts that are in collections,

00:16:05.200 | and that Congress is actually thinking about letting post offices offer payday loans?

00:16:09.200 | We live in a country where almost everyone is drowning in debt,

00:16:13.200 | and where most people are either flat broke or very close to flat broke.

00:16:17.200 | Years ago, 'Your mama is so broke' jokes were all the rage,

00:16:21.200 | and at the rate we are going, they could make a big comeback.

00:16:24.200 | Some of my favorites were 'Your mama is so broke, she went to McDonald's and put a milkshake on layaway.'

00:16:29.200 | And your mama is so broke, your family ate cereal with a fork to save milk.

00:16:35.200 | Unfortunately, the facts that I'm about to share with you are not funny at all.

00:16:39.200 | In fact, they are quite sobering.

00:16:41.200 | Yes, things are going fairly well for the elitists that live in the good areas of New York City,

00:16:45.200 | Washington, D.C., and San Francisco right now.

00:16:48.200 | But most of the country is deeply struggling as our economic fundamentals continue to crumble.

00:16:53.200 | Please share these numbers with as many people as you can, so I'm sharing them with you,

00:16:57.200 | because we need people to understand that there has not been an economic recovery for most of America.

00:17:02.200 | In fact, in many ways, things just continue to get even worse.

00:17:05.200 | The following are 21 ways to end the phrase 'Americans are so broke.'

00:17:09.200 | Number one, and I'm not going to read all of these, don't worry.

00:17:12.200 | Number one, Americans are so broke that about a third of them have debt collectors on their heels.

00:17:16.200 | One recent study discovered that more than one out of every three adults in the United States

00:17:20.200 | has an unpaid debt that is in collections.

00:17:23.200 | That is a total of 77 million people.

00:17:26.200 | In other words, the debt collection business in America is absolutely booming.

00:17:30.200 | And it goes on with another 20, 21 statistics.

00:17:34.200 | So go ahead, and if you want to read through these statistics,

00:17:38.200 | and there's a citation to a story for each one of them, and I would encourage you to look through.

00:17:44.200 | But for example, let's look here.

00:17:47.200 | So Americans, number 14, Americans are so broke that there are 49 million Americans

00:17:52.200 | that are dealing with food insecurity.

00:17:55.200 | Number, let's go with number 19.

00:18:00.200 | Americans are so broke that 76% of all Americans are living paycheck to paycheck.

00:18:05.200 | Number 20, Americans are so broke that 26% of Americans have absolutely no emergency savings whatsoever.

00:18:12.200 | And then number 21, Americans are so broke that approximately two-thirds of all Americans

00:18:16.200 | do not have enough money saved up to cover six months of expenses if an emergency arose.

00:18:22.200 | Oh, and in typical zero-hedge fashion, we have to--I'll read the closing paragraph to you.

00:18:29.200 | If things are this bad now during the so-called economic recovery,

00:18:32.200 | how bad will things get during the next major economic downturn?

00:18:36.200 | Unfortunately, most Americans have been lulled into a false sense of security.

00:18:40.200 | The financial crisis of 2008 seems like ancient history to most of them now,

00:18:44.200 | and most people appear to believe that our leaders have fixed whatever was wrong the last time.

00:18:49.200 | Of course, that is not the case at all.

00:18:51.200 | In fact, our long-term problems have just continued to grow since then.

00:18:54.200 | The truth is that what we are experiencing right now is about as good as things are going to get for the U.S. economy.

00:19:00.200 | When the next crisis arrives, all the numbers in the list above are going to get rapidly to get a lot worse.

00:19:06.200 | So enjoy the rest of this bubble while you still can.

00:19:08.200 | It certainly will not last for too much longer.

00:19:11.200 | So now that you're ready to put yourself out of your misery, let's talk about some of these numbers.

00:19:16.200 | And here's where these numbers just simply don't make sense to me.

00:19:19.200 | I don't doubt the legitimacy of necessarily the data, but what doesn't make sense is the disparity.

00:19:29.200 | And this is where, as I was just looking through these articles and researching and following some of these numbers down,

00:19:36.200 | this is where I think I'm understanding a little bit more of some of the things that I haven't understood a lot in the past,

00:19:43.200 | which is this emotional divide between Americans, this class warfare that seems to be developing in our society.

00:19:53.200 | Because the reality is that one out of 25 Americans is a millionaire.

00:19:59.200 | If you run the numbers and go look up the numbers, one out of every 25 Americans is a millionaire,

00:20:04.200 | which means that if you think of the average person, the number of people that the average person knows,

00:20:11.200 | I say 200, I don't even know, look at the number of your Facebook friends and divide that by 25,

00:20:16.200 | and that's how many millionaires are probably in there.

00:20:18.200 | Now this will vary with economic station in life, of course, but that would be the aggregate number.

00:20:27.200 | And if you go and you look at things like credit card debt and things like mortgages,

00:20:33.200 | and I went and looked up the figures after reading these articles,

00:20:36.200 | I went and looked at the figures because I wanted to check,

00:20:38.200 | and what you'll find is that for mortgages, basically one out of three homeowners in the United States of America

00:20:45.200 | doesn't have a mortgage.

00:20:47.200 | So when you on the one hand say the majority of people are broke and deeply in debt,

00:20:52.200 | one out of three homeowners in the U.S. doesn't even have a mortgage.

00:20:56.200 | Now what percentage of the population is a homeowner? Let me look at the data here.

00:21:01.200 | So I'm looking at the data from the 2000 and this is based upon the 2007 census data here,

00:21:10.200 | and we've got 75,647,000 total owner-occupied units,

00:21:17.200 | and the number that are owned free and clear is 24,885,000.

00:21:22.200 | So that's one out of three.

00:21:23.200 | And then you can look through and see the other mortgage data.

00:21:25.200 | Okay, so I should have gone and looked it up before the show,

00:21:27.200 | but the point is that the number of households that people that rent as a household versus own.

00:21:40.200 | But the point still stands.

00:21:42.200 | We usually don't think of one.

00:21:44.200 | So go through and think of all the people that you know that own a home,

00:21:48.200 | and one out of three of those houses is owned debt-free, completely free and clear.

00:21:54.200 | Doesn't seem to square with the other data, does it?

00:21:57.200 | Or at least it doesn't to me.

00:21:58.200 | Other thing, credit card debt.

00:22:00.200 | So if you go and you read, you read studies like this all the time.

00:22:03.200 | So, example, I pulled up one today from the 2014 -- this is coming from Federal Reserve data,

00:22:11.200 | and I've just chosen a Nerd Wallet article here to use as the example here.

00:22:19.200 | And I'll read a couple of paragraphs here.

00:22:22.200 | The average U.S. household credit card debt stands at $15,191.

00:22:27.200 | The result -- so to their credit, they actually go into the analysis here.

00:22:32.200 | So remember that the zero hedge article here says that -- how did they put out?

00:22:39.200 | From the first paragraph, we live in a country where almost everyone is drowning in debt

00:22:44.200 | and where most people are either flat broke or very close to flat broke.

00:22:50.200 | We live in a country where almost everyone is drowning in debt

00:22:54.200 | and where most people are either flat broke or very close to flat broke.

00:22:57.200 | And by the way, I'm not picking on zero hedge here.

00:22:59.200 | I guess I am picking on them.

00:23:01.200 | I'm picking on them because just to use -- I go here oftentimes just to try to figure out what to cite

00:23:08.200 | for an extreme point of view, and they're usually pretty good about providing an extreme point of view.

00:23:15.200 | I mean, that's a pretty extreme point of view.

00:23:17.200 | But let's go look at the data.

00:23:18.200 | And so here, NerdWallet.

00:23:20.200 | The average U.S. household credit card debt stands at $15,191,

00:23:25.200 | the result of a small number of deeply indebted households forcing up the numbers.

00:23:29.200 | Based on an analysis of Federal Reserve statistics and other government data,

00:23:33.200 | the average household owes $7,087 on their cards.

00:23:37.200 | Looking only at indebted households, the average outstanding balance rises to $15,191.

00:23:45.200 | Here are statistics, trends, studies, and methodologies behind the average U.S. household debt.

00:23:50.200 | This is current as of April 2014.

00:23:53.200 | The U.S. household consumer debt profile.

00:23:55.200 | The average credit card debt is $15,191.

00:23:59.200 | The average mortgage debt is $154,365.

00:24:06.200 | The average student loan debt is $33,607.

00:24:10.200 | In total, American consumers owe $11.68 trillion in debt, which is up 3.7% from last year.

00:24:17.200 | $854 billion in credit card debt, $8.15 trillion in mortgages, and $1.15 trillion in student loans.

00:24:26.200 | And that's increased from 13.9%.

00:24:29.200 | So when you go through this, you would say, "Okay, well, that's a lot of debt for the average person."

00:24:34.200 | But when you dig into the statistics, so I'm going to scroll right down on the page here,

00:24:39.200 | and what you find--and this will be here--the percentage of households with a credit card balance.

00:24:46.200 | And this data here is for December 30, 2012.

00:24:50.200 | The percentage of households with a credit card balance is 46.7%,

00:24:56.200 | which means that the majority of Americans do not owe any money on their credit cards.

00:25:04.200 | So just the majority of Americans, statistically speaking, the majority would be anything greater than 50%.

00:25:10.200 | So 46.7% have a credit card balance, so that would be 53.3% of Americans do not owe any money on their credit card.

00:25:21.200 | So that's where the difference is between the numbers of the average indebtedness per household of $7,087 versus $15,191.

00:25:32.200 | So of the indebted households, the average is $15,000.

00:25:36.200 | But most Americans--most defined as average--actually don't owe any credit card debt.

00:25:44.200 | Most Americans don't actually owe any credit card debt.

00:25:48.200 | And then those households that do own credit card debt, when you go through and look at the statistics,

00:25:53.200 | the majority of that is only a couple thousand bucks,

00:25:56.200 | and only a very small amount of households are skewing the data.

00:26:02.200 | So the majority of Americans simply do not have credit card debt.

00:26:11.200 | And I was able to find another article here that helped to pull this out,

00:26:19.200 | and this was from Joshua Kennan's site, which I'll also cite in the show notes.

00:26:24.200 | And he pulls data from Liz Pullian, I guess.

00:26:32.200 | Liz Pullian points out that 23.8% of American households have no credit cards at all.

00:26:39.200 | So there's a majority--well, not a majority, a quarter of Americans don't owe any credit cards at all.

00:26:47.200 | So I find this kind of thing very interesting and--well, not frustrating, it's just interesting--

00:26:54.200 | to sort through the data and try to figure it out.

00:26:57.200 | And what it points out to me is one of the things that I'm learning about--

00:27:01.200 | and I'm just trying to figure out why--is I think that there is a lot of inequality.

00:27:05.200 | And it feels like the extremes--in the same way that our political system--

00:27:10.200 | the extremes in our political system have gotten larger,

00:27:13.200 | where if you're right-wing, it's more likely that you're very right-wing,

00:27:16.200 | and if you're more left-wing, it's more likely that you're more left-wing,

00:27:19.200 | and that we've become more and more polarized in the political sphere.

00:27:23.200 | It's how it feels with some of this data, that it seems as though the people who are struggling

00:27:29.200 | are really struggling, and the people who are really doing well are really doing well.

00:27:34.200 | And this is--some of the trend that people have pointed out as far as the trend,

00:27:39.200 | if you want to get into the political sphere, the eroding middle class,

00:27:43.200 | or I just look at it as just the trends, and there may be various reasons for this.

00:27:48.200 | So next article here, Yahoo Finance again.

00:27:51.200 | "Baby boomers at work while millennials sit out of the job force."

00:27:54.200 | Baby boomers are still working, and that's helping to prop up the job market,

00:27:58.200 | according to new figures from the Labor Department.

00:28:01.200 | It was reported that 209,000 jobs were created in June.

00:28:04.200 | The overall unemployment ticked up in 6.2%.

00:28:08.200 | Coming on down here, the labor participation rate rose slightly to 62.9%.

00:28:14.200 | A higher percentage signals that Americans are employed or actively looking for work.

00:28:18.200 | So it's interesting. I always like to look at these numbers.

00:28:21.200 | The labor participation rate is 62.9% in July.

00:28:25.200 | A lot of numbers before that.

00:28:27.200 | But the point that we want to look at for this article is right here,

00:28:32.200 | down in the middle of the article.

00:28:34.200 | Alpert, who's being quoted, says, "When you actually look at the statistics,

00:28:38.200 | the participation rate for those 55 and older is as high as it has ever been historically.

00:28:43.200 | The participation rate, unfortunately, for those in the 25 to 34 demo,

00:28:49.200 | that's 4% lower than before the crisis."

00:28:53.200 | Wages in July edged up by a penny and are up 2% year over year,

00:28:56.200 | but Alpert says mobility from lower to higher paying jobs remains difficult.

00:29:02.200 | "You are looking at an environment in which people are not really able to move

00:29:06.200 | into the top wage-paying categories the way they would in a typical recovery," he notes.

00:29:11.200 | "Wages in the high-wage category are actually coming down a bit on a real basis,"

00:29:15.200 | meaning they're falling relative to inflation,

00:29:17.200 | "while wages in the very low-low category are increasing."

00:29:23.200 | So what to do with this?

00:29:25.200 | This one was an interesting headline for me to read.

00:29:29.200 | Now, I don't want to extrapolate too much from this data

00:29:31.200 | because this is just simply the monthly jobs report.

00:29:34.200 | But it is interesting to me because this is--

00:29:37.200 | I just cherry-picked this article to use it as an example of an overall trend

00:29:42.200 | that I think you really see in--an overall trend that I think you really see in--

00:29:49.200 | you see it in Europe with an extremely high unemployment rate in Greece

00:29:56.200 | and in some of the European nations, in Spain, when you look into that data from Europe.

00:30:00.200 | You see it here in this country.

00:30:01.200 | You see an extremely high unemployment rate among the youth.

00:30:05.200 | And so that made me go looking, so I've cherry-picked a piece of audio

00:30:09.200 | that I've read various essays in the past that really made me think.

00:30:14.200 | And I want to play this audio for you, and hopefully you'll find it thought-provoking

00:30:18.200 | from a macroeconomic policy perspective.

00:30:21.200 | And this is an older video, and this is by an economist named Walter Williams.

00:30:26.200 | And this is an older video, which you'll hear--

00:30:28.200 | I'm not sure exactly when this was recorded.

00:30:30.200 | It may have been the '80s or early '90s.

00:30:34.200 | But you'll hear there's some references in here that will illustrate it as being very dated.

00:30:39.200 | So enjoy. This is only 1 minute and 41 seconds.

00:30:42.200 | [video plays]

00:30:46.200 | Back in 1948, before dramatic increases in the minimum wage law,

00:30:52.200 | black youth unemployment was 9.4%.

00:30:55.200 | Today it stays at 50% or more.

00:30:59.200 | That isn't because employers have become more racist.

00:31:02.200 | We can't even blame today's black youth unemployment on a recession.

00:31:06.200 | No, the culprit here is the minimum wage law.

00:31:10.200 | The minimum wage law is telling our young people that if they can't produce $3.35 an hour

00:31:15.200 | of goods or services, then they are not worthy of a job at all.

00:31:20.200 | This is so because the minimum wage law requires every employer to pay a worker

00:31:25.200 | at least $3.35 an hour, no matter how unskilled that worker may be.

00:31:31.200 | However, the businessman has to look at more than that $3.35 an hour.

00:31:36.200 | He also has to pay Social Security, unemployment compensation, and fringes such as insurance.

00:31:43.200 | So the actual cost to the employer is around $4 an hour, even for the lowest skilled worker.

00:31:54.200 | A lot of 16-year-olds just don't have the capacity to produce that amount of goods and services an hour.

00:32:00.200 | Kids are kids. They're inexperienced. They're immature.

00:32:04.200 | They haven't formed good work habits.

00:32:09.200 | Only a teenager can only produce $2 an hour worth of goods and services.

00:32:13.200 | It is a losing economic proposition for an employer to pay somebody $3.35 an hour

00:32:19.200 | when that person can only produce $2 an hour worth of goods and services.

00:32:25.200 | So if you've never thought about that or never heard about this economic discussion of minimum wage laws,

00:32:30.200 | I would imagine it's somewhat provocative, but I would encourage you to consider it.

00:32:36.200 | Here's one of the things that I am observing a lot and I'm just kind of wondering about.

00:32:41.200 | I'm observing a lot going on in our society.

00:32:45.200 | I wonder of some of the unintended consequences.

00:32:49.200 | It made me think also of an article that Joshua Kennan wrote, which I feel like I cite him a lot.

00:32:57.200 | Frankly, I just find his writing that he's one of the few rational people in the world of finance,

00:33:04.200 | the world of economics. He's just a private investor, but he does a good job of writing.

00:33:10.200 | I like that he cites his data and he's fairly rational and straightforward.

00:33:14.200 | So in case you're wondering, that's why I cite him so much.

00:33:17.200 | I do read more, but I just find his resources to be more useful.

00:33:20.200 | It reminded me of an article that I remember him writing, so I went and looked it up.

00:33:24.200 | The title line of his article was "Income Inequality is Partially Caused by Women Joining the Workforce."

00:33:30.200 | It goes through, and I would encourage you to read it. It's linked in the show notes.

00:33:34.200 | Basically, it's well established that educational levels will essentially drive someone's lifetime earnings.

00:33:45.200 | So the higher someone's educational achievements, that will drive their total medium lifetime earnings.

00:33:52.200 | So looking here at a chart, if someone has a high school diploma, they'll earn $1.3 million throughout their lifetime.

00:34:00.200 | Less than a high school diploma, $973,000. A bachelor's degree, $2.268 million.

00:34:07.200 | That's called $2.3 million. And then a professional degree, $3.6 million.

00:34:12.200 | A doctoral degree, $3.2 million.

00:34:15.200 | And his point is that it's very likely that the women's liberation movement is partially responsible for the widening gap between the rich and the poor.

00:34:26.200 | So we know that as people with a higher educational attainment, those people go on to earn more money, statistically speaking.

00:34:36.200 | We also know that educated people are much more likely than the general population to get married.

00:34:41.200 | They're much more likely than the general population to stay married for life.

00:34:46.200 | And they're much more likely to marry someone with educational attainment equal to their own.

00:34:50.200 | And that marriage rates have been declining for those with lower levels of educational attainment.

00:34:55.200 | So this basically winds up how it adjusts incomes.

00:34:59.200 | When today, 46 out of every 100 births in the U.S. are just single mothers,

00:35:04.200 | and a single mother is much more likely to only have a high school diploma or less,

00:35:09.200 | then that means that you wind up in a major situation.

00:35:14.200 | So where in the past, most mothers were likely to be married, but now half of mothers are single and are unlikely to be married.

00:35:21.200 | So now you have a situation where you have a single mother who is a high school diploma,

00:35:26.200 | so you don't get the dual income earnings of a household with two people, two college-educated people in it, making twice as much money.

00:35:35.200 | You have one person raising a child on a low amount of money.

00:35:40.200 | So then you figure out, with the economies of scale with a household,

00:35:45.200 | and this is his point, I'm kind of summarizing his essay, but I'd encourage you to read it.

00:35:49.200 | The economies of scale of a household are a big deal.

00:35:52.200 | So if you take marriage away for lower classes, and you take that out,

00:35:57.200 | and you put the impact on a single mom to run her household,

00:36:03.200 | and then you figure that people in lower educational brackets are more likely to smoke, more likely to drink,

00:36:08.200 | more likely to waste money on things like gambling, more likely to be obese,

00:36:12.200 | you have just this long-term compounding effect for the inequality of workers.

00:36:18.200 | So compare a single mother with a high school degree and $1.3 million of earnings,

00:36:23.200 | versus two college-educated people marrying, two bachelor's degrees, each of which earning $2.2 million,

00:36:32.200 | you have a situation where they're likely to earn $4.5 million in their lifetime.

00:36:39.200 | So this is a big deal when you start looking at what's going on in a society

00:36:44.200 | and start to see what some of the widening gaps are.

00:36:48.200 | I don't know what the solutions are. I really don't.

00:36:51.200 | I'm trying to contribute part of my solution, which would be educational achievement,

00:36:55.200 | because none of these things are--the way I see it is we have to start with taking responsibility,

00:37:02.200 | start with taking personal responsibility for our situations,

00:37:06.200 | because all of these things are choices.

00:37:09.200 | Now, there may be substantial circumstances stacked for somebody versus stacked against someone.

00:37:14.200 | Certainly if you are raised in a household where it's generally expected that everyone in your household

00:37:20.200 | goes to college, gets a college degree, everybody is well-educated,

00:37:24.200 | everybody--it's expected that you will marry and have children

00:37:28.200 | and that you will be faithful to your spouse and enjoy lifelong marriage,

00:37:32.200 | that can be a substantial advantage versus a household where it's not expected that you'll go to college.

00:37:39.200 | It's expected that you will--for a woman using the single mom--

00:37:44.200 | it's expected that you'll have premarital sex and you'll get pregnant and have a baby prior to marriage

00:37:50.200 | or that you won't stay married.

00:37:52.200 | All of these things are choices.

00:37:54.200 | So I think we have to take responsibility for our decisions is the primary thing,

00:38:02.200 | but then we also have to just focus on educating ourselves and anybody that we have contact in.

00:38:08.200 | My plea--and I hope that I can do some with this show--but all of these things seem to me fairly predictable.

00:38:15.200 | When I look at these numbers, it just seems to me fairly predictable.

00:38:18.200 | Education. So on that note, I want to give a hat tip to My Money blog,

00:38:24.200 | to Jonathan who writes My Money blog, Jonathan Ping.

00:38:27.200 | And I was not aware of a project that Warren Buffett is doing--or actually, it's not really him--

00:38:32.200 | but I found this on his blog.

00:38:34.200 | And the headline here is "A Financial Literacy Cartoon for Kids Starring Warren Buffett."

00:38:39.200 | And I thought this was interesting.

00:38:42.200 | I was planning to play you some audio, but I'm going to skip it.

00:38:45.200 | There's a few episodes available.

00:38:47.200 | These are short little cartoons, about five minutes long, and it's called "The Secret Millionaires Club."

00:38:52.200 | And you have this group of kids getting together with Warren Buffett,

00:38:55.200 | and Warren Buffett is their personal mentor, evidently, for their money-making events.

00:39:05.200 | And they're pretty cool. I'm so thrilled to see this, and I would love to see it.

00:39:08.200 | If you have kids or if you know any kids, then you might consider passing this along to them

00:39:14.200 | as a way to teach some business concepts to them.

00:39:17.200 | Check the link in the show notes from Jonathan of My Money blog.

00:39:22.200 | "Get Rich Slowly article. Read a story. Could crowdfunding help this guy pay off his mortgage?

00:39:27.200 | Published yesterday, August 3rd, on the Get Rich Slowly blog."

00:39:30.200 | And we get dozens of requests at GetRichSlowly.org every day.

00:39:34.200 | They're usually questions, and we don't go on to them.

00:39:37.200 | However, we did receive this question, and I'm just paraphrasing here.

00:39:41.200 | "The writer had started--last week, we received a question that intrigued me.

00:39:44.200 | The writer had started a crowdfunding effort to pay off his mortgage,

00:39:48.200 | and he wanted to share it with the Get Rich Slowly community.

00:39:51.200 | I replied, 'Why would anyone want to pay off your mortgage?

00:39:54.200 | I'd like other people to pay off my mortgage, too. What's in it for them?'

00:39:57.200 | His reply and reasoning made me decide to let him tell his story and make his plea to you."

00:40:02.200 | So he goes on, and he says--and here is his request for crowdfunding.

00:40:08.200 | "My name is Eric Estrada, and please don't let the name fool you.

00:40:11.200 | I'm not an actor famous for riding on a CHP motorcycle.

00:40:14.200 | I'm actually just a regular guy. I'm 34 years old.

00:40:18.200 | I have three kids, two girls, one boy, a fiancé, and a dog named Zero.

00:40:22.200 | My fiancé, Jeanette, is a hairstylist, and I work for a medical device company as a quality process technician.

00:40:27.200 | We pay all of our bills on time.

00:40:29.200 | We currently do not have any credit card debt and budget as best we can for groceries and other miscellaneous monthly costs.

00:40:36.200 | I'm not a financial guru, nor do I claim to have all of the answers.

00:40:40.200 | Heck, I've made some financial decisions in the past that I wish I had not,

00:40:43.200 | and made others that I wish I would have made sooner.

00:40:46.200 | One of the 'best' decisions we made was to stop renting and purchase our first home in 2010.

00:40:52.200 | As our family was growing rather quickly, we knew it was time to buy a house.

00:40:56.200 | Not just any house--it had to be a house that we could raise the kids in

00:40:59.200 | and see ourselves living in for a very long time.

00:41:02.200 | All the important stuff that everyone else looks at when buying a home.

00:41:06.200 | After searching for a few months and falling in love with many houses that were big, beautiful, and obviously expensive,

00:41:11.200 | we decided to stay within our means and bought a small, three-bedroom, two-bath, 1,322-square-foot home

00:41:18.200 | with a price tag of $167,000.

00:41:21.200 | We found a house that was below market value.

00:41:25.200 | I'll have to write another article on how we found it for such a low price.

00:41:28.200 | Although the bigger houses would have been great, especially since we found out we were pregnant with our third child,

00:41:33.200 | we decided this small home was just going to have to work.

00:41:36.200 | It's been four years since we bought our home.

00:41:38.200 | We've worked really hard to get to where we are.

00:41:40.200 | For the first time in many years, we actually have a savings account that we've actually saved money in.

00:41:44.200 | We've sold our new cars and bought much older cars with cash to avoid interest and monthly payments.

00:41:49.200 | We don't eat out as much as we used to. We buy clothes at the second-hand stores.

00:41:53.200 | I even grow my beard as long as I can so I don't have to buy razors.

00:41:56.200 | What? Razors are expensive.

00:41:58.200 | Some might even say I'm obsessed with the thought of having financial freedom.

00:42:03.200 | Call me crazy, but I like to save everywhere I can.

00:42:06.200 | As frugal as I may sound, I do have a kind heart.

00:42:09.200 | He goes on, he said, "I'm not suffering from any illnesses or living on the streets.

00:42:14.200 | I have a goal, and that goal is to pay off my mortgage, the last of my debts, to give me financial freedom.

00:42:20.200 | This goal of ours is what led me to create this account."

00:42:22.200 | Some of you may say this.

00:42:24.200 | He goes on, "What's in it for me?"

00:42:26.200 | He says, "Basically, you can donate to me and help me receive my donations."

00:42:30.200 | I think this guy is awesome for his creative request and his marketing effort to request donations.

00:42:40.200 | I went over to his GoFundMe site, and it'll be very interesting to see whether or not he gets funded.

00:42:48.200 | As of today, let's see here.

00:42:52.200 | Today is August 4, 2014.

00:42:56.200 | He created this on July 18, 2014.

00:43:00.200 | So far, he has raised $95 out of his $158,600 that he needs to raise for his mortgage.

00:43:08.200 | I'm not sure it's quite going so well.

00:43:13.200 | He's got nine people who have donated a total of $95 to his fund.

00:43:19.200 | It'll be interesting to see if his fund gets funded.

00:43:26.200 | I personally don't think it's going to work for him, but I applaud him on his efforts and his creativity,

00:43:33.200 | as we were talking about in the show on Friday.

00:43:37.200 | It's an updated form of panhandling for the modern Internet era.

00:43:44.200 | The next article here I want to pass along to you is from medium.com.

00:43:50.200 | This is the 20 best lessons from social psychology.

00:43:55.200 | A hat tip here to Michael Kitsis.

00:43:58.200 | This was listed in his weekend reading for financial planners, which I would encourage you to go to his blog at kitsis.com.

00:44:05.200 | If you're interested in finance, if you're a financial planner or someone who's interested in finance, check out his writings.

00:44:13.200 | Every Friday he posts a weekend reading for financial planners, and it's always a useful source of articles.

00:44:25.200 | He does what I'm doing here on Monday with some of his shows.

00:44:29.200 | These 20 lessons of psychology, and I want to point them out because so much in our life is based upon psychology.

00:44:41.200 | By studying psychology and recognizing that we're really not that much different from just about everyone else,

00:44:47.200 | I think we can do a better job of coaching ourselves through some of the issues that we face.

00:44:55.200 | Last spring I took a class on social psychology.

00:44:58.200 | It was one of the most useful classes I've ever taken, so I figured I'd share some of the more interesting findings.

00:45:03.200 | Each paragraph has a citation to it so you can get more information or read the original study.

00:45:10.200 | Number one, reciprocity has a strong effect on us.

00:45:13.200 | 20% of people send Christmas cards back to people they've never met just because they've received one from them.

00:45:19.200 | For the same reason, tips to waiters go up 3.3% when an after-dinner mint is provided with a receipt.

00:45:25.200 | When the server looked the diner in the eye and gave them a second mint, tips went up 20%.

00:45:31.200 | So tips to waiters, notice that, and try to induce reciprocity.

00:45:36.200 | Learn from this.

00:45:37.200 | Number one, try to induce the feeling of reciprocity in other people any time you have the opportunity.

00:45:42.200 | Then be aware of it when you have that feeling of reciprocity.

00:45:46.200 | All of these psychological truths can either be used for the positive and the upright and the correct,

00:45:53.200 | or they can be used for the manipulative.

00:45:55.200 | So recognize the effect that reciprocity has on us.

00:45:59.200 | Number two, you attribute a higher value to things you already own.

00:46:02.200 | This is known as the endowment effect.

00:46:04.200 | Willingness to sell was twice as high as willingness to pay in one study.

00:46:08.200 | In other words, participants were willing to buy a mug for $5, but once they owned it, they wouldn't sell for less than $10.

00:46:16.200 | To me, this is a big one.

00:46:18.200 | This is a big one.

00:46:19.200 | It goes into the sunk cost fallacy of economics.

00:46:22.200 | This goes into why people hang on to losing investments and winning investments more than they should.

00:46:27.200 | So be aware of this so that you can recognize the effect on yourself.

00:46:37.200 | Be aware of this so that you can recognize the effect of this weird twerk where once we own something, we think more highly of it.

00:46:50.200 | Next, I'm going to skip a few of these, but the next one here.

00:46:56.200 | Number eight, comparing people to their friends is the most effective way to make them do something.

00:47:01.200 | When an electric company tried to encourage people to save energy at home, telling them, "Your neighbors are reducing their energy use,"

00:47:08.200 | led to a 2% reduction in household usage.

00:47:11.200 | Telling people, "Save energy to save money," or "Save energy to save the environment," did not decrease,

00:47:17.200 | but in some cases, increased energy usage.

00:47:20.200 | So this one is a big deal to me.

00:47:23.200 | I think we can apply this to just about every area of life.

00:47:27.200 | By recognizing that other people, our peer group, has a major influence on us, we can choose to adjust our peer group.

00:47:35.200 | I think we know this intuitively.

00:47:37.200 | If you were an alcoholic, you and you had all of your friends -- let's just say you're -- let's ignore the alcoholic.

00:47:43.200 | Let's say that you're a drunk, and all of your friends are drunks.

00:47:46.200 | Is it more likely that you're going to get drunk when you're hanging out with your drunk friends

00:47:51.200 | than when you're hanging out with friends who don't drink?

00:47:54.200 | It's obvious, right?

00:47:56.200 | So how can we apply this for our own best interest?

00:48:00.200 | Well, I think we can apply it in the areas of money.

00:48:03.200 | If you have friends that are wasteful with their money or friends that don't have good money habits, be aware of that.

00:48:10.200 | Now, what you do with it, I certainly wouldn't want to -- I wouldn't cancel a friendship because I had a friend that was wasteful with money.

00:48:21.200 | To me, that's not something I would do.

00:48:24.200 | But I would certainly want to be aware of it, and I would want to adjust my actions in order to kind of forestall the problem.

00:48:31.200 | So if there's a friend that always calls you last minute, and you always wind up going out to an expensive restaurant --

00:48:36.200 | I have a few of these in my life -- you need to arrange and adjust your circumstances in some way

00:48:42.200 | so that you don't get caught out of the blue and find yourself accepting the invitation when you really don't want it.

00:48:48.200 | So consider what your friends are doing, and consider how you can use that to your good.

00:48:53.200 | If you have friends that are always health nuts and you want to become a health nut -- I'm working on this myself --

00:48:59.200 | then I need to make sure that I'm not hanging out with the friends who are into beer and pizza every day.

00:49:03.200 | I want to hang out with the friends that are health nuts, that are more likely to go to the park and play Ultimate Frisbee or something.

00:49:15.200 | Next, number 10. The more you're exposed to something, the more you like it.

00:49:19.200 | This is called the mere exposure effect, and it works in milliseconds.

00:49:22.200 | Participants shown a foreign word frequently were more likely to say the word had a positive connotation.

00:49:28.200 | The most immediate application of this effect is advertising.

00:49:32.200 | The more often you're exposed to a commercial or ad, the more positively you will rate the company.

00:49:37.200 | Flashing images that elicit positive or negative emotions for only a few milliseconds subliminally conditions your attitude.

00:49:45.200 | Same thing for financial health. Get rid of the advertising.

00:49:49.200 | Cut it off the TV. Cut it out of the books. Just get rid of it.

00:49:53.200 | And what you'll see -- I have a show planned at some point in the future.

00:49:57.200 | One of the many shows on my list of show ideas is the idea of choosing habits and hobbies that will be useful to you.

00:50:04.200 | I think most of our likes and dislikes are not genetic. They're not inherent to us. They're mainly conditioned.

00:50:11.200 | So if you're into sports, for example, I think -- I can't prove it. I haven't done the research to find any studies.

00:50:17.200 | But I think if you're into sports, it's very likely that a parent maybe was into sports.

00:50:25.200 | So if you're really into football, it's likely maybe your dad was into football.

00:50:29.200 | It's likely that there was someone that you admired or was -- someone that you admired was into sports,

00:50:36.200 | whether it was a childhood hero, or it was likely that you had some sort of peer group that influenced --

00:50:43.200 | so maybe your buddies in college or something like that, that influenced you,

00:50:47.200 | and you found yourself watching sports and you found yourself loving sports.

00:50:51.200 | I've experienced this me personally. I never cared about sports. My parents don't care anything about sports.

00:50:56.200 | My dad has never watched a game of football in his life. So I don't have any interest personally in watching sports.

00:51:03.200 | When I was in college, that was kind of the "it" thing. All of my peers were into sports.

00:51:08.200 | So I started watching SportsCenter. I started taking an interest in sports, started paying attention to it, started enjoying it.

00:51:14.200 | And then after college, I just didn't really realize I really didn't care.

00:51:18.200 | It was an utter and complete waste of time, and it had far more productive things to do with my life.

00:51:22.200 | So that was my opinion on it. And I recognized how susceptible I was to the peer group of sports.

00:51:30.200 | I haven't seen -- I think I've watched the Super Bowl at least two of the last three years,

00:51:35.200 | but beyond that, I haven't seen a single sports game -- anyway, I haven't seen a single sports game, period, from beginning to the end.

00:51:44.200 | I've enjoyed playing various sports, but I just never see it.

00:51:47.200 | And so basically the point here, the more you're exposed to something, the more you like it.

00:51:52.200 | That was how it was with me with football. I didn't care about football, but then once I started watching football, I started to like it.

00:51:58.200 | Basketball, I didn't care about basketball. Once I started watching basketball, I chose to like it.

00:52:03.200 | So I say, apply this and adjust it to our own lives and say, "How can I expose myself to something that --

00:52:10.200 | how can I expose myself to something positive that would support my goals, what I want in life?"

00:52:15.200 | So how can I expose myself to -- if I have a goal of -- and I do, I have a goal of having a loving relationship with my wife.

00:52:22.200 | So how can I expose myself to those resources and those things that are going to enhance that?

00:52:28.200 | Well, it's probably not going to be to develop a closet pornography habit.

00:52:34.200 | It's probably going to rather be, how can I focus on reading books on marriage and looking at marriage seminars

00:52:41.200 | and listening to podcasts on marriage and just thinking about the importance of a relationship?

00:52:46.200 | And by exposing myself to that information, I'll be much more likely to assimilate it and to be drawn towards that

00:52:53.200 | and be pushed away from the negative concepts.

00:52:57.200 | Same thing with health. I'm working on adjusting my health and adjusting my weight.

00:53:04.200 | I'm overweight and I'm trying to change that. So I'm trying to expose myself to more reading in that area,

00:53:10.200 | more media in that area, and limit the exposure to pizza commercials or whatever.

00:53:18.200 | So I commend that to you as an idea. That's just one of the ones that I picked out.

00:53:23.200 | And then last one here, well, I didn't really get number 13, which was we really want to be happy,

00:53:29.200 | but being too happy can negatively affect our work.

00:53:32.200 | I followed that through and I'm interested in that, but I just thought that was interesting.

00:53:36.200 | But number 14 is what I'm going to end on with this article.

00:53:39.200 | We do stupid things because we want to conform.

00:53:43.200 | In one study, a participant was placed in a group and asked to answer a seemingly simple question.

00:53:48.200 | The rest of the people in the group were all told to respond with the same incorrect answer to the question,

00:53:53.200 | after which the participant was asked to answer in front of the group.

00:53:56.200 | 37 of 50 participants gave the same incorrect answer as the rest of the group,

00:54:00.200 | even though it was very clearly wrong, either because they wanted to be liked by the group

00:54:06.200 | or because they thought the rest of the group was more informed than they.

00:54:09.200 | This effect was dampened by having just one other person in the group agree with the participant.

00:54:16.200 | Consider that.

00:54:19.200 | I think that one is relatively straightforward.

00:54:25.200 | Just consider, how am I being willing to--am I sacrificing things that are--

00:54:34.200 | am I doing something stupid because of a desire to conform?

00:54:37.200 | I know I have been there and done something stupid.

00:54:40.200 | Actually, I'm going to--two more quick things because these are too good,

00:54:44.200 | so I'm going to cover two more.

00:54:46.200 | Number 18, authority can also make us be obedient and do things to other people we could never imagine.

00:54:51.200 | In the famous Milgram experiment, participants were told to administer a shock of increasing strength

00:54:57.200 | when a participant in another room gave incorrect answers to a series of questions.

00:55:01.200 | About halfway through, the shocks were labeled "danger," "severe shock,"

00:55:06.200 | and a recording was played begging the experimenter to stop the experiment.

00:55:10.200 | Yet in 63% of cases, the participant administered the maximum shock,

00:55:15.200 | even when the person they thought they were administering--

00:55:19.200 | even when the person they thought they were administering a lethal dose of electric shock to another human being.

00:55:25.200 | Authority can make us be obedient and do things to other people we could never imagine.

00:55:30.200 | That is a big deal to me as far as just being aware of that, because I've been there.

00:55:34.200 | I've done things I could never imagine.

00:55:36.200 | When I was a kid, I was never a bully, but I remember an incident on a bus.

00:55:41.200 | Someday I'm going to go and find the young man.

00:55:44.200 | Whenever I come across his road, I have to apologize.

00:55:52.200 | There are two people that I was just incredibly cruel to, and I specifically remember being cruel to them.

00:55:58.200 | I wasn't raised to be cruel. I knew better.

00:56:02.200 | But the peer pressure and the people that I looked up to--and this one is about authority--

00:56:07.200 | but the peer pressure here caused me to be really cruel to people.

00:56:16.200 | Looking back on it now, it scares me how easily I was cruel to someone.

00:56:22.200 | I didn't bully them physically, but I certainly joined in the emotional abuse of another person because of the peer pressure.

00:56:30.200 | This one was a big deal to me.

00:56:35.200 | Being aware of that, I don't want to repeat those mistakes in the future,

00:56:40.200 | so I'm hoping that just simply being aware can help to adjust.

00:56:43.200 | Number 19, self-control at an early age might be indicative of success later in life.

00:56:48.200 | You've heard of this one.

00:56:49.200 | In the famous Stanford marshmallow experiment, a group of children participants were asked to wait in a room with a table full of marshmallows and cookies.

00:56:57.200 | If they wanted, they could have one treat now and the experiment would be over.

00:57:01.200 | Otherwise, if they could wait for the experimenter to return in a few minutes, they could have two treats.

00:57:06.200 | The children who couldn't delay their urges--either they asked for the treat right away

00:57:10.200 | or tried to sneakily eat a treat when the experimenter left--had more behavior problems, lower SAT scores,

00:57:16.200 | more trouble paying attention in school, and found it difficult to maintain friendships.

00:57:20.200 | In fact, the child who could wait 15 minutes scored 210 points higher on the SAT than children who could wait only 30 seconds.

00:57:27.200 | Delayed gratification.

00:57:29.200 | To achieve any goal, I think we've got to be aware of delayed gratification

00:57:36.200 | and to train that in ourselves and to train it into ourselves.

00:57:44.200 | It's a learned skill.

00:57:45.200 | I think it's a learned skill and we should be teaching it to children and we should be learning it ourselves.

00:57:50.200 | Two articles on privacy, both from The Guardian,

00:57:55.200 | which it's very interesting that The Guardian is the only newspaper, it seems, that prints some of this stuff.

00:57:59.200 | They were the ones who released the Edward Snowden whistleblowing leaks.

00:58:03.200 | But these privacy issues are bothering me more and more.

00:58:09.200 | I've got an idea that I want to share about how to deal with it that I thought was an interesting idea.

00:58:14.200 | So The Guardian, "The ultimate goal of the NSA is total population control."

00:58:18.200 | You usually read articles like that and you say, "Ah, come on. This is a Guardian article."

00:58:23.200 | So it's interesting that they would lead with that.

00:58:26.200 | And the subheading, "At least 80% of all audio calls, not just metadata, are recorded and stored in the U.S.,

00:58:33.200 | says whistleblower William Binney. That's a totalitarian mentality."

00:58:39.200 | William Binney is one of the highest level whistleblowers to ever emerge from the NSA.

00:58:44.200 | He was a leading codebreaker against the Soviet Union during the Cold War,

00:58:48.200 | but resigned soon after September 11, disgusted by Washington's move towards mass surveillance.

00:58:55.200 | On 5 July, he spoke at a conference in London organized by the Center for Investigative Journalism

00:59:01.200 | and revealed the extent of the surveillance programs unleashed by the Bush and Obama administrations.

00:59:07.200 | "At least 80% of fiber optic cables globally go via the U.S., Binney said.

00:59:13.200 | This is no accident and allows the U.S. to view all communication coming in.

00:59:18.200 | At least 80% of all audio calls, not just metadata, are recorded and stored in the U.S.

00:59:25.200 | The NSA lies about what it stores."

00:59:28.200 | The NSA will soon be able to collect 966 exabytes a year, the total of Internet traffic annually.

00:59:36.200 | Former Google head Eric Schmidt once argued that the entire amount of knowledge

00:59:40.200 | from the beginning of humankind until 2003 amounted to only 5 exabytes.

00:59:46.200 | So it goes on, and it's a lengthy article. It's not that long, but I don't want to read any more right now.

00:59:52.200 | But it's very interesting. 80% of all audio calls are recorded and stored in the U.S.

00:59:58.200 | Now, is it true? I don't know. One paragraph here.

01:00:01.200 | "Unlike Snowden, Binney didn't take any documents with him when he left the NSA.

01:00:06.200 | He now says that hard evidence of illegal spying would have been invaluable.

01:00:10.200 | The latest Snowden leaks, featured in the Washington Post,

01:00:13.200 | detail private conversations of average Americans with no connection to extremism.

01:00:18.200 | It shows that the NSA is not just pursuing terrorism, as it claims,

01:00:22.200 | but ordinary citizens going about their daily communications.

01:00:25.200 | 'The NSA is mass collecting on everyone,' Binney said, 'and it's said to be about terrorism.

01:00:30.200 | But inside the U.S. it has stopped zero attacks.'"

01:00:34.200 | So this, to me, is interesting.

01:00:37.200 | And then there's another Guardian article here.

01:00:40.200 | And I will read the headline and one paragraph from it.

01:00:45.200 | The headline. The dateline here is the 15th of July, 2014.

01:00:52.200 | This is a couple weeks ago.

01:00:53.200 | "Germany may revert to typewriters to counter high-tech espionage.

01:01:00.200 | NSA inquiry head Patrick Sandsberg claims communications technology mistrusted

01:01:05.200 | in the wake of U.S. spying allegations.

01:01:08.200 | German politicians are considering a return to using manual typewriters

01:01:12.200 | for sensitive documents in the wake of the U.S. surveillance scandal.

01:01:15.200 | The head of the Bundestag's parliamentary inquiry on NSA activity in Germany

01:01:19.200 | said in an interview with the Morgan Magazine TV program

01:01:23.200 | that he and his colleagues were seriously thinking of ditching email completely.

01:01:27.200 | Asked, 'Are you considering typewriters?' by the interviewer on Monday night,

01:01:32.200 | the Christian Democrat politician Patrick Sandsberg said,

01:01:37.200 | 'As a matter of fact, we have, and not electronic models either.'

01:01:42.200 | 'Really?' the surprised interviewer checked.

01:01:44.200 | 'Yes, no joke,' Sandsberg responded.

01:01:47.200 | 'Unlike other inquiry committees, we are investigating an ongoing situation.

01:01:53.200 | Intelligence activities are still going on.'

01:01:56.200 | 'They are happening,' said Sandsberg."

01:01:58.200 | And he goes on.

01:02:00.200 | Now, can I imagine the German government going to typewriters

01:02:08.200 | and doing away with all of the advantages of computers?

01:02:12.200 | Of course not. I can't. Maybe you can. I don't know. I can't.

01:02:16.200 | But right here, "Above all, people are trying to stay away from technology whenever they can.

01:02:28.200 | Those concerned talk less on the phone, prefer to meet in person.

01:02:31.200 | More coffees are being drunk and lunch is eaten together.

01:02:34.200 | Even the walk in the park is increasingly enjoying a revival."

01:02:38.200 | Just amazing to me how some of these in the news--

01:02:41.200 | I mean, this just reads like a spy novel, right?

01:02:44.200 | I mean, I don't know about you. I've always loved spy thrillers,

01:02:47.200 | and Tom Clancy has always been my favorite author,

01:02:50.200 | and Brad Thorne and some of these guys in the spy novels.

01:02:54.200 | And the two people going in the park to escape surveillance,

01:02:58.200 | it's the stuff of spies or of novels.

01:03:03.200 | But here you have a newspaper article from The Guardian

01:03:08.200 | literally saying, "We may revert to typewriters to counter high-tech espionage."

01:03:12.200 | One idea that I had--and this was actually in the book that I mentioned on Friday's show

01:03:17.200 | when I read "The Art and Science of Dumpster Diving."

01:03:20.200 | The author of that article--or the author of that book, excuse me--

01:03:25.200 | he made a point that he was talking about junk mail.

01:03:29.200 | And his point is he was kind of a right-wing privacy guy.

01:03:34.200 | He's like, "I'm concerned about privacy."

01:03:36.200 | And this was written back in--I guess the book was '94, I think.

01:03:39.200 | He made a point about how to avoid the government censors.

01:03:44.200 | And he said, "I subscribe to every mailing list I can."

01:03:47.200 | And he said, "I don't just subscribe to the Libertarian Party newsletter.

01:03:52.200 | I go and subscribe to the Communist Party newsletter

01:03:58.200 | and the Democrat and the Republican and all in between."

01:04:01.200 | And I thought to myself, "That is actually a really good strategy."

01:04:07.200 | At this point, he would use the information that he dumpster-dived.

01:04:11.200 | He would use all of the trade associations and the industry associations,

01:04:15.200 | and he would join everything so that his entire profile was--

01:04:22.200 | his entire profile of--his government profile on him would be so incredibly muddy

01:04:28.200 | that they would never be able to get it figured out.

01:04:34.200 | And I thought that was an excellent idea.

01:04:37.200 | And there's only two things that I've been able to figure out

01:04:40.200 | that are going to really make a difference in the privacy stuff.

01:04:43.200 | I don't see any--I mean, personally, if you have knowledge in this area,

01:04:47.200 | let me know. I'd be interested in it.

01:04:49.200 | But I don't see any national or international furor about the privacy.

01:04:57.200 | I see more and more of it.

01:04:59.200 | I see more and more people just simply saying, "Ah, it's okay.

01:05:02.200 | It's a big problem. No big deal. I'm going to surrender all of my privacy.

01:05:05.200 | It's no big deal."

01:05:06.200 | And in my own life, my life is basically an open book.

01:05:09.200 | I use Google for everything. I use Google for everything.

01:05:13.200 | And at that, you basically are done.

01:05:15.200 | Everything is an open book.

01:05:17.200 | But it's starting to bother me more and more, and it seems to me--

01:05:22.200 | I mean, this is just nuts.

01:05:24.200 | Some of the stuff that's coming out in the Snowden documents,

01:05:26.200 | when you start reading through them, so it's really bothering me.

01:05:29.200 | But the only answer I see is clog the system.

01:05:33.200 | Clog the system is what I'm thinking about doing, is clog the system.

01:05:37.200 | Sign up for everything, as the dumpster diver guy said.

01:05:39.200 | Sign up for everything.

01:05:41.200 | And I say encrypt everything.

01:05:43.200 | And I'm trying to figure out some of the technology stuff.

01:05:45.200 | I'm not a real techno geek, but I would love to be able to figure out

01:05:48.200 | some of the technology to be able to encrypt everything and just clog it up

01:05:52.200 | because that's the only way that I can see to even remotely escape

01:05:59.200 | some of the violations of privacy is just in the abundance of data.

01:06:04.200 | I mean, everything exists.

01:06:06.200 | It's like if you look at how the government tracks down a criminal.

01:06:11.200 | Once you have targeted somebody as a suspicious person--

01:06:16.200 | think back to the Boston bombing.

01:06:21.200 | What was that, a couple years ago?

01:06:23.200 | The Boston bombing of the Marathon.

01:06:26.200 | Once you start with those kids, if they did it, and I assume they did,

01:06:32.200 | but the--I'm not sure, whatever happened with the younger brother,

01:06:37.200 | if he was ever brought to trial and found guilty.

01:06:39.200 | I need to go and check that.

01:06:40.200 | I'm not sure if he actually was found guilty or if it was still alleged.

01:06:44.200 | But the Boston bombers, they were completely free and completely off the radar,

01:06:50.200 | basically, until their terrorist act was actually done.

01:06:55.200 | Then once it was done, boom, in two days, it seems like every detail about their life

01:06:59.200 | is known and figured out to the point of shutting down an entire city

01:07:02.200 | and invading people's homes to find these kids.

01:07:06.200 | Then they're found and they're tried and executed, basically, in two days.

01:07:13.200 | The entire world says that they're guilty.

01:07:15.200 | To this day, I don't even know if the guy was even found guilty.

01:07:19.200 | I don't know. I assume he was innocent, because that's what I'm supposed to assume.

01:07:23.200 | He's innocent until proven guilty.

01:07:25.200 | But if he was found guilty, he's guilty. I don't know.

01:07:27.200 | But the point is that they could hide until they were targeted.

01:07:33.200 | So this just seems to me like a really sensible way to do is try to clog the system

01:07:38.200 | and encrypt everything and get away.

01:07:42.200 | I've got to figure out how to disentangle from Google.

01:07:45.200 | Subject for another show.

01:07:47.200 | So a couple of other ones here.

01:07:50.200 | One of the ones that I would see here is I'm going to play a video here on welfare.

01:07:57.200 | I thought this was an interesting set of statistics.

01:08:00.200 | This was published by the Cato Institute.

01:08:02.200 | The Cato Institute would be considered to be a right wing, a conservative institute.

01:08:09.200 | But they put some solid statistics here on welfare.

01:08:15.200 | So I think this is interesting, and I think, A, exploit this if you can,

01:08:19.200 | but that it's important to be aware of some of these numbers, kind of tying it in to--

01:08:26.200 | and I'm going to tie it in next to an article on college.

01:08:32.200 | In 1965, President Lyndon Johnson famously declared a war on poverty.

01:08:37.200 | Half a century later, the poverty rate,

01:08:40.200 | the percentage of people the government declares to be living in poverty, has barely changed.

01:08:51.200 | Why? Are we not spending enough money?

01:08:55.200 | The federal government funds 126 separate anti-poverty programs.

01:09:00.200 | 72 of these provide benefits either directly or indirectly to individuals.

01:09:05.200 | The cost? $680 billion in 2013.

01:09:10.200 | Add in state and local government spending on poverty programs, another $280 billion.

01:09:17.200 | And the total comes to nearly $1 trillion.

01:09:21.200 | That's for one year.

01:09:23.200 | If just spending money was the solution, our poverty problem should be solved.

01:09:27.200 | But clearly it's not. We need a better answer.

01:09:30.200 | And that answer, upon a few moments of reflection, should be obvious.

01:09:34.200 | Work.

01:09:35.200 | Only 2.5% of Americans working full-time are, by government standards, considered poor.

01:09:41.200 | Given, then, that work is the road out of poverty,

01:09:45.200 | shouldn't we be doing everything we can to encourage people to get on that road?

01:09:49.200 | Of course we should.

01:09:51.200 | Unfortunately, however, we are doing just the opposite.

01:09:54.200 | Our welfare benefits are frequently so generous that they discourage people from working.

01:09:59.200 | We have created, perhaps with the best of intentions, what economists call a perverse incentive,

01:10:05.200 | in this case, against work.

01:10:08.200 | This is not to suggest that poor people are lazy.

01:10:11.200 | Most certainly aren't.

01:10:13.200 | But they also aren't stupid.

01:10:16.200 | In a recent study for the Cato Institute,

01:10:18.200 | we looked at what a typical family on welfare could receive in benefits

01:10:22.200 | and compared that to what that recipient would need to earn in wages to maintain the same income.

01:10:28.200 | Our study looked at a typical welfare family with two children under the age of five.

01:10:34.200 | We assumed that this family receives benefits from the seven most common welfare programs.

01:10:39.200 | Temporary assistance for needy families, TANF, a straight cash program, Medicaid, food stamps,

01:10:47.200 | Women, Infants, and Children Nutrition Program, or WIC, public housing vouchers, utilities assistance,

01:10:53.200 | and the Commodity Supplemental Food Program, or CSFP,

01:10:58.200 | which provides staples such as cheese, milk, canned vegetables, and other basic dietary items.

01:11:05.200 | Of course, not every welfare recipient gets all these benefits.

01:11:09.200 | But some get benefits from even more programs.

01:11:13.200 | With 72 programs involved, there is a buffet of options.

01:11:17.200 | For example, if our hypothetical family had children older than five,

01:11:22.200 | they wouldn't receive benefits from Women, Infants, and Children Program, WIC.

01:11:27.200 | Instead, they would get free school breakfasts and lunches.

01:11:31.200 | Our study found that the value of these benefits varied from a low of $16,984 in Mississippi

01:11:39.200 | to an astonishing high of $49,175 in Hawaii.

01:11:45.200 | And keep this in mind, welfare benefits are not taxed while wages are.

01:11:50.200 | That means that in many states, welfare recipients would have to earn even more by working

01:11:55.200 | than they receive in benefits for not working in order to come out even.

01:11:59.200 | In fact, taking taxes into account, in 33 states,

01:12:03.200 | a welfare recipient would receive more income through benefits than a worker could

01:12:07.200 | from working full-time at a minimum wage job.

01:12:11.200 | In 13 states, a mother on welfare with two children would receive more in benefits

01:12:16.200 | than by earning $15 per hour at a job.

01:12:20.200 | And in the eight most generous states, she could get more in benefits

01:12:24.200 | than by working at a $25 per hour job.

01:12:28.200 | And that's without having to get to a place of business at a specific time,

01:12:32.200 | having to work eight hours, or deal with a boss and fellow employees.

01:12:37.200 | But don't people who receive many of these benefits have to be working in some capacity

01:12:41.200 | or at least actively searching for work?

01:12:44.200 | Not really.

01:12:46.200 | In 2009, work requirements, the centerpiece of the Republican Congress-Clinton administration

01:12:51.200 | welfare reform bill of 1996, were severely eroded.

01:12:56.200 | Nationwide, fewer than 42% of recipients are participating in what are called "work activities."

01:13:03.200 | In some states, such as Missouri and Massachusetts,

01:13:06.200 | fewer than one out of five welfare recipients are working.

01:13:11.200 | And that uses a very broad definition of work activity.

01:13:15.200 | Going to college can be considered work.

01:13:18.200 | Job training can be considered work.

01:13:20.200 | Even just looking for work can be considered work.

01:13:24.200 | Yet less than half of welfare recipients meet even these definitions.

01:13:28.200 | Many poor people are making what would seem to be a rational economic decision by not working.

01:13:34.200 | It's pretty simple.

01:13:36.200 | If welfare pays better than work, why choose to work?

01:13:40.200 | But in the long run, that tempting choice is a bad one

01:13:44.200 | because it will end up keeping those in the welfare system trapped in poverty.

01:13:49.200 | Only working for wages, even minimum wages, or marrying someone who works,

01:13:53.200 | puts you on a path out of poverty.

01:13:57.200 | If we are serious about reducing welfare dependency and helping Americans climb out of poverty,

01:14:02.200 | we need to establish a clear policy preference for work over welfare.

01:14:08.200 | Our current welfare benefits are so generous that not working too often seems like a better deal.

01:14:14.200 | It is no wonder, then, that even after 50 years of trying, we are still losing the war on poverty.

01:14:22.200 | I'm Michael Tanner of the Cato Institute for Prager University.

01:14:27.200 | So I think that's an interesting overview on the welfare system.

01:14:32.200 | I don't particularly care to make any comment about the political side of it.

01:14:39.200 | Personally, if I could eliminate it, I probably would.

01:14:43.200 | But as far as how to get there, it would seem like you have to have a pragmatic approach to it

01:14:49.200 | and do it in some kind of phased approach.

01:14:53.200 | But I find myself really challenged when trying to think through that

01:14:57.200 | because it's easy in the abstract to have a political idea,

01:15:05.200 | but it's more challenging when you're sitting working with a real family and say,

01:15:09.200 | "How do you make this transition?"

01:15:11.200 | And that's the major problem with all political issues is how do you transition?

01:15:15.200 | How do you make a transition from one thing to the next?

01:15:18.200 | So I'm stumped by some of it, but I'm not commenting, except for the fact that I just did.

01:15:25.200 | I'm not trying to comment on the political realities of it.

01:15:29.200 | My issue of it is two things.

01:15:31.200 | Number one is those are some pretty amazing benefits for some states and in some situations.

01:15:37.200 | So look and research to see if you might qualify for some of those benefits.

01:15:41.200 | If you're listening to this, look and do the research and use it as a--

01:15:46.200 | if you need to use those benefits, if they're available to you, use them,

01:15:49.200 | and use it as a launch pad to your next deal.

01:15:53.200 | Don't sit around and wait on your dreams or wait on your goals and wait on your dreams

01:15:58.200 | when programs like that are just sitting there waiting for you to use them.

01:16:03.200 | So get your piece of the pie and go get it if you qualify.

01:16:08.200 | Now, on the other hand, that is a brutally horrible place to be stuck.

01:16:12.200 | If that's not just a step, I mean, with the welfare families

01:16:15.200 | and the families that have gone on just to stay stuck in that situation,

01:16:21.200 | how heartbreaking, how utterly heartbreaking is that?

01:16:25.200 | But now the question is, are people applying the same welfare mentality to their own families?

01:16:31.200 | Headline from the New York Daily News--New York Daily News,

01:16:34.200 | and this is actually an older article, but I had not seen it.

01:16:40.200 | This is from January of 2013.

01:16:43.200 | "Parents who help their children pay for college might find them coming home with lower GPAs," says a study.

01:16:49.200 | "When parents are paying the college tuition bill, students have more time to hang out.

01:16:54.200 | Getting involved in the party scene can drag down their GPA,

01:16:57.200 | according to a new study by the American Sociological Review.

01:17:01.200 | Parents who are footing more of the college tuition bill for their children

01:17:04.200 | give them a better chance of graduating,

01:17:06.200 | but a surprising new study finds they may not be doing them any favors in another area.

01:17:11.200 | Generous financial support appears to lead to lower grades.

01:17:14.200 | The study, published in this month's American Sociological Review,

01:17:18.200 | suggests students with some of their own "skin in the game" may work harder

01:17:22.200 | and that students with parents picking up more of the tab

01:17:25.200 | are free to take on a more active social and extracurricular life.

01:17:29.200 | That may be fun and even worthwhile, but comes at a cost to GPA.

01:17:33.200 | "It allows for a lot of other activities in college that aren't academics,"

01:17:37.200 | said author Laura Hamilton of the University of California, Merced.

01:17:40.200 | Participation in the social scene is expensive--money to hang out and drink--

01:17:46.200 | but the more you have all these extras, the more you can get dragged into the party scene,

01:17:51.200 | and that will drag down your GPA.

01:17:53.200 | The study is based on figures from three large federal data sets

01:17:56.200 | that allow parental contributions and grades to be compared.

01:18:00.200 | Hamilton controlled for family socioeconomic status,

01:18:03.200 | allowing a comparison of similar students whose families make different choices

01:18:07.200 | about how much of the cost of college to pick up.

01:18:09.200 | The effect on GPA is relatively small.

01:18:12.200 | Hamilton said, "The reason it was so shocking, however,

01:18:15.200 | is that all of the research on parental investments from preschool through college

01:18:19.200 | assumes you give something to your kids, particularly money, at least to good things.

01:18:23.200 | This is one case where it not only doesn't have the expected good effect,

01:18:27.200 | it has a small negative effect."

01:18:30.200 | So I find this to be an interesting article

01:18:34.200 | because it corroborates, maybe in a small way,

01:18:39.200 | what I intuitively have observed to be true for me.

01:18:42.200 | And I have observed it to be true in other situations.

01:18:49.200 | I can't prove that it's true, and this is where you get into where's the data,

01:18:55.200 | how do you have the data, and is the data accurate.

01:18:59.200 | You can have somebody who their entire college tuition was paid for,

01:19:04.200 | for them, with no contribution for themselves,

01:19:09.200 | and that person is very motivated, very dedicated, and an excellent student.

01:19:13.200 | And you can have somebody who is paying for college themselves,

01:19:17.200 | and they're a really poor student.

01:19:20.200 | And you have all of this in between.

01:19:23.200 | But you definitely see this in the work of Tom Stanley.

01:19:26.200 | He calls it, with children, "economic outpatient assistance."

01:19:29.200 | And he profiles a lot in his books, on his book "The Millionaire Next Door"

01:19:33.200 | and some of his later books, he talks a lot about economic outpatient assistance.

01:19:37.200 | And the question is, are you providing too much economic outpatient assistance

01:19:41.200 | for your children?

01:19:43.200 | So I would challenge you with the way that I'm trying to tie in that welfare video,

01:19:48.200 | is are you providing economic outpatient assistance too much to somebody else?

01:19:53.200 | Because I can't fix the welfare system.

01:19:56.200 | I make these radical statements of "exploit it if you can" and "fix it if you can."

01:20:01.200 | And the reason is because I do think those things,

01:20:04.200 | but in absence of a specific individual situation,

01:20:07.200 | I don't know what the solution is.

01:20:09.200 | But the advantage is that an individual family, in our own lives,

01:20:13.200 | we can assess situations.

01:20:16.200 | We can assess, are we enabling bad behavior?

01:20:19.200 | Are we enabling laziness?

01:20:21.200 | Are we promoting lack of character, lack of work ethic in somebody else?

01:20:27.200 | Or are we encouraging good behavior and high character qualities?

01:20:33.200 | I know for me, in college, I funded my way through college myself

01:20:39.200 | through scholarships and through work and through student loans.

01:20:43.200 | And the time when I got the best -- and so my freshman year of college,

01:20:49.200 | I worked my way through.

01:20:52.200 | I actually had three different jobs while I was working my way through.

01:20:56.200 | I think I took 18 credits the first semester and 15 the second.

01:20:59.200 | Maybe I did 18 both times.

01:21:01.200 | And I was working three different jobs.

01:21:04.200 | None of them were full-time jobs, but I was working three different jobs.

01:21:07.200 | I had a work-study job on campus where I had some bird-brain job on campus,

01:21:10.200 | sitting there and collecting money for -- I don't even remember what I was doing.

01:21:14.200 | I was watching over the lobby of my dorm.

01:21:17.200 | And then on Thursday night and Friday night and Saturday night,

01:21:21.200 | I would ride a bicycle taxi around the downtown West Palm Beach

01:21:26.200 | where they have the bicycle taxis.

01:21:29.200 | And you get the idea.

01:21:31.200 | And then on Saturday, I would do construction all day.

01:21:33.200 | I had a side job with a friend who was building a house,

01:21:36.200 | and I would do construction all day.

01:21:38.200 | And when I was doing these three jobs, I was doing that and going to class

01:21:42.200 | and trying to work, and I was tired.

01:21:45.200 | And so I decided I was working too hard.

01:21:47.200 | So my sophomore year, I quit working and started borrowing money on student loans.

01:21:51.200 | Then my junior year, I studied abroad and then skipped a semester.

01:21:58.200 | And then I came back my senior year.

01:22:00.200 | My senior year, I took 18 credit hours of senior courses,

01:22:03.200 | and I worked a full-time 40-hour-a-week job.

01:22:06.200 | And I found my senior year, I made straight A's, and I did better in school,

01:22:11.200 | and I learned more my senior year than I ever had my previous years.

01:22:15.200 | My sophomore year, when I thought I was working too hard

01:22:17.200 | and needed to borrow a bunch of money on student loans,

01:22:20.200 | I borrowed some stupid amount of money on student loans,

01:22:23.200 | which I worked and was able to pay off before I graduated from college

01:22:25.200 | from working my senior year.

01:22:27.200 | I got the worst grades.

01:22:28.200 | I got a C. I think I got two C's my sophomore year when I wasn't working

01:22:33.200 | because I was playing all the time.

01:22:35.200 | I learned a lesson from that.

01:22:36.200 | I learned that there is very much a major focus on--

01:22:45.200 | focus makes all the difference, I guess is the point I'm trying to make.

01:22:48.200 | Focus and motivation make all the difference.

01:22:51.200 | And it wasn't about how much work I could or couldn't have.

01:22:54.200 | It was all about my personal motivation.

01:23:01.200 | So to wrap up here, a couple of quick articles on--

01:23:05.200 | one article on corporate inversions.

01:23:07.200 | I mentioned this last week.

01:23:09.200 | And again here, Joshua Cannon has written a basic overview

01:23:12.200 | of corporate inversions, and he talks about how that happens

01:23:18.200 | and why it is that so many companies are leaving the U.S.

01:23:24.200 | or considering leaving the U.S.

01:23:26.200 | I don't know if it's--I'm not sure.

01:23:28.200 | I wouldn't say so many.

01:23:29.200 | Why some companies, some notable big headline companies,

01:23:33.200 | are leaving the U.S. and moving to another place.

01:23:36.200 | And I think this is an awesome trend because the only thing that's going to

01:23:39.200 | make those economists--the only thing that's going to unite the audio clip

01:23:43.200 | that I led off with, the only thing that's going to bring politics

01:23:46.200 | and economic theory together is actions.

01:23:50.200 | And so this is why I encourage all companies and all individuals

01:23:54.200 | just to take action.

01:23:56.200 | So you've got Pfizer--Pfizer tried to do a corporate inversion.

01:24:01.200 | AbbVie is going to Ireland with an inversion.

01:24:04.200 | Walgreens is talking about moving to Switzerland.

01:24:07.200 | Chiquita did a corporate inversion.

01:24:09.200 | Chiquita Banana did a corporate inversion and is now an Irish corporation.

01:24:14.200 | And in today's world, you see a lot of the financial world,

01:24:19.200 | you see a lot of people going to other places--Hong Kong, Singapore--

01:24:22.200 | to reach into Asia.

01:24:23.200 | You see this exodus from the United States.

01:24:26.200 | And he goes through an example of a jam company.

01:24:29.200 | You start a jam company, you're in the United States,

01:24:31.200 | and the U.S. government takes 35% of your profits for taxes.

01:24:35.200 | And you're happy, everything is great, you grow, grow, grow, grow, grow,

01:24:38.200 | and then you start growing internationally.

01:24:40.200 | And the situation you face when you're going internationally

01:24:43.200 | is that the American company is that--let's say that you make money

01:24:46.200 | and you expand over to England here.

01:24:51.200 | You fly over to London to attend the board meeting of Farmer Bob's Jams and Jellies,

01:24:56.200 | and along with the other directors you get ready to declare a dividend,

01:24:59.200 | which of course will go entirely to your own American business

01:25:02.200 | since it is a sole stockholder.

01:25:04.200 | So in the example here, you started a British company selling your jams.

01:25:11.200 | Suddenly the secretary runs into the room with an emergency phone call.

01:25:14.200 | "Farmer Bob, it's the CFO of the American parent company on the line."

01:25:17.200 | You grab the phone and hear him scream, "Stop what you're doing.

01:25:20.200 | Don't have the British company pay a dividend."

01:25:22.200 | Puzzled, you put him on speakerphone.

01:25:24.200 | He continues, "The United States Congress doesn't like that Her Majesty

01:25:27.200 | only charges companies in her realm 21%."

01:25:30.200 | Since American businesses have to pay 35%,

01:25:33.200 | if you take a dividend out of the British firm and ship it back to the U.S.,

01:25:37.200 | the IRS is going to force you to pay a 14% special tax

01:25:41.200 | to make up the difference for what you would have paid if you'd made the money here.

01:25:44.200 | Even though none of that profit was made in the United States,

01:25:47.200 | none of the assets are located in the United States,

01:25:49.200 | and the United States has nothing to do with the operations,

01:25:52.200 | Congress is going to confiscate the differential.

01:25:54.200 | But you interject, "That makes no sense.

01:25:56.200 | I want to bring that money back to the United States for my fellow citizens

01:25:59.200 | to use it at home. I don't want to keep it in England."

01:26:02.200 | "Sorry," your CFO responds, "you can only avoid that tax

01:26:05.200 | if you refuse to bring the money back to the United States.

01:26:08.200 | You need to declare it indefinitely reinvested in your foreign subsidiary

01:26:12.200 | with no intention of ever bringing it back to America.

01:26:15.200 | That way they can't touch it."

01:26:17.200 | You grow angry, "This is idiotic.

01:26:19.200 | You mean first they want to cut out a profit that wasn't made in America

01:26:22.200 | and has nothing to do with America.

01:26:24.200 | Next they want to punish me for shipping it back to America

01:26:27.200 | so that it can be used to help our economy grow?

01:26:29.200 | They want me to keep the profits overseas?

01:26:31.200 | They want me to build factories here in England instead of in my home state?

01:26:34.200 | You've got to be kidding.

01:26:36.200 | Your CFO doesn't miss a beat. That's right.

01:26:39.200 | And worse, even after you pay that special tax,

01:26:41.200 | if you turn around and pay it out to our stockholders of the American business,

01:26:44.200 | they are going to charge them, federal, state, and in some cases local taxes

01:26:49.200 | on top of it, as we are one of the few countries that double taxes dividends.

01:26:53.200 | They're going to end up taking at least half of everything, if not more."

01:26:57.200 | So he goes on and talks about this, and the article is excellent.

01:27:01.200 | Go and consider and read it.

01:27:03.200 | Because what it illustrates is it illustrates the--

01:27:09.200 | it just illustrates how the corporate tax code works

01:27:14.200 | and why all of the economists agree that it would be a good idea

01:27:17.200 | to eliminate the corporate income tax,

01:27:20.200 | and why none of the politicians can sell that to people

01:27:24.200 | because of the education level--and this is my opinion--

01:27:27.200 | because of the education level of the average person to get it

01:27:33.200 | and to understand it and to understand the numbers.

01:27:36.200 | So you have a situation now where most large multinational corporations

01:27:40.200 | have billions of dollars sitting outside the country that they can't repatriate.

01:27:44.200 | They can't bring it into the U.S. unless Congress declares

01:27:47.200 | a special repatriation tax holiday, which--

01:27:53.200 | if it was a good idea to have a tax holiday,

01:27:55.200 | why would it not be a good idea to do it?

01:27:58.200 | So just consider that.

01:28:00.200 | And then consider--the last link that I'll put here in the show notes

01:28:05.200 | is a link to a website called freedominthe50states.org.

01:28:09.200 | And this is interesting.

01:28:11.200 | Consider the state that you live in.

01:28:13.200 | I live in Florida, and it's interesting.

01:28:15.200 | We're ranked number 23 overall, so just in the middle

01:28:18.200 | as far as in this freedom situation.

01:28:20.200 | But look through some of this information on the states.

01:28:24.200 | My point was to bring it through and say that I can't solve--

01:28:28.200 | I can't solve the political problem, the large problem,

01:28:31.200 | but I can encourage you and me to make decisions

01:28:34.200 | that are in our own economic self-interest.

01:28:37.200 | So if you'll make a decision that's in your own economic self-interest,

01:28:41.200 | and if I make a decision that's in my economic self-interest,

01:28:45.200 | and other people will see that, and they'll start making decisions

01:28:48.200 | that are in their economic self-interest,

01:28:50.200 | and ultimately that will change the tide of the political space,

01:28:54.200 | is that the politicians pay attention to money, money talks.

01:28:58.200 | So that's why it's so important that we do a good job with our own finances,

01:29:02.200 | and so important that we do a good job of rewarding the jurisdictions,

01:29:07.200 | the states, the cities, where our resources are valued,

01:29:11.200 | and penalizing the ones where they're not.

01:29:14.200 | And a big one--I was going to play a video,

01:29:16.200 | but I'm going to cut it short for the sake of time.

01:29:19.200 | Is what state you live in.

01:29:22.200 | So in the same way that these companies are doing corporate inversions

01:29:26.200 | to get out of the U.S. to move to other countries--

01:29:29.200 | I'd like to interview some people, by the way.

01:29:31.200 | There are a lot of people who feel that American citizens should do that.

01:29:34.200 | I'd like to interview some of them.

01:29:36.200 | Not going to work for me right now, but who knows, maybe it'll work for you.

01:29:39.200 | But you can certainly easily do that with states,

01:29:41.200 | and you can easily transition states.

01:29:43.200 | And then we're going to talk on this show,

01:29:45.200 | and I'm going to try to research and present some of the strategies

01:29:49.200 | for how if you are living in a state--

01:29:51.200 | so let's say you're living in California--get your business out.

01:29:54.200 | Get your business over to Nevada,

01:29:56.200 | where you're going to be a little bit more appreciated,

01:29:59.200 | or to Arizona or something like that.

01:30:01.200 | See if you can get your business across the border,

01:30:03.200 | but keep yourself living in California

01:30:06.200 | so that you can enjoy the benefits, but defunding the state.

01:30:10.200 | We'll talk about some of that and some of those strategies.

01:30:13.200 | I think that was a lot for today.

01:30:15.200 | Hopefully--probably a little bit too much, but I'm learning.

01:30:18.200 | So that's the show for today.

01:30:20.200 | I hope that you enjoyed this overview of articles.

01:30:22.200 | I know it was a lot.

01:30:24.200 | And I hope that you have some ideas and some exposure

01:30:28.200 | and some things to think about.

01:30:30.200 | Again, I don't know what the answers are in all of these issues.

01:30:34.200 | I don't know what the answers are for each person,

01:30:37.200 | but I do know that you can figure them out

01:30:39.200 | and you can kind of coach yourself through.

01:30:41.200 | So enjoy these resources.

01:30:43.200 | I hope that you have an awesome week,

01:30:45.200 | and I promise we'll do some financial planning this week.

01:30:48.200 | If you don't like this news and these overview ideas and these shows,

01:30:57.200 | basically at this point in the podcast I'm trying to create--

01:31:01.200 | my only guide is to try to do the kind of show that I would like to listen to.

01:31:05.200 | And so what I plan to do is I plan to do maybe 100 episodes

01:31:09.200 | and just kind of with that as a guide,

01:31:11.200 | and then I'll poll you, you who are listening,

01:31:13.200 | and I'll do some polls and I'll just see what's working, what's not,

01:31:16.200 | because I'm still learning how to do this.

01:31:18.200 | I'm not very good at it yet, and I'm still trying to learn

01:31:20.200 | what works and what doesn't work.

01:31:22.200 | So if you like this, let me know that you like it.

01:31:24.200 | If you hate it, let me know that you hate it,

01:31:26.200 | and we'll adjust accordingly.

01:31:28.200 | You're the audience and you're the boss in some ways,

01:31:30.200 | and other ways I'm the boss, but we'll work together

01:31:32.200 | to create something that is mutually beneficial.

01:31:35.200 | Hope you had fun today.

01:31:37.200 | I enjoyed the show, and I wish you a tremendous week.

01:31:41.200 | [music]

01:32:11.200 | And it's 11.59, so that means I got my show done for Monday.

01:32:15.200 | When you download the Ralphs app,

01:32:17.200 | you have easy access to savings every day.

01:32:20.200 | Get the most out of weekly sales and receive personalized coupons

01:32:23.200 | to save on your favorite items,

01:32:25.200 | all while earning one fuel point for every dollar spent.

01:32:28.200 | Ralphs makes it easy to save while you shop,

01:32:30.200 | whether it's in-store or online,

01:32:32.200 | so you get the most value out of every trip, every time.

01:32:36.200 | Download the Ralphs app now to save big on your next purchase.

01:32:39.200 | Ralphs, fresh for everyone.

01:32:41.200 | Must have a digital account to redeem offers.

01:32:43.200 | Restrictions may apply. See site for details.

RPF-0034-Monday_Roundup