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Never forget!
I ran for Idaho state senate in 2008--didn't win
I've written a number of history books, as well as scholarly and popular articles, (see my web page).
Sorry, high pressure isn't included.
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Other blogs you may enjoy:
My civilian gun defense use blog
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Pete Drum's Web Page
Gun Laws Don't Work
instapundit.com
Dissecting Leftism -- By John Ray
A courageous Briton arguing for relaxing Britain's gun control laws
Right Thoughts
Final Protective Fire
Amitai Etzioni's Blog
Scrappleface -- Dangerously Clever Satire
Michael Williams -- Master of None
Another Conservative Blogger
A Group Blog By Iraqis
THE MESOPOTAMIAN: TO BRING ONE MORE IRAQI VOICE OF THE SILENT MAJORITY TO THE ATTENTION OF THE WORLD
Specializing in discussions of discrimination and affirmative action
An Iraqi dentist
Promoting children being raised by their own parents
A federal law clerk opines about the law
Michelle Malkin's blog
Impearls: a blog as electic and interesting as mine
Proving that the United States military does more than kill people and break things.
May not agree with this group on everything, but stopping the ACLU is high on my list
A conservative/moderate black blogger.
Another sensible American
Sex, Crime, and Corruption in the Democratic Party
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Maggie's Farm: Freedom from nags, cranks, government, do-gooders, control-freaks and idiots is all that we ask for.
A blog dedicated to "Documenting Saddam Hussein's support of Terrorism"
The blog of one of my fellow bloggers on the Civilian Gun Self-Defense Blog
J. Norman Heath's Blog--a circus rigger and Second Amendment scholar (really!)
Buckeye Firearms Association, for you Ohio gun owners and activists
Click here for a FREE NEWSLETTER on Ohio Gun Rights from Buckeye Firearms Association!
Another conservative.
Neocon Blues
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More Signs That California Government Needs To Grow Up
Go ahead--read the whole account here. I'm excerpting just enough to give a feel for it, but even if you aren't concerned about guns--even if you think guns are icky-poo and naughty--ask yourself if your legislature is fiddling while Rome burns:Stereotypes are a common part of American culture. Often as not they are based on a grain of truth wrapped in a mile of exaggeration. While most of us enjoy a good laugh at the wacky world of California politics, a rational man might think that accounts of strange thinking on the Left Coast, like any good bass fishing story, were a little larger than life. After spending two days in the halls of California state government in Sacramento, it is apparent that the inmates are running the asylum.
So while in the deepest budget crisis that California has experienced in my lifetime (and remember, I lived there from 1958 to 2001), what are these idiots doing? Pushing for a ban on a type of gun where there has been no reported criminal misuse--ever:
California is struggling with the biggest budget crisis in its history. Take note: we are not talking about your run-of-the-mill budget shortfall where teachers and medical services are cut as a first-line response. California is so awash in red ink that on the day I arrived, the Sacramento District Attorney’s office filed a proposal with the state under which it will simply stop prosecuting misdemeanor crimes because it cannot afford the staff. A subsequent component of that proposal will cease supervision of all paroled criminals, misdemeanor and felons alike, for lack of parole officers. Jails are releasing prisoners they can’t afford to house. The implications of this are staggering. The message to criminals is clear-- hunting season is open on law-abiding Californians because the government can’t afford to prosecute you!The catastrophic failure in judgment is California bill AB50, authored by Paul Koretz of the Hollywood area. In his bill, Mr. Koretz expressed a sky-is-falling need to ban .50 caliber target rifles by including them in the ever-changing definition of "assault weapon". The strident urgency driving this bill was Mr. Koretz’ claims that these bolt-action rifles are a terrorist superweapon which have the ability to shoot planes out of the sky, punch holes through tanks, and kill people in armored limousines from four miles away.
Very depressing. California is on the edge of becoming something like a libertarian utopia--no prosecution of misdemeanors in some counties, while other counties close most of their psychiatric facilities. But with one difference: in a libertarian utopia, the people wouldn't be paying taxes; they would have that money in their own pockets to spend on these services. They also wouldn't have the government running around trying to disarm the victims.
Mr. Koretz should send his report to the Pentagon. Apparently the greatest assembly of military minds and experience on earth has universally overlooked the earth-shattering power of the humble target rifle. Perhaps they missed "superweapon day" in basic training. The more likely answer is that Assemblyman Koretz took on an ultra-liberal cause that most Democrats would have been ashamed to author, having no real idea what he was doing. During questioning on the floor of the committee, Koretz admitted, "I don’t understand much of this gun stuff, I just think they are bad." Well, Koretz was half-right... he clearly doesn’t understand gun stuff.
Thankfully, there were some people on the Public Safety committee who do understand, people who made an effort to demand a few facts before signing another blank check for a bill listed as "fiscal impact not yet determined". On the forefront of this group was Assemblyman Jay La Suer. Drawing on an extensive experience in law enforcement, La Suer knows a great deal about crime in California. He conferred with recognized experts on terrorism to either confirm or rebut the emotion-packed claims set forth in the bill. With a prosecutor’s focus on hard fact, La Suer began to grill the small handful of AB50 proponents. The facts he revealed told a very different story.
How many years have .50 caliber rifles been in civilian hands? Over 80 years.
In that time, how many people in America have been killed by these rifles? Zero.
How many aircraft have been shot, on the ground or in the air? Zero.
How many limousines have been shot through? Zero.
How many oil refineries have been blown up? Zero.
One by one La Suer dissected the claims of what was soon exposed as just another myopic gun ban pushed to center stage while the economy burned. At one point, La Suer’s growing disgust crossed its limit. The Assemblyman vehemently expressed his outrage that the time and resources of the state were being diverted from the economy to even consider such a blatant sham and he called on Koretz to pull the bill so they could get on with real work. Koretz simply smiled and refused, knowing the fix was in. His fellow Democrats on the committee seemed all too eager to rubber-stamp the bill in spite of the facts.
...
On this day, the only other balance to help protect the California economy was Assemblyman Todd Spitzer. Like La Suer, Spitzer seemed very concerned that the Assembly was being fed a bag of lies. It was also clear that Spitzer had done his homework. He asked pointed questions regarding the basis of allegations made by Koretz, pointing out that numerous statements made in the bill were prefaced by "it is said that...". Spitzer wanted to know who said it, and what tests had been run. He demanded facts in place of innuendo. As before, supporters of AB50 could point to no document, no experience, no test or study to support their claims. A representative of the Los Angeles Police Department with 26 years on the job admitted that in all that time he had never run into a single .50 caliber rifle involved in any way with any criminal activity. Not once.
The farce became even more apparent when La Suer asked the LAPD officer what weapons he had seen used in violent crimes. The answer ranged from handguns to knives, tools and the ever-popular "blunt objects". La Suer asked if all of these items used to commit murder were presently banned, to which the officer answered no. "Do you think they should be banned?" La Suer asked calmly, and again the officer firmly answered no. It was then that La Suer cut to the chase. "Well then explain to me Officer, how is it that you don’t want to ban things that have killed people, yet you want to ban something that you admit has never killed anyone and has never been used in any sort of crime?" Speechless, the officer mumbled and backed away from the microphone.
...
While speaker after speaker took the floor in opposition of the bill, Democratic members sat in dull disinterest. Just an hour earlier, Assemblywoman Goldberg found ample passion to debate a law that would make it illegal for a sports-event spectator to hurl his cellphone at an athlete, but she sat through the AB50 presentation with barely a peep. Assemblyman Longville, who earlier was casting votes self-admittedly having no idea which bill he was voting on, was likewise indifferent to the concerns of La Suer, Spitzer and most of the assembled audience. When asked on the sidelines how he was leaning, Longville rather blithely explained, "I don’t know. I’ll vote which ever way the speaker tells me to." Not what he thinks, or God forbid, not what his constituents think, but what the Speaker thinks -- a Speaker who is not even present to hear the facts. It must be disturbing to the voters of San Bernardino to learn they elected a Muppet to represent them.
...
One member of the voting majority, who asked to remain nameless, set it out in no uncertain terms. "Everyone on the committee thinks he [Koretz] is an ass. He put up four bills this term and they were all idiotic. Three went down in flames so the Democratic caucus had to throw him a bone to keep him voting the right way on other bills. AB50 was the bone. It had nothing to do with facts."
The Decision About the Campaign Finance Reform Act
Thanks to Orin Kerr for the pointer. Lawyers Relief Act should have been the formal title of the bill. The high level pointer is here. It is almost funny reading the description of how complex this case is, because of the number of provisions of the law, and the number of plaintiffs and defendants (who take up the first four pages of the decision). The guts that I quote here are the per curiam opinion: Because of the complexity of our positions, this per curiam
I haven't had enough time to read this carefully yet (and perhaps I won't have enough time--I'm 46 years old), but it appears that many of the provisions that us knuckle-dragging right-wingers and our allied forces of evil (like the NRA) said were unconstitutional--by golly, the three judges on this special panel agreed that they are unconstitutional!
opinion, by Judge Kollar-Kotelly and Judge Leon, includes a schematic description of the
three-judge panel’s conclusions in regard to each of BCRA’s challenged provisions and a
chart as to the rulings on each provision’s constitutionality. The per curiam opinion also
includes: (1) a brief history of campaign finance regulation in the United States (pp. 16-42);
(2) the legislative history behind BCRA’s enactment (pp. 42-50); (3) a procedural history of
the litigation in this case (pp. 50-57); (4) a description of the specific provisions in BCRA
at issue in these lawsuits (pp. 57-80); (5) certain Findings of Fact relating to the identities of
the parties and BCRA’s disclosure provisions (pp. 80-106); and (6) conclusions of law
relating to claims of the Paul Plaintiffs and most of BCRA’s disclosure provisions (pp. 106-
170). The separate opinions of each judge hearing this matter follow thereafter.
I understand the concern about political corruption that motivates well-intentioned sorts to ask for laws like this. But the core problem here isn't addressed by complex and unconstitutional campaign finance reform laws. The fundamental problem was well stated by P.J. O'Rourke some years ago. (I'm operating from memory on this, so I may have a few words screwed up here and there.) "When buying and selling are controlled by the legislature, the first thing to be bought and sold will be legislators."
Mike Royko's Boss, a political biography of Mayor Richard Daley the Elder mentions that when Daley was an Illinois legislator, back in the late 1940s, it was common to introduce what were known as "getter" bills. These were regulatory measures that would injure a particular industry. After the industry had ponied up money to the legislator's campaign committee, the legislator would quietly pull the bill.
This is, I think, not unique to Illinois. Robert Sherrill wrote a very entertaining book in 1973 book about gun control politics--and Sherrill was definitely a supporter of gun control. That book, The Saturday Night Special , makes a similar claim about Senator Thomas Dodd of Connecticut, a perennial introducer of gun control laws in Congress that generated much heat and light but until 1968, did not result in any enacted statutes. Sherrill's claim, after talking to Dodd's former staff, was that these bills were also intended as "getter" bills--strictly ways to get the gun industry to give Dodd campaign funding, at which point he would see that the bills died.
The more control that the government can take over the economy, the more interest that various special interests will have in buying influence. Perhaps what we need is fewer opportunities to introduce "getter" bills?
It Takes a Village to Watch Your Husband, Hillary
A reader sent in this little song that came to her this morning while she was at the car wash.
For those of you who weren't present at the time--a few years back, Hillary Clinton wrote a book titled It Takes a Village, and Other Lessons Children Teach Us. The title comes from an African saying that, "It takes a village to raise a child." There is some truth to the idea that the community as a whole plays some part in inculcating values--which is why you want to be careful what sort of community you try to raise children in. Hillary Clinton had more powermad ambitions that she was trying to justify, of course.
(To the tune of, "It Takes a Woman" -- I keep wishing they'd remake Hello, Dolly with somebody other than Barbra Streisand, but now that Walter Mathau is dead, I guess it doesn't matter.)
It takes a village to keep us in shape;
To say when a "no" really means that it's rape.
Yes, it takes a village with its concept of "me-dom"
To make sure our children have sexual freedom.
(chorus)
Oh it takes a village, an entire village,
Academics, the pundits, the cops,
Yes it takes a village, to rape and pillage
A culture of all of its stops.
It takes a village - a rainbow diverse -
To pounce on the fool citing a Bible verse.
Yes it takes a village to think that it's dandy
To legalize incest, gay marriage, polyandry;
(chorus)
It takes a village, with tolerance none
To drop-kick from school kids with a toy gun.
It takes a village, when hate crimes are mentioned
To have real insight in a crook's true intention;
(chorus)
It takes a village, a complete village,
The lefties, the hefties, the small;
Oh yes it takes a village, an entire village
To generally screw up us all.
How to Become Wealthy (Part 7)
Bonds, stocks, mutual funds, money market accounts--what are all those things? Today we will start to cover bonds.
Until you have $20K-$40K sitting around with nothing to do, I would not encourage you to buy bonds of any sort. But: you need to understand bonds in order to understand bond mutual funds. We'll get to mutual funds in a later segment; you need to understand bonds and stocks first, because most mutual funds are built on top of bonds and stocks. Bonds are enough of a struggle to get through that I'll take two segments to get through them, followed by stocks, then by mutual funds.
A bond is a loan to a government or corporation for a certain period of time at a certain interest rate. As an example, I have some 30 year Treasury bonds that are due November 15, 2016. When the U.S. government first sold these bonds in 1986, they sold for $1000 each. (That's also known as the par value or face value.) The U.S. government promises (cross their heart and hope to die) to pay 7.5% (or the coupon rate) of the par value as a dividend every year. This dividend is actually paid in two halves--one half on the anniversary date, November 15, and the other half on May 15 (six months later). When the bonds are due, on November 15, 2016, they will make the final dividend payment, and the par value of the bond.
Now, this isn't like a marriage; you can sell a bond before maturity. (Okay, maybe it is like a marriage.) At any given time, there are people trying to sell bonds, because they want the capital out of them; there are other people who are buying bonds. As it happens, I was one of those people that was looking to buy bonds back about ten years ago. My first, very nervous foray into long-term investing, was to buy those Treasury bonds from someone who had bought them when they were first issued.
If bonds were a straightforward loan, this would be simple to understand. But there's a little complexity here. It turns out that interest rates rise and fall--but the dividend that the government promised when they issued that bond doesn't change. If you think about this for a minute or two, you'll realize that a bond that pays 7.5% interest--and has the full faith and credit of the United States government behind it--is really, really good today. If you tried to buy new government bonds today, you would be lucky to get 4.5% interest. So, these older bonds, that pay much higher interest rates, are in high demand. What happens to the price of a bond that everyone would like to buy? The price of the bond goes up. You must pay above par in order to buy that bond. The dividend each year will still be 7.5% of the par value of the bond--but you now have to pay $1300 to buy that $1000 bond. You'll get $75 a year in interest for the next 13 years, but in 2016, when that bond is redeemed, you will have lost $300. This goes the other way, too. If interest rates rise, a bond issued today that pays 4.5% dividend is going to be unattractive to bond buyers. Its price will fall.
This leads us to the concept of "yield to maturity" (YTM). If you buy that $1000 par value bond for $1300, but it pays 7.5% of the par value each year, how much will you make on this bond, including both dividend payments, and the change in value of the bond from now to when it is redeemed? This is the annualized YTM--the yield divided by the numbers of years left. (Watch carefully--you will sometimes see YTM listed for a bond that has less than a year left. This may not be the annualized yield to maturity.)
So, if you want to make money on bonds, you buy when interest rates are high, and sell when interest rates are low, right? Well, you can do that. If you hold a bond for more than one year, the difference between the purchase and sale price is taxed as a long-term capital gain. Long-term capital gains are subject to a maximum 20% federal income tax rate--for most well-paid people (the only sort who are going to be buying and selling bonds), this is a big improvement over the 28% or 31% federal income tax rate. (The states, however, don't necessarily follow the federal rules on this. Idaho, for example, taxes capital gains as ordinary income.) If you have a really good crystal ball, the strategy could be: buy bonds when interest rates are high, and earn high dividends; sell the bonds when the economy is in recession and interest rates are low; put that money into savings; wait for interest rates to go up again, and take the money you earned from the dividends and the capital gain on the bonds, and buy more bonds.
The problem, of course, is that good crystal balls are in short supply. Had I realized that interest rates were going to be this low, instead of buying 50 of those Treasury bonds, I would have bought 200 of them. I had the cash available at the time, but I didn't have the guts to do it. Right now, I am looking at those 50 Treasury bonds, and it is tempting to sell them while interest rates remain low. I paid about $47K for them; I could sell them today for about $65K. Of course, that would mean paying about $4900 in capital gains taxes to the federal and Idaho governments, and giving up that lovely $3750 a year in dividend income.... When I run the spreadsheet, it tells me that I would have to reinvest the money in a 6.6% YTM bond next year to break even with this strategy--and I do not expect to see Treasury bonds with yields that good over the next few years.
Generally, the reason to buy bonds is for the dividends. There are people that make a living buying and selling bonds. My own calculations suggest that unless you are doing this on a pretty large scale (millions of dollars in bonds), and have somewhere interesting to park the cash when interest rates are low, you are better off buying bonds and holding them to maturity. There are a couple of interesting exceptions, however, which I will now discuss.
Bond Maturity and Volatility
Rising interesting rates make the prices of existing bonds fall. Dropping interest rates make the prices of existing bonds rise. What happens to the price of a bond that is just about to mature when interest rates change? You own a bond that matures three weeks from now. Its price is going to be very nearly identical to its par value. No surprise in that, is there? You expect the bond to be repaid, with the final interest payment. So what happens if interest rates suddenly doubled? There's only three weeks left to maturity! The difference between what your bond will pay you, and what you could get by selling that bond and buying another is almost insignificant. Here's an important rule: the less time there is to maturity, the less sensitive bond prices are to interest rates. A bond due in 30 years can gyrate pretty impressively as interest rates change; a bond due tomorrow is going to be effectively untouched; a bond due in two years will be only slightly affected by interest rate changes.
Last year, having watched the stock market sit in the doldrums, I decided to sell off some of my worst performing mutual funds, and move some of my spare cash, into bonds. But interest rates were low. Buying bonds with long maturities would have meant low interest rates, and the danger of the prices falling when interest rates start to rise again (as I expect that they will in 2004 or 2005). On the other hand, letting this money sit in a money market fund at 1.1% interest just wasn't attractive. So I bought bonds with relatively short maturities; some AT&T bonds due in 2007; some Capital One Bank bonds due in 2005; some Ford Motor Company bonds due in 2007; some Verizon bonds due in 2005. These are all short enough maturities that if rising interest rates sneak up on me, I can sell them and buy long-term bonds without much danger that my short-term bonds will fall dramatically in price from what I paid for them last year. If worst comes to worst, I can just sit on these bonds until they come due. The Ford bonds and the AT&T bonds, for example, have an annualized yield to maturity exceeding 7%. I can live with that!
Next segment: bond creditworthiness, risk, and volatility.
How to Become Wealthy (Part 6)
I am reluctant to get too specific about the sequence to follow on this, because everyone has slightly different situations. If you are single, or you and your spouse aren't planning to have kids anytime soon, buying a house may not make sense immediately. If you have a low income--and are therefore in a low marginal tax bracket--it may not make sense to buy a house either. What I intend to do is show you the sequence that my wife and I followed, as modified by what I have since learned.
401(k) Plans
Especially if you are in a high marginal tax rate bracket, and especially the younger that you are, you want to put as much money into your employer's 401(k) plan as you can, as early as you can. The money that goes into a 401(k) plan is not subject to income tax. If you contribute $100 from every paycheck into a 401(k) plan, and you are in a 40% marginal tax bracket, your paycheck only drops by $60. However, you have put $100 into your 401(k) plan--and all the interest it earns in that plan until you withdraw (sometime after 59 1/2), is untaxed. Through the miracles of compound interest, if your 401(k) plan averages an 8% return over the next 38 years, that $100 will be worth $1862.
Of course, you don't just put in $100 once; you put $100 in every month. If you start early enough at this, it turns into a huge pile of money. Start at age 22. Put $100 a month into your 401(k). If your 401(k) averages 8% return (which is not a terribly high return, when you consider the last 60 years), it will have $299,470 and some change when you retire at age 60. I cannot emphasize too strongly how important it is to get started early. This is one of the few cases where time is on your side. Instead of starting at 22, what happens if you start contributing at age 32? When you retire at age 60, instead of $299,470, you have $126,621--or less than half the amount.
But in what sort of mutual funds should you invest your 401(k) money? The traditional model says that a young person should invest in the most aggressive stock growth mutual funds (which exchange high risk for high yield). As you reach your 40s, you start to move the money into more conservative stock funds. As you approach retirement, say, in your 50s, you move most of the money into bond funds (which have disappointing returns, and lower risk), and then, when you are ready to retire, any additional money going into your 401(k) should be in money market funds (almost no return, but no real risk).
There's a lot to be said for this model--and I kick myself that when I first start contributing to a 401(k) in the mid-1980s, I put everything into bond funds. I was so scared that the money might evaporate away. Even into the early 1990s, I was still far too heavily weighted towards bond funds and conservative stock funds. If I had followed the traditional advice on this, I would have benefited from the most amazing stock market boom in history--the 1990s bubble--and I would probably have another $40K-$80K in my 401(k) account than I have now.
However: there is something to be said for being cautious, especially when you are living in "interesting times." (There is supposedly an old Chinese curse, "May you live in interesting times.") A lot of people saw their 401(k) funds drop quite impressively in value since May of 2000, as the stock market bubble deflated with all the charm and grace of a tire running over a nailstrip. I think it is likely that over the next two to three years, all of this will be a painful memory (for most Americans). Those who cashed out their 401(k), or who had to retire, or moved 401(k) money from stock funds to bond funds--they are never going to forget this experience--and not in a positive way. DO NOT PANIC IN A BEAR MARKET! This not only wipes out the advantages of the bull market that you just enjoyed, but you, along with millions of other nervous nellies, cause the market to sink even faster, because you are trying to sell when others are doing likewise. The time to buy is when others are losing their heads in panic; the time to sell is when others insist that the market can only go up. (Thanks, Abby Cohen, the stock analyst who was talking about Dow 20,000 a couple of years ago, and persuaded me to stay in the stock market. Yes, that "thanks" is sarcasm.)
I am about 15 years away from the magic age where I expect to start using some of that 401(k) money, so I have been allocating my new contributions to medium-term bond funds--funds that invest in corporate and governmental bonds that will come due roughly when I will start to draw down on that money--and very conservative stock growth funds (the kind that emphasize stocks that pay a regular dividend). I generally leave money that is already in existing funds in place, hoping that the managers of those funds are smart enough to make sensible decisions with the money.
I still think that people in their 20s should be investing primarily in stock growth funds--but I would emphasize growth funds that buy stocks in blue chip companies--the kind that pay dividends; not the funds that invest in companies that have never made any money, but that everyone knows are going to be worth a lot one of these days. Yeah, those days of high tech companies losing piles of money while their stock rises 800% a year will come again--but it seems like a pretty risky thing to put much money into. This isn't play money; you are going to need this to pay for your health insurance in 30 years.
I emphasized "hoping that the managers of those funds" know what they are doing a couple of paragraphs ago. This is one of the reasons why I think it is best to have the money in your 401(k) plan distributed among several different plans. I don't think it is likely that any of these mutual funds is going to make the headlines when the fund manager cashes out everyone's money and moves to Brazil. Mutual funds tend to have lots of checks and balances to prevent that sort of thing. But it is not unknown for mutual fund managers to make very, very poor decisions--and it would be nice if only 10% of your 401(k) money ended up disappointing you, instead of 100% of it.
You may not have access to a 401(k) fund at your employer. There are Individual Retirement Accounts available to you. I don't know enough about them to tell you much, however. (Well I could, but I might well mislead you, and I would rather not do that.)
Indecent Behavior With Your 401(k)
Vitally important: way too many people put piles of money into a 401(k) fund, then, when they leave their current employer, instead of leaving the money there, or rolling it over into their next employer's 401(k) fund--they take a distribution of the money. They thus get taxed on all that money as taxable income, plus pay a 10% penalty for doing so. Remember: high marginal tax bracket means that if you pull $30,000 out of a 401(k) fund, that will be added to your income for the year, and suddenly, you may find yourself being taxed at a 45% marginal tax rate, plus the 10% penalty. Your $30,000 windfall, after the IRS gets done with you, is now about $14,000. Hmmm. Maybe it would have been best to leave it there.
Some people get especially screwed on this because they take the money out when their job evaporates, live on it for a few months, and forget about the tax problem. Come the following April, they are scurrying around looking for $10,000 to pay to IRS and their state income tax agency.
Another really amazing behavior that I will mention, because I've heard of people doing this: a guy leaves a job he has held for 15 years to go to work for a startup. He takes a huge wad of money out of his 401(k) plan because he is convinced the startup is going to make him rich. He buys himself a very fancy car (so he doesn't have to wait for the startup to be successful). The startup makes him a very disappointing amount of money (if it doesn't just go down the tubes, like my last startup did). Whoops! There went $65,000 on a fancy car--and it's not going to be available for his retirement in another 20 years. Dumb, dumb, dumb.
If you don't understand bonds, stocks, etc.--not to worry. We'll get to that soon.
The McVeigh Trial
From an AP news story that I read in the local paper today:WASHINGTON (AP) - Less than two weeks before Timothy McVeigh was executed, the Justice Department received a letter suggesting a key prosecution witness had given false testimony. Prosecutors didn't disclose the allegations to McVeigh's lawyers and later sought to recover all copies of the letter in exchange for a lawsuit settlement.
If you read the McVeigh trial transcripts--as I did, while the trial was taking place--this is no surprise. It was obvious that the FBI's much respected crime lab was run by the Keystone Cops. Agents walked directly from the bomb range (where they were handling and setting off explosives) into the lab where technicians were running gas chromatography tests. Testimony from the director of Britain's equivalent was devastating--evidence coming from the FBI's lab had enormous problems from an evidentiary standpoint--and that was assuming just honest errors, not intentional shading of the truth.
The letter, marked "urgent," was sent by fax and courier to the attention of Attorney General John Ashcroft on June 1, 2001, by a law firm representing several current and former FBI lab employees. At the time, a judge was deciding whether to delay McVeigh's execution because of evidence the government withheld from his trial.
The letter's allegations involved Steven Burmeister, now the FBI lab's chief of scientific analysis, and were recently turned over to bombing conspirator Terry Nichols, who faces another trial on Oklahoma state murder charges.
"Material evidence presented by the government in the OKBOMB prosecution through the testimony of Mr. Burmeister appears to be false, misleading and potentially fabricated," said the letter to Ashcroft obtained by The Associated Press.
As an example, evidence from the Oklahoma City bombing site and evidence from McVeigh's car were thrown in the same paper bag to be transported to Washington DC. When you are measuring the presence of explosives in microgram quantities, it takes very, very little contamination to make your evidence untrustworthy. To put it bluntly, it's a good thing that McVeigh finally confessed before he was executed--the FBI's case against McVeigh was utterly destroyed by McVeigh's highly competent attorney, Stephen Jones.
This is, by the way, one of the reasons that I am a weak opponent of the death penalty. There is way too much dishonesty and carelessness to have 100% certainty about guilt in a many capital cases.
How to Become Wealthy (Part 5)
When I first started mulling this series over, I didn't even think about this topic: financial struggles with your spouse. I received enough emails suggesting that I deal with it--because they were dealing with it.
I'm going to keep this short and simple, because this is only partly a financial planning problem; it is mostly a problem of your relationship with your spouse. Almost any advice I can give about how to handle financial disputes with your spouse is going to be wrong for some of you.
The Spendthrift Spouse
I can tell you that I have seen a lot of serious financial insanity that results from one person being a spendthrift. One marriage that I watched break up (and being from California, I have seen a lot of that) involved a spendthrift husband. He operated on the theory that if there was any money, he was going to go and spend it, on what he wanted to spend it on. It also meant that they were in continual financial difficulties, and so the little luxuries of life (like regular dental checkups for the kids, and health insurance) were beyond them. The wife worked very, very hard to try and correct for this. This wasn't the fundamental cause of the divorce, but it certainly contributed to it.
There are a lot of causes of this tendency. In the case of this particular guy, the problem was probably two factors combined: he came out of a physically abusive home with an alcoholic father; he had been sexually abused by a Scoutmaster as a child.
Children growing up in alcoholic homes often have trouble with the notion of causality--that action A results in result B--and that this is likely to be a repeatable phenomenon. Why? Because in homes where alcohol is a major influence on people's behavior, there is no causality. The mother or father who is sweet and concerned one evening may be a violent, raging monster the next. You can't predict the future because the past makes no sense. You've got an extra $200 this month? Quick, spend it! It may disappear over night!
The sexual abuse had also left some very serious scars on this guy. In some respects, he had never grown up. Again, this is no surprise. I know several dozen child sexual abuse survivors (remember, I'm from California), and all of them, to one degree or another, are still exhibiting signs of that damage. Difficulties with emotional maturity seem to be common.
Of course, not every spendthrift has deep and dark secrets driving them. Some people just don't like to exercise the self-discipline that says, "I don't really need this." Others become convinced that they are never going to have anything anyway, so why bother to save? (I speak from experience on both counts.) Persuading a spendthrift spouse to rein in their unnecessary spending is a very, very hard thing to do. If there are some deep dark secrets driving this behavior, professional counselling may be in order--but I wouldn't make that assumption, especially in a society that encourages spending and materialism as a way to achieve happiness. It almost never does provide happiness; at most, your latest purchase is a short-term distraction--and then you feel the need to spend again. A friend of mine calls it "retail therapy."
Retaliatory Purchasing
More common than the spendthrift spouse, especially where we lived in California, is retaliatory purchasing. In my experience, this is more common in homes where both partners bring in adequate paychecks. The husband decides to take flying lessons; the wife retaliates with a new car. "If he's going to spend money on something stupid for him, I can buy something that I want!"
In the especially brutal form, this is done surreptiously. If you have good credit, this can escalate to a point where a financial crisis makes bankruptcy look like a good idea. Most of the time, it's a bit more restrained than that, and just leads to increasing resentment. Sometimes, neither party sees their complicity in this. "Everything I buy is reasonable and necessary; she's the spendthrift!"
Sometimes, this spending frenzy is the result of an agreement: "I want new furniture for the living room; you can go buy that milling machine you want." This is an improvement over the retaliatory purchasing approach, but something you need to think about when you get to a point of negotiating extravagant purchases with your spouse: would I rather have new living room furniture this year, or would I rather be wealthy in five or ten years? The choice is yours.
Divorce: A Really Effective Way to Prevent Wealth
If you think a spendthrift spouse is a financial problem, wait until you get yourself involved in a divorce! My wife and I have been married for 23 years ("The last trees in a forest full of stumps"), and this is at least part of our healthy finances. A divorce means that the two of you are now paying for two separate residences. You are probably eating out more (especially the non-custodial parent). If the divorce turns messy, or custody issues turn messy, both of you will probably end up paying lawyers to represent your side.
The only longitudinal studies that I have seen about the effects of divorce on the kids suggest that you are going to be putting out money to help them through their feeling of abandonment and responsibility for the divorce. I've also personally seen a lot of these damaged kids. Divorce: it's a luxury that you can really only afford when you get really, really rich.
I've watched (from a painfully close distance) dozens of marriages break up. I've only seen a couple where the divorce was really necessary (spousal or child abuse; repeated infidelity). Quite a number of these divorces can be laid at the feet of a materialism that says, "We gotta have all those toys that everyone else has!" The result: husband and wife both working their tails off, coming home exhausted, then Mom cooks dinner, helps the kids with their homework, and does the laundry. By the time Dad and Mom crawl into bed, he's ready; she's just ready to go to sleep. Eventually, Dad meets a woman who isn't too tired for sex, or Mom meets some guy who listens to her complaints sympathetically. Shortly thereafter, Mom tells Dad to move out.
Here's the hardest question I am going to ask in this entire series: how important are those toys you want to buy? Is it worth you and your spouse being so exhausted that you have to make a weekend getaway to make love? You are both working too hard. As our kids were growing up, my wife stayed home and raised our kids. She was there doing the housework, dealing with plumbers, taking the kids to doctors and dentists, sitting on hold with insurance companies. I was able to devote my full energies to my job. Are you surprised that our marriage held together, and most others did not?
A lot of people misunderstand how much extra they are gaining from having both parents working full-time. Remember the marginal tax rate issue we discussed earlier in the series? If Mom is working full-time, grossing $3,000 extra per month, on top of Dad's $3,500 a month, how much extra do they actually get to keep? Perhaps $2,000 extra a month, assuming that you have a house mortgage. Out of this, you have the commuting costs, day care costs (if the kids are still small), extra money on clothes (if Mom has to get dressed up for her work), the cost of lunches out--and then, because both of you are exhausted at the end of the day, a lot more dinners out, or pizzas delivered. Yes, there is actually a net gain from Mom working--but once you figure in those other costs, you may be astonished at how little it turns out to be.
Your personal equation is going to be dependent on what you do for a living. If your paycheck is $5,000 per month, even after paying those bills, the job will contribute significantly to your wealth--but there are a lot of Moms out there whose gross income is more like $1,500 a month, probably netting, after taxes, commuting, and day care expenses, closer to $600 a month. You should consider whether you can cut expenses instead. Can you operate with one car instead of two, if one of you isn't working? For a number of years, my wife and I had one car. I walked or took the bus to work most days; sometimes she would drop me at work and pick me up. (Obviously, this only works if your job is close to home.)
Now, it's true that a stay-at-home Mom (or Dad--your choice) isn't a guarantee of a successful marriage, and there is certainly a price to pay in reduced income. But from what I have seen, the model of two full-time working parents while the kids are small leads to divorce far more often.
The next segment will deal with retirement plans.
Flag Burning Amendment--Again!
Eugene Volokh has something to say about this perennial error. My view is that the notion that flag burning is a form of protected speech is a bit bizarre (along with smearing your naked body with chocolate sauce on stage), but you know what? I want left-wing crazies to burn the American flag. It's just one more way for them to marginalize their ideology with the vast majority of Americans.
The map is not the object. An American flag is a symbol of our nation. Burning the symbol does not burn the nation.
Does anyone besides me find it interesting that many of our traditions about proper American flag etiquette (it should never be allowed to touch the ground, when too worn to be used, it should be buried, not burned) are also traditions about Torah?
Oops! I see that while it was the case when I was young that American flags should always be buried, this is no longer considered required. Burning is now preferred.
South Carolina Democratic Party Activists Want Lyndon LaRouche In Democratic Party Debate
This is absolutely wonderful.South Carolina media reported today that the state's Democratic Party chairman had received a letter from nearly 40 current and former Democratic elected officials asking that Presidential pre-candidate Lyndon LaRouche be invited to the May 3 Presidential debate to be broadcast nationally by ABC-TV. At a press conference held by the representatives on April 28, Florence, S.C. City Councilman Edward Robinson released the letter, which had been sent to state chairman Richard Harpootlian on April 12. In it, the Democratic leaders—roughly half from South Carolina and the other half from other states, joined by former Surgeon-General Joycelyn Elders—pointed out that LaRouche now has more contributors to his Presidential campaign than any of the nine Democratic candidates invited to the debate, from which the Party is seeking to exclude him.
For those of you to young to remember--LaRouche's "Anglo-Venetian Dope Inc." conspiracy theories make Rev. Al Sharpton look like a serious statesman. LaRouche used to head the U.S. Labor Party, a Communist group that was big (for a Communist party) in the 1970s.
There was some unfortunate incident in which LaRouche's first wife ran off with a British member of the party. When LaRouche returned from a long absence, he went from a fairly unsurprising communist to a bizarre conspiracy theorist in which traditional "international Jewish bankers" are replaced with "British royal family," and the theory works about as well with either substitution. I am pleased to see Jocelyn Elders--an example of the insanity of the left end of the Democratic Party--allied with LaRouche.
Oh yes, LaRouche is a big advocate of nuclear power--this should make the green factions of the Democratic Party so happy! Make sure that you read this. At first, I thought it was a parody of LaRouche's disconnected, irrational writing. But it appears to be legitimate.
UCLA's New Sexual Harrassment Policy
I am both disturbed and amused by UCLA's new sexual harrassment policy, as described by Eugene Volokh (who teaches there). Among other things, Eugene says that, "it risks punishing a wide range of speech -- allegedly sexist political statements, sexually themed jokes, sexually themed art, and other speech. And it would potentially do this in student newspapers, in public places, in Internet discussions, and in a variety of other places."
Now, I find this very disturbing, because "sexist political statements" would seem a rather arbitrary defintion. A conservative who supports traditional families would almost certainly not be allowed to ask some questions in a classroom there.
But I also find this somewhat amusing because I think the first time that I ever saw a photograph of naked female breasts was when I was very, very young--in an artsy black & white photograph at a UCLA art gallery, around 1964. Wouldn't this be amusing--if UCLA became more restrictive now that the left runs it, than it was in the bad old ideas of crew cuts and co-eds going to UCLA to get their Mrs. degree.
Virginia Makes Spamming a Felony
Virginia has made spamming a felony. My careful, rational, analytic approach says, "This is wrong. Felony should be reserved for the most serious and egregious of crimes--not wasteful nuisances."
The part of me that has to wade through and add filters for hundreds of spams a day offering me pornography (including stuff too sick to discuss on my blog), penis enlargement, Homer Simpson beer mugs, mailing lists that let me spam others, and--best of all--spam offering to sell me spam blocking software--thinks felony is letting these greedy, stupid, usually incompetent morons on the hook way too easy! Drawing and quartering! When the Framers wrote our "cruel and unusual punishment" protection, they didn't have to do deal with spammers!!!
There, I feel much better now. We now return you to your regularly scheduled program.
Punitive Damages
Sasha Volokh discusses the question of punitive damages vs. compensatory damages. I think I disagree with him, but I also think he raises an important question.
For those of you who aren't quite sure what the difference is--or what the dispute is about--compensatory damages are those awarded in a civil suit to compensate you for an injury or loss that you have experienced. Punitive damages are those awarded in a civil suit to punish (hence, punitive) wrongdoing. In principle, a civil suit might involve a few hundred dollars of actual damages that you suffered, but because the actions that caused your loss were so outrageous and so obviously wrong, the person that caused you the loss gets hit for $100,000 in punitive damages. (I believe that the judgment against BMW in Alabama a few years in which they had repainted a car damaged in shipping, but didn't disclose this to the purchaser--and in which several million dollars in damages were awarded--was such an example.)
Sasha's argument--and it's not a silly argument--is that punishment is properly a matter for the criminal justice system, where there are procedural safeguards to make sure that the evidence is very clear-cut. In the civil lawsuits realm, all you need is a preponderance of evidence. Why does anyone care about this matter? At least partly because some of the punitive awards are huge. The BMW lawsuit, I think, is such an example. The actual loss of value of the car was negligible, and it seems hard to justify that repainting a car represents some dramatic injury to the purchaser. How is it so different from the original paint job? The award of millions of dollars in damages smacks of "I've won the lottery"--a recurring problem, I understand, with Alabama juries.
However: one of the reasons why I am not quite as negative as Sasha about punitive damages is that there are times when an individual, or a corporation, does something that is clearly and obviously wrong, and they need their nose whacked good to get the message across that this is not just a matter of paying for the damage that you have done. Up in the north end of Idaho there is a place where silver and lead mining went on for a long, long time. From the accounts that I have read, the poisoning of the environment with lead meant that large numbers of kids were being born with severe birth defects--and the company involved in the smelting operation paid the families off, encouraged them to move elsewhere--and keep their mouths shut. There are some evils that should simply not be done--and sometimes the only way to get the attention of a corporation's board to the inappropriate actions of their lower level managers is a big, fat award. Swat 'em on the nose!
The McDonald's hot coffee suit is another example of something that, by itself, was pretty trivial. The Wall Street Journal account of what happened that I read some years ago indicated that McDonald's could have made the suit go away at the earliest stages for less than $1000--the amount of actual medical expenses that the old woman was burned asked them to pay. The arrogance of McDonald's counsel prevented them from seeing that whether they were, in any sense, liable or not, it was good customer relations to pay actual medical bills in such a case, and perhaps improve warnings about hot coffee. I can see if the original request was for huge amounts of money for pain and suffering why being hardnosed might have made sense--but that wasn't the case in that suit. McDonald's arrogance made it into that sort of suit. Swat 'em on the nose!
Sasha suggests that these suits tie up resources of the civil justice system. Very true. You won't find me defending the greedy ambulance chasers. Except: there are times (a lot of times, actually) when the government isn't terribly interested in chasing these sort of evils--especially when the bad guys have sufficient political influence.
I'm not keen on limits on pain and suffering damages, at least as such limits are usually written, because they are flat amounts: usually $250,000. Monetary punishments of any sort (civil or criminal) should be in some way tied to the net worth of the person who has done something wrong. I received a speeding ticket last year for about $70. Yeah, I wasn't thrilled about it, but relative to my net worth, that's a minor nuisance. Relative to the average resident of Idaho, that $70 fine would be the equivalent of $700 to me: $70 must really, really hurt. The same is true up the line. I have friends for whom, if the goal of a fine is to swat 'em on the nose, their traffic tickets would be in the tens of thousands of dollars. For some corporations, the fine for wrongdoing would be measured in the millions.
The large punitive damage awards may seem absurdly large. There is, I think, an argument for making sure that punitive damages have a higher standard of proof than compensatory damages--just to avoid the "I've won the lottery" approach. There is clearly a strong argument that a lawyer shouldn't become multimillionaire for spending 100 hours pursuing a lawsuit. (You may recall that Republicans tried to limit the amount lawyers could earn on the tobacco settlements to something like $1500 per billed hour, and the Democrats simply wouldn't hear of it.) I am reluctant to go quite as far as Sasha suggests.
UPDATE: Sasha says, and I agree, that he wasn't talking about resources being used up in the literal sense, but the social resource of blame. Let me be clear on this: product liability suits are legitimate. What I call "ambulance chasers" are those attorneys whose pursuit of profit causes them to pursue lawsuits against not the responsible party, but the one with the deepest pockets--or where the case is clearly absurd (such as those complaining that gun makers are failing to do the government's job).
My objection to lawyers making vast quantities of money on these suits is that it creates an unhealthy interest in pursuing a suit--even if there is no merit to it. "Let's see, the evidence that has popped up in discovery shows that the defendant really didn't do anything wrong. But if I can persuade a jury--I'll make $10 million for my efforts! Should I do the right thing, or continue the suit?"
Lotteries: if you are genuinely an injured party, you deserve the money. If your belief is that a suit might be your chance to retire, regardless of its merits, that's a greed problem.
Sasha also says, "the McDonald's suit is an awful example of why punitive damages might have been necessary: given that you believe you're not liable, it's never reprehensible to refuse to pay unless you lose the lawsuit." It isn't reprehensible to settle out of court for actual medical expenses; it may, however, be good business, both from the standpoint of being sued for a lot more money later, and because it shows concern for an injured customer. Did McDonald's get negative press from being hardnosed about paying for her injuries? Yes--and doubtless far more than the several hundred dollars in medical bills.
Arrogance Is Dangerous
Instapundit and Virginia Postrel are both apparently irritated by the positive press that Bill McKibben's book, Enough, receiving. I haven't read McKibben's book, but to judge from the David Gelernter review of it, it is a passionate warning against genetic engineering of people.
Now, remember, Gelernter isn't exactly a technophobe. He is missing bits and pieces of his body because the Unabomber decided Gelernter was part of the evil conspiracy to remove us from the state of simple farmers who sacrifice chickens to agricultural deities. I'm not technophobe, either. But I fear that Instapundit and Postrel have spent too much time reading science fiction that presents future technologies as unalloyed good (say, almost everything by Larry Niven), and not enough reading the dystopian visions.
Let me recommend Lawrence Saunders's The Tomorrow File. Published in 1975, in the aftermath of Watergate, it was a cautionary tale about arrogance, power, and a society that values results over morals. The Secretary of the Department of Health, Education, and Welfare (predecessor to Health & Human Services, for you young'uns that don't remember) is de facto the controller of the executive branch; post-Watergate, the President's powers have been constitutionally limited. A race of superbabies have been created by increasing oxygen in utero. These superbabies are brilliant--completing their doctorates typically by 18, and then go on to government service, remaking the technologies under which we live.
There's only one thing that they lack--a conscience. Having been raised in a post-Watergate world, if someone gets in the way of their vision of what should be, they kill them. But of course, they don't call it that. They "stop" them. People don't die; they "stop."
Nothing is true or false; statements are "operative" or "inoperative." Dishonesty, deception, cheating--all are considered completely acceptable if used in pursuit of what you think is a laudable goal.
There is no sexual morality in this future, of course. Sex is something that use for pleasure, for manipulation, for control. Promiscuity is widespread, especially among the younger generation. Nearly all of the protagonists are bisexual--it serves their purposes, and if there is no right or wrong, why be limited in any way?
When I first read it, I saw it as a worrisome, though unlikely future. In some respects, it has come true. Had it not been for the outbreak of AIDS, much of the sexual subplot of The Tomorrow File would be true today. The acceptability of cheating, deception, dishonesty? That subplot is fully realized.
I shudder when I see intelligent people so enthusiastic about genetic engineering of people. These are powerful technologies, and arrogance is especially dangerous the more technology that you combine with it. Shelley's Frankenstein was a cautionary tale about scientists meddling with life, playing God, as was Huxley's secular Brave New World. Today, the popular conception of Shelley's work is colored by the horror aspects of the monster--but the real horror of the novel is Dr. Frankenstein's willingness to create life, without understanding the suffering it causes.
Clarifying About Public Nudity and Gay Pride Parades
See here. My remarks were snippy and not terribly clear.
This Tax Cut Question
I think rather highly of our current president (as I am sure most of you know)--but I was a bit disappointed with his radio address this last Saturday. He portrayed those Congressmen who support a smaller tax cut than the one he wants as not making any sense, because, Bush claims, they agree that a tax cut would create jobs. Therefore, opposing a large tax cut means that they oppose a large number of jobs being created.
Now, if this were a remark make off the top of his head, I might be inclined to call this thoughtless or ignorant. If Bush wrote his own speeches (which no president, to my knowledge, has done since Wilson), I would wonder if he was as stupid as the Democrats claim.
But Bush's speech would have been carefully crafted and discussed before he gave it. Whoever wrote this speech--and I presume Bush as well, because he's not stupid--must know that this is misleading.
Yes, there is some level of tax cut, depending on which taxes are cut, and who ends up with the extra money, that will create jobs. If the tax cut increases money available for middle income families to buy cars, houses, and other big ticket items, it will certainly create a lot of jobs. If the tax cut puts money into wealthy families (as a neutral tax cut inevitably will--the rich pay most of the income taxes), it will probably increase savings and investment, which is more indirect and less certain way of creating jobs.
But it is also true that a dramatic tax cut can increase deficits enough to drive up long-term interest rates. This might help sales of items that are financed on 2-5 year loans, like cars and appliances, but it will not help house sales--quite the opposite. Driving up long-term interest rates will impair house sales.
I, personally, would benefit from an increase in long-term interest rates--at least if the increase only lasted for a few months--because I could take some of my short-term corporate bonds and reinvest the capital in long-term A-rated corporate and government bonds, and increase my income significantly. Of course, as nice as it would be if President Bush structured our budget to suit my interests, they probably aren't your interests, and they certainly aren't in the best interests of the nation as a whole.
I don't know if the size of the tax cut that Bush is asking for is good or bad. There might well be an economic model in which a very sizeable tax cut more than compensates for the increase in deficits. Imagine, for example, such a dramatic expansion of the economy spurred by lower tax rates that total revenues increased fast enough to wipe out that deficit. But this is where we get into the voodoo aspects of economics--predicting what an n% change in this tax rate does six months, one year, and two years from now to total government revenues. The Laffer Curve suggests that a 100% income tax rate is bad for the economy and the government (everyone goes on the dole, and tax revenues drop effectively to zero) and a 0% tax rate is good for the economy but bad for the deficit (everyone works hard, but the government doesn't get any revenue). Somewhere between those extremes will be an optimum rate--one that gets maximum tax revenue with minimum impact on the economy. No one knows what that rate is, however, and it varies from year to year (and probably from second to second) based on the aggregate set of decisions of a free eonomy.
No one really knows for sure what the optimum size of tax cut would be right now. I just would prefer Bush to have admitted that there is some legitimate uncertainty about the effects of a large tax cut. Of course, that's because I want intelligent people to rationally debate this matter, and politics and swaying the masses (not partial to either intelligence or rationality) is what this is really all about.
How to Become Wealthy (Part 4)
Okay, you have cleaned up your finances enough that all you have is your rent and car payments. What now? Should you cut your credit cards up? No. You just need to be careful what you pay for with your credit cards.
I am at a point now where almost everything that I purchase, other than groceries, I put on my Discover Card. It's convenient (much quicker than writing a check), and I get 1% of my total purchases back from Discover. Should you do this? Hmmm. Maybe not--at least until you are sure that you aren't going to return to the bad practices of the past.
What Credit Cards Are Good For
They are a convenient way to not carry a lot of cash and to avoid writing checks. Especially if you live in a place where carrying cash is risky (as Los Angeles was, when I grew up there 1975-1985).
They are a relatively low cost way to amortize larger purchases over a 1-3 month period, especially if writing a check would deplete your savings account. These should be purchases that are necessary, unusual, and that you don't expect to repeat during the time that you are paying for that purchase. Good examples: tires; brake job. Bad examples: groceries; meals out; books. Yes, the interest rate is high, but if you have something that you truly need, use the credit card to finance it over a short period of time. Yes, 18% APR over three months will be about 4.5% that you are paying for that purchase. If you can pay cash or check, all the better. But if paying by cash or check means that you have $28 left in savings, it might be better to pay the interest, and keep your savings account a little healthier to cushion any surprises that come along.
Some people, unfortunately, can't handle a credit card. If you find yourself (or worse, your spouse) charging stuff like groceries, or confusing "want" with "need," it might be best for the credit cards to go into a drawer, and stay there until a legitimate need for them arises. If you really have no self-control, give up the card--but remember that if you have screwed up badly in the past, getting a new credit card might be a lot harder now than it was before.
Building Up A Savings Account
Savings accounts perform three useful functions:
1. They provide a cushion against unexpected financial disasters.
2. They gather interest (pitiful as interest rates are right now, it's better than 0%).
3. They are a staging area to bigger forms of wealth--like houses.
It used to be a widely spouted rule that you should have six months living expenses in savings. There's certainly some merit to this idea, but this rule seems like it was designed for the era before unemployment insurance, and there was only one person in a family bringing home a paycheck. Today, if you get laid off, unemployment insurance will help a bit. If you are a two paycheck family (as is, unfortunately, now the norm), if one of you loses his or her job, the disaster won't be quite as sudden as it traditionally was for the one paycheck family.
I would encourage, however, the idea that you should strive for having at least a couple of months expenses saved up before you start looking at the next step: buying a home.
Buying a Home
Not everyone should buy a home. If you think it likely that your job is going to evaporate, and you might need to move, buying a home may not be the best maneuver. At times, homes, especially condos and townhomes, can be highly illiquid. There are also situations where the housing market simply doesn't justify buying, because there is such a huge oversupply of rentals that you will be paying a lot more to buy than to rent. If you have a very low income, and therefore you are in a very low income tax bracket, and you have the good fortune to live somewhere where houses are so cheap that you can afford to buy a house in spite of your low income, it may still not make sense to buy a home, for reasons that we are about to explore.
But if you are likely to live in the same area for the next several years, and especially if your household income exceeds $60,000 a year, it almost certainly does make sense to buy a house. The reasons are:
1. Equity.
2. Appreciation.
3. Lowered income taxes.
Equity is obvious. If you pay $900 a month in rent, that's all money that is down the tubes. If you pay $1100 a month for a mortgage, most of that is interest, but some of it is payment on the loan principal. You will, after a few years, own some equity in your home.
More importantly than the equity you gain from paying down the loan, however, is that real estate usually appreciates. It doesn't always appreciate--a friend of mine likes to tell of how his family managed to lose money because they bought a house in Malibu, California, and sold it a few years later. People who buy houses during California's periodic panic buying frenzies can find themselves regretting it two or three years later.
In some areas of the country, appreciation is quite slow--or even negative. A figure that is often quoted for the Boise, Idaho area where I live is 1%-3% a year. Where I lived in California, however, it was often a bit higher than that. We bought a house in San Jose in 1985 for $115,950, and sold it in 1987 for $125,000 (3.9% per year). We bought a house in Rohnert Park for $116,000 in 1987, and sold it for $160,000 in 1995 (4.7% per year). We bought a house for $244,000 in 1995, and sold it for $429,000 in 2002 (10.8% per year). None of these are spectacular results for California real estate, but they are all a giant improvement over renting.
The biggest reason for buying a house, however, and why it may not make a lot of sense for those in low tax brackets, is the tax advantage. The government, paying careful attention to the lobbying efforts of the National Association of Realtors, and various homebuilding groups (both corporate and labor), has structured our tax code to encourage you to buy a house. All the interest that you pay on the mortgage (which is typically 95% or more of the monthly payment in the first several years) is tax-deductible. So is the entire property tax bill. The "points" (prepaid mortgage interest) you pay on the mortgage when you purchase (not refinance) a house are deductible.
What does "deductible" mean? It means that if you make $75,000 a year, you get to reduce your income by the amount of mortgage interest and property taxes before you compute the federal and state income tax that you owe. For most renters, that kind of household income will mean that they pay a marginal federal income tax rate of about 21%. (What does marginal mean? It means that for every additional $1 you make, the federal government will demand $0.21 in federal income tax.) Marginal state income tax rates vary wildly, from 0% (for those states with no state income tax) to 9.3% for California. (I think it may even be higher in other states.) Let's assume that you are in a pretty typical state; your combined federal and state marginal income tax rate will be about 25% to 28%.
For every $1 in mortgage interest and property taxes that you get to deduct from your income, you reduce your federal and state income taxes by $0.25 to $0.28. This means that even though your mortgage payment might be 10% higher than rent--you still come out ahead--because your income tax drops when you start making house payments. (But be careful--if you get enough of a reduction in your taxable income, your marginal tax rate will drop--and the reduction in your income taxes drops accordingly.)
One other advantage of buying over renting--you have a pretty good idea what the mortgage is going to be. If you get a fixed mortgage, you know exactly what your payment will be for the next 30 years. Even with most adjustable mortgages, you know the maximum payment for the next several years. This cannot always be said for rent!
I'm not going to try and go into all the nuances of buying houses--there's far more than I can ever tell you, and I won't claim to any great expertise in this area--but I will tell you these items that I have learned over the years:
1. Adjustable mortgages are really, really scary. Why, if interest rates went up 5 points, your house payment could be $1400 a month! However--if interest rates went up that high--and stayed up that high for very long--the whole economy would collapse. Lunatics sometimes get in charge of the asylum in Washington, but they don't hold it indefinitely. In addition, most people refinance their house, or sell, within five years. Calculate what a fixed mortgage will cost you over the next five years--and then what an adjustable will cost your over the next five years, even if interest rates went up so fast that you were paying the maximum possible payment. You'll often find that the fixed mortgage isn't going to be dramatically cheaper. The more realistic scenario--interest rates go up, but not radically--and the adjustable will usually be a bit cheaper. (Be careful, however, about the difference between the "teaser" rate that is in effect for the first six months, and the actual rate you will pay for the following year, three years, or five years.)
2. Don't buy a house primarily for the appreciation. There are too many people who spent too much time watching programs about how to become rich in real estate who ended up in bankruptcy. Buy a house because you need a place to live, and you want to pay yourself part of that monthly payment, not a landlord, and reduce your income taxes.
3. Don't buy the biggest house you can afford. At best, you may find yourself living on beans and peanut butter for the next several years. At worst, you may find yourself out of the house, with a foreclosure black mark on your credit history. You will discover unexpected surprises when you move in. Remember: you are responsible for the repairs--there's no landlord to call up and have fix the clogged toilet, or the leaky faucet. Buy the smallest house that you can afford that meets your needs--even if it is only for a few years. Our first house was 887 square feet, 3 bedroom, 1 bath. It was cramped, but it was brand new, and it was adequate for my wife and our rambunctious toddler.
4. Condos and townhouses may be an adequate substitute for a real house in crowded big cities. They are generally harder to sell than real houses. With condos and townhouses, there are usually homeowners association fees that you have to pay as well--and these can be surprisingly steep. Generally, they are not deductible on your taxes. That's just money down the drain.
5. In spite of the hype from people selling timeshare condos, this is not a substitute for a house. Buy the house first. If you want a timeshare condo on the Kona coast (I visited a nice one there when we were vacationing there last year--but we didn't buy), wait until you have bought the house first.
6. If you want a snazzy car--buy the house first. Four or five years after you buy your house, your income will have risen so much faster than your house payment that you will be able to buy the snazzy car without pain. Trust me on this. I spent too much money on new cars when I started working at 18, and not enough saving for the house.
Next segment (whenever I get to it): dealing with conflict in your marriage about money.
Minnesota Goes Non-Discretionary?
I have received a short email telling me that Minnesota's governor has just signed, or is just about to sign, a non-discretionary concealed weapon permit issuance law. Yahoo!
UPDATE: Here's the news story about it:The bill's Republican sponsors, led by Sen. Pat Pariseau of Farmington, dismissed the protests as fear-mongering and doomsday predictions, maintaining that 34 other states have adopted similar measures without catastrophic consequences.
And here's the highly rational response of opponents:
"If I want to have a gun in my purse, that should be my choice, not the sheriff's," said Sen. Julianne Ortman, R-Chanhassen.Sen. Jane Ranum, DFL-Minneapolis, said the bill's lack of a Minnesota residency requirement will make the state a magnet for gun-lovers from the handgun-restrictive neighboring states of Wisconsin, Iowa and Illinois.
Except, of course, if you aren't a resident of Minnesota, federal law prohibits you from buying a handgun there.
"This bill was written by the gun industry and it's all about their profits," she said. "The Midwest is the one place they haven't infiltrated yet. This will make Minnesota the place to come and get your gun."
Here is the end of the article, and it really captures the issue well:Ranum also criticized the bill's limits on evidence of applicants' dangerousness that sheriffs may consider in deciding whether to issue permits. For example, alleged crimes that a person has been acquitted of cannot be factored in.
And from KSTP-TV in Minnesota, this article has a nice quote from Hamline University Law Professor Joe Olson (who, of course, they don't identify as such):
That means a sheriff could not weigh any of the evidence presented in the murder trial of O.J. Simpson should he seek a permit, Ranum said.
"O.J. Simpson was not seeking a permit," Pariseau replied. "But maybe his wife needed one.""Today is a wonderful day in that honest, law-abiding citizens will be able to protect themselves starting next month," said Joe Olson, president of Concealed Carry Reform Now, an organization formed in 1996 to push for such legislation. "Good people are going to be safer."
The article mentions that several legislators were wearing bullet-proof vests on the floor while the debate went on. I hope that this is just for dramatic effect--otherwise, I wonder about their sanity.
Interesting Email Conversations That I Am Having About Male Homosexual Promiscuity
I've received several interesting and somewhat contradictory types of email (some from self-identified homosexuals) about my recent postings. I am pleased to report that none of them have been abusive or threatening.
Some have told me that they don't know any homosexual men that are promiscuous, and certainly nothing like the numbers from that study that Masters, Johnson, and Kolodny had in their book.
Others tell me that homosexual men are promiscuous because they can't get married, with all the stability that this provides. Yet the same email will talk about how unstable heterosexual marriages are now, and claims that this is because even heterosexual males are by nature promiscuous. Hmmm. Now heterosexuals can't stay faithful to each other, even with marriage to stablize them. Perhaps the stability provided by marriage doesn't help all that much....
A third email contention that I have received is that if heterosexual women were as easy as heterosexual men are, heterosexual men would have thousands of completely anonymous sexual partners as well--and they point to examples like Magic Johnson. Of course, you see where that got Magic Johnson--HIV+. But more to the point, my experience from both my own stupid and wild days, and from talking to a fair number of other guys, is that relatively few straight guys would have hundreds of anonymous sexual partners, even if they could.
I was, I think, pretty typical in my late teens and early 20s. I would much rather have made love to the same woman 100x, not 100 women 1x each. I did not always follow my goals perfectly, but I was looking for love--not a one-night stand. Even had a steady succession of one-night stands been available, I would have lost interest too soon to get my lifetime sexual partners count into the hundreds--and this was at a time when I was not a Christian, and I did not have any sense that premarital sex was wrong. Whenever I did find myself doing something cheap and short-term, I recoiled in horror the next morning, and for weeks or even months, I would tell myself, "No, that's not what I want."
I used to work with a guy who was like a movie about the disco era. He quite literally had no permanent home. He came to work from a different place every night, sleeping with a dozen or more different girls over a week or two period. My first reaction was a little envy, and then, as I realized how shallow his relationships were--strictly sexual--with all these girls, the more disgusted I became. He tried very hard to give the impression of, "Wow, I'm such a stud!" But eventually, as we became better friends, the truth came out. The week before he was to get married, his fiance ran off with the best man. That had been a couple of years before--and he had lost himself in this tawdry sexualization that let him avoid ever getting close to another woman. My disgust was replaced with pity.
New Additions to the Primary Sources Page
04/28/2003: Added 1700 and 1705/6 Pennsylvania laws regulating trial of blacks, including a ban on carrying of weapons, at Race-Specific and Religion-Specific Gun Control Statutes page, and under the Slavery section.
UPDATE: Added the 1756 and 1757 Pennsylvania militia laws here.
This Is Where The Most Extreme Forms of Libertarian Thought Lead
Just received this news story:SEATTLE (Reuters) - A Seattle man has sued police for the right for local revelers to celebrate the arrival of spring naked and on bicycles.
Now, I can understand why homosexuals are worried about being arrested in the privacy of their own homes for what they do. I can understand their upset about undercover police going into a gay bathhouse or bar, and trying to entrap someone into a violation of the law. I am not sympathetic to laws that try to regulate what consenting adults do on private property, and even with respect to private property that is a public place, there needs to be some good reason for the police to step in. But in a public place? This guy thinks it is really, really important to bicycle naked, and that he has some right to do so. This is the sort of stupid exhibitionism that is why the most extreme forms of libertarian thought--anarchism--just strike me as childish. Nothing better to be worried about? (Not to mention the increased risk of injuries to sensitive parts--and the gross-out factor, because let's face it, not that many people look better naked than dressed.)
In Seattle, rain-soaked citizens celebrate the return of sunshine with an annual summer solstice parade featuring traditions like samba dancers, colorful floats and -- believe it or not -- nude bicyclists.
But with officials regularly hinting they may crack down on this cheeky biking trend, a local nudity advocate has sued the police, demanding they keep their pants on while he takes his off.
Oh, of course, at the bottom of the story we get to the real issue of why nudity in public places is so important:A Seattle Police spokeswoman could not be reached for
I keep hearing that homosexuals are just like other people. Right.
immediate comment. Local police generally have tolerated nudity
at adult events like Mardi Gras or Gay Pride festivities and
typically look the other way at the solstice parade, slated
this year for June 17. [emphasis added]
UPDATE: I was trying to say something a bit more sensible and less snipy than I managed to say. Let me try this again. There are a lot of very juvenile behaviors out there--adults acting kids would act--if they wouldn't get in trouble. That Mardi Gras and solstice parade participants feel a need to run around naked in public says a lot. Ditto for Gay Pride Parade participants. This is not a terribly mature sort of behavior.
Imagine if there were Black Pride Parades around the country at which every nasty stereotype of blacks was presented on floats: blacks doing their best Stephen Fetchit impression; black men stealing TV sets, or beating their wives. Imagine that a group marched in the parade called North American Forced Interracial Sex Coalition, whose stated goal was the abolition of rape laws. Not every float contained degrading stereotypes, and not every group that marched was like the NAFISC--but enough to amaze and shock you. Now imagine that these parades had huge crowds show up--and the black community said nothing in protest. That would be the analogy to some of the Gay Pride Parades.
Biowar Has Started
Fox News is reporting that an Egyptian sailor en route to Canada was apparently curious about a suitcase he had been asked to deliver. He died very quickly of anthrax.
UPDATE: A bit more about the circumstances. Curious that there isn't more coverage.
How to Become Wealthy (Part 3)
In the last installment, I promised you the secret "that enables you get in deep financial trouble very quickly--and get out almost as quickly." This is one of those items that is blindingly obvious--and yet most people don't ever think about, until you tell them.
Let's say that you are a typical American. You spend $4000 a month; you bring home $4000 a month; you have a few hundred in savings, and $10,000 in credit card debt. You never get ahead financially, but at least you aren't sinking. Then, one day, you need to replace the engine on your car--and now, to keep your monthly minimums on your credit cards, you now are spending $4100 a month. As Mr. Micawber would tell you, "result misery." You are now getting further behind every month--and in a few months, even if nothing else goes wrong, you are now spending $4150 or $4200 a month. Soon, you are beginning to watch those ads from bankruptcy lawyers.
Magic Secret #1
You must, before this deficit gets out of control, either reduce your spending or increase your income enough to have a budget surplus--even a very small one. Then, once you have created this budget surplus, you must exercise great self-control, and use that surplus for one purpose alone: paying down the highest interest rate debt that you have. Consider the poor guy above. He has a $5000 balance on MasterCard A, and the rest on Credit Card B. He has a $200 a month minimum monthly balance (4% of the outstanding balance)--of which $75 is interest alone (1.5% monthly, or 18% annually). If he increases his payment from $200 a month to $400 a month, instead of paying $125 in principal and $75 in interest, he will be paying $325 a month in principal--and within four months, instead of paying $75 a month in interest, he is paying $55 a month in interest. Keep it up: in another four months, he is paying $36 a month in interest. But you must keep paying more than just the minimum monthly payment, or you are going to find out what the miracles of compound interest can do for your credit card company.
Once you have wiped out MasterCard A, it's time to tackle the next one--and here's the magic trick. Take the $400 a month that were spending on paying down MasterCard A--and now apply it to the other credit card with a $5000 balance. You were already putting out $200 a month on that credit card bill, so it will shrink away a lot faster than MasterCard A.
This requires a lot of self-discipline--to stop spending money on things that you don't truly need--and using the money that you have freed up from debt service to pay down other debts as quickly as possible--instead of celebrating. "Whee! I've got $400 a month freed up--I can trade in my Toyota on a Lexus!"
Magic Secret #2
There I was in Irvine, with a colicy baby, a mountain of credit card debt, and a small increase in income from consulting work. What else could I do to improve my finances? Well, what kind of an interest rate was I paying on that debt? I had bought an IBM PC in 1982, back when PCs were still expensive. You young'uns can laugh, but I spent several thousand dollars for a computer with 64K RAM (that's a K, not an M), and two floppy drives. The credit card on which I purchased it was 18% APR. (I had very good credit--that's why the interest rate was so low.) What could I do to refinance it?
At the time, my sister Susan was getting 9% yield on her money market funds. She was looking for a better return, and I was looking for a lower interest rate. Voila! She loaned me the money at 14.5% APR. She was now getting a better return on her money; my minimum monthly payment dropped. But instead of paying it back to my sister over the same four year repayment term as my credit card, I doubled up the payments, and paid it off in two years. Susan was richer; I was less in debt.
What you need to make this work: a relative, or a close friend, who trusts you enough to loan you money unsecured. You need to offer them an interest rate that is attractive, relative to what they are getting in their incredibly boring and safe money market funds or CDs. However, the gap is still huge. My money market fund is paying me about 1.1% yield right now; my one year CDs are about 2.2%. Interest rates on credit cards are still absurd--12%-18%. Look around--you may find an older relative who has the money to refinance your debt--especially if you can make a strong case to them that this will improve your long-term financial picture, that you are going to aggressively pay down your debts--and that you aren't going to flake on them. (I've lent significant chunks of money to friends and relatives three times; once to pay for an engine repair--almost none of it was paid back; once to my brother-in-law, so he wouldn't lose his mobile home, almost none of it was paid back; once to help some people at church consolidate their debts--most of it was paid back.)
By the way, this strategy really only makes sense for unsecured debt. Car loans are typically financed at rates low enough that this sort of private refinancing isn't going to be a huge win. I think that there may be some liability issues in some states as well on being the lienholder on a car.
It's tempting to use this strategy for putting together the down payment on your first house. The problem is that increasingly, lenders won't allow it--the money has to be a gift, not a loan. My mother was willing to loan us the money for our first house, and did so, but fortunately, by the time we were ready to plunk down the cash, the strategy above had cleaned up our debts to the point where we were able to pay her back, and do the down entirely on our own.
Next segment (probably tomorrow): what to do when you get down to just rent and car payments.
How to Become Wealthy (Part 2)
So, now you know what your budget is. You are either spending more than you make, or spending less than you make. If you are spending more than you make--well, you are pretty typical of a lot of people in America. Been there, done that, got the financial scars to show for it. There are three choices: cut spending, increase income, or borrow the difference. (Well, there is the counterfeiting option, but that has its own set of problems--I would strongly discourage it.) Too many Americans take "borrow the difference" as their solution, increasing their credit card debt every month. Some think that they are being clever by opening an equity line of credit to borrow the money at a lower interest rate. Well, it's more clever than paying 18% on your credit card bill, but that's like calling yourself educated, compared to an illiterate. There are circumstances where borrowing against your home equity can make sense--but not to pay for meals out, an oil change for your car, groceries, or your annual vacation to Hawaii.
As I mentioned in the last installment, it is usually better to cut spending, rather than trying to increase income. Increasing your income means that 1/3 to 1/2 of your gain goes to taxes, as part of the government's campaign to make sure that no new rich people happen; reducing spending doesn't enrich the government. There's a place for both actions, however, and we'll cover both of them.
Cutting Spending
At the financial planning class I attended in Irvine, the instructor told us a very funny story. One of his new clients was on the edge of bankruptcy; he was unable to raise a family in Orange County, California, on $100,000 a year. (Obviously, the cost of living was a lot lower in 1985 than it is today--substitute $180,000 today.) As he went through this guy's monthly bills, he found one bill for $75 a month made out to some sort of doctor.
"What's this for?"
"That's the dog's psychiatrist."
"Why does your dog need a psychiatrist?"
"If we leave him in the house, he pees on the carpet. If we leave him outside, he barks and the neighbors get upset."
"You're about to go into bankruptcy. Get rid of the dog!"
Learn to distinguish "need" from "want." Shelter, food, transportation to work and school are needs. Vacation, pets, fancy cars, entertainment equipment, a health club, and yes, dog psychiatrists, are wants.
In some cases, you will discover that you signed up for low easy payments for the next decade to pay for one of your "wants." It may be the case that getting out of that bill isn't going to save you much money at all. Just stop adding to your woes, however, until you get your finances straightened out.
Even in the category of needs, however, look carefully at what you buying. Most Americans are carrying too much weight. This suggests that while food is a "need," for most Americans, their eating is a mix of "need" and "want." Most prepared foods are expensive compared to buying staples. Yes, pizza tastes better than a peanut butter and jelly sandwich. But you will soon discover that eating when you are hungry (as opposed to satisfying your desire to enjoy a wonderfully tasty meal) will save you a pile of money each month.
Restaurants: ditto. If it's really necessary to eat out, hit the fast food places until your financial woes are resolved--and then go for the smallest and cheapest item that will fill you up. It's amazing how many adults are still eating like they did as teenagers. My son is 15, and like most teenaged boys, he can go through a truly astonishing quantity of food, and still be thin as a rail. I was like that....long, long ago in a galaxy far, far away. At 15, Supersizing the Big Mac Value Meal may be necessary to keep from eating the upholstery in the car; at 25, it's just wasting money.
Housing: if you are renting, ask yourself if you would get any benefit from moving to a less expensive place. You should at least look at this possibility, but most of the time, unless you are childless, or are living in an extravagantly expensive place, this really isn't a big win. Look carefully at what you will spend on renting a truck, paying for pizza for your friends to help you move--it may take a long time to save enough on rent to justify it. At least, when I lived in Irvine, I did the math, and concluded a move would take me 13 months to pay for itself--and we ended up being relocated to San Jose by my employer before that point was reached.
There's one other big category of spending reduction, but that's in the segment on interest and credit, so you'll have to wait on this.
Increasing Income
"Hey, boss, I need a raise. Otherwise Clayton's program for making me wealthy slowly won't work!"
"Why, I would overjoyed to give you a 10% raise! Anything for my loyal employees!"
Okay, back to reality. The best that you can hope for is that your income will rise faster than your expenses. Yes, maybe working a little harder will impress the boss, but that's not one of the more likely strategies to increasing your income. When I was living in Irvine, and confronting financial reality, I was rather stuck. My wife had just had our first baby, and there was no realistic way for her to make enough money to pay a babysitter, and still come out with any net increase in income. (Not that either of us was keen on that anyway.) I went out and found a moonlighting job taking inventories in stores. This was a job that started at 9:00 PM and ended typically about midnight. After working all day long, this was a grueling experience. The pay wasn't much--$7 an hour--but any increase in income without a corresponding increase in spending is a win. Fortunately, another, better moonlighting opportunity came along a few weeks later, doing software development for $20 an hour. I did this for about five months, and the extra money provided the downpayment we needed for our first house.
Make sure that whatever moonlighting job you get doesn't involve driving an extra 200 miles a week to bring in $50 net taxes. That will be a lot of work for little or no net gain. Also make sure that you don't impair your effectiveness at your day job. It is better to work harder and get a better than average raise.
Next segment: the magic secrets that enable you get in deep financial trouble very quickly--and get out almost as quickly.
How to Become Wealthy
Even before I had some minor success with a couple of startups, I had moved from just below the poverty line to reasonable comfort, with a house, a year's expenses in savings, and no debt (other than a house mortgage). I've learned a few things, some in classes, some in the college of hard knocks. I've also had a little help along the way from relatives, some of it purely one-sided, and some of it mutually beneficial. I would like to pass on this information to those of you who are just getting started in life. (Some of this advice will be valuable to those of you who aren't just getting started in life, too.)
The most valuable three hours I think I have ever spent was at a free financial planning class in Irvine in 1985. It was, quite literally, free. Yes, they were trying to sell us on paying for a more comprehensive class, but what I learned in those three hours, in retrospect, was worth $10,000 to me. What I learned there was freely given, and I give it to you freely as well. (Feel free to throw money in the PayPal tipjar, however.)
Running a Budget Surplus Consistently
“My other piece of advice, Copperfield,” said Mr. Micawber, “you know. Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery." [Charles Dickens, David Copperfield, ch. 12]
To translate it into modern terms: "Take home $40,000 a year, and spend $39,500, result happiness. Take home $40,000 a year, and spend $40,500, result misery." Obviously, the greater the difference--either way--the more rapidly you will see the result.
At one time, I commuted 25 miles each way to work. Because only part of the costs of commuting are visible on a daily or weekly basis, I didn't realize that I was spending more than I was earning. When the invisible part of the commuting costs would show up, in a brake job, tune-up, or tires, it was always a crisis--and of course, charging those bills just led to the next crisis--interest on credit cards (to be discussed later).
You must figure out what you are actually spending. You will not find this out by adding up your bills for a month. There are too many big bills that only come up every few months (tune-up, brake job, paying for that vacation you just took). Proper budgeting means going through your check register for many months. It also means having a realistic picture of what you are buying in cash. My experience is that most people, especially most people without kids, are absolutely shocked by how they spend in cash eating out each month. Start saving the receipts, even if it's just a Big Mac, fries, and a Coke--add them up at the end of the month.
Are you increasing your credit card debt every month? That increase in debt--the amount that your balance increases in month--is part of your monthly expenditures. Don't tell yourself, "This was a one-time expense--it won't happen again." There are very, very few such expenses.
Cars: The Monkey On Your Budget Back
For most people, there is one additional expense that is hard to measure, and that's car repairs and maintenance. The cents per mile figure that the federal government allows for tax purposes really doesn't do the job adequately. The major marginal maintenance expenses of operating a car are usually gasoline, tires, brakes, oil changes, and tune-ups. You know (or should know) roughly what sort of gas mileage you get: 20 miles per gallon is 1/20 gallons per mile. Multiply by the price of gas, then multiply by the number of miles a month that you drive. Find your last tire purchase receipt, divide the total price tag by the number of miles you get on that set of tires (e.g., $300 for four tires, they lasted 30,000 miles, that's $.01 per mile). Ditto for brakes, oil changes, and tune-ups. Don't worry if you don't have the exact amount, or the exact number of miles--it will be close enough.
Insurance and registration fees are primarily determined by the number of months that you have the car--not the number of miles you drive. Some auto insurers will determine rates by your daily commute, and for what purpose you use the car--but this usually doesn't make a big difference in the total bill. Treat auto insurance as a monthly expense, and don't try to factor it into your mileage costs.
Depreciation is often the biggest chunk of the expense of driving a car, but unless you buy new cars and then sell them every three or four years, this is not likely to be a significant part of your annual budget--and you do have the advantage that you don't suffer the depreciation until you actually sell the car. This isn't really a regular expense for you. Here's a tip: buy cars that are still under factory warranty, but are 1-2 years old. I recently bought a 2000 Corvette with 23,000 miles on it for $33,500. Brand new, it cost about $48,000. The first buyer thus spent 63 cents a mile JUST ON DEPRECIATION! I would have to drive the car another 60,000 miles to knock another $14,500 off its value.
The one uncertainty is repairs. While piling up debt by buying a new car is usually a mistake, there are circumstances where it can make sense. What do you get with a new car (or, in most cases, a slightly used car)? The remainder of the factory new car warranty. Relatively new cars are also eligible for extended warranties. If your car with 90,000 miles on it has already demanded a transmission rebuild, a valve job, and a new master cylinder--and you have no idea what it will need next--it might make sense to buy a new, cheap, sensible car. You will have a regular monthly car payment, but you can budget around that, in a way that you can't budget around the next repair that your heap needs (or that the mechanic claims that it needs). "Yeah, your Johnson rods are shot, your muffler bearings need to be repacked, and it's time to rotate the air in your tires."
Okay, enough with the car digression. You must find out where you are spending your money, and either reduce spending, or increase income. More about that in the next installment. While you are waiting, however, remember this: an extra dollar earned, because of federal, state, and Social Security taxes, is typically $0.55 to $0.65 more in your pocket. A dollar reduction in spending, however is $1 towards solving your budget problem.
Next segment.
Your Tax Dollars At Work
Here's an interesting news story from the Salem, Oregon Statesman Journal (via How Appealling) that raises an interesting set of questions: Horacio Alberto Reyes-Camarena was sent to death row six years ago for stabbing to death an 18-year-old girl and dumping her body near the Oregon Coast.
Now this guy--who is supposed to be executed, one of these days--wants the state to pay for a kidney transplant for him.
At the Two Rivers Correctional Institution in Eastern Oregon, Reyes-Camarena, 47, gets hooked up to a dialysis machine for four hours three times a week to remove toxins from his blood.
Without dialysis, he would die because his kidneys are failing.
Each dialysis session costs $775.80 for treatment and medication, according to Corrections Department figures. At that rate, his dialysis costs $121,025 a year.
I wish I had a simple answer on this. It's cheaper, in the long run, to get him a kidney transplant, than to keep him on dialysis. If he was in prison for life, simple economics would argue for the transplant. But he's on death row--"long run" isn't one of the phrases that should be associated with someone there.
The article points out that Oregon's financial problems mean that "bad" Oregonians--the ones that don't kidnap and murder, and therefore aren't in prison--are unable to get medical treatment that this piece of scum gets for free. On the other hand, refusing him treatment isn't an option--that would be execution by an unlawful and tortortous method.
If only the ACLU would show their belief in the virtue of keeping guys like this alive, and pay for the transplant.
Jacob Levy on Why Conservatives Should Act lIke Liberals
Jacob Levy is now arguing that conservatives should have pushed for repeal of sodomy laws at the state level after the Supreme Court upheld Georgia's sodomy law so that there would be no danger of a slippery slope into the Supreme Court striking down laws on incest, bestiality, etc. on the same basis. Why do I keep thinking of Cleavon Little in Blazing Saddles? He played the black sheriff, who takes himself hostage to drive away an angry mob.
If the Supreme Court goes ahead and strikes down laws on bestiality, incest, child molestation, and all the rest of the liberal campaign, it will be the end of liberalism. We will see either constitutional amendment to clarify that sickness and perversion are not constitutionally protected activities, or we will see a revolution. I don't think Levy and other promoters of this attitude realize the extent to which they have been spending too much time talking to themselves, and not enough time talking to people outside of the ivory tower.
Something With Which To Annoy Your Leftist Friends
This is a marvelous parody of Noam Chomsky and Howard Zinn deconstructing the film The Two Towers. If you don't know who either of these leftists are--or what deconstructionism is--you probably won't catch the wit. It does capture how Chomsky and Zinn manage to turn every evil little thug into a good guy, just because they aren't Americans. I found this link over at instapundit.
More on Griswold v. Connecticut (1965)
This is the case on which much of the sodomy law repeal hope is based. I am gratified to see that Eugene Volokh, in spite of his support for overturn, acknowledging that the concurring opinion by Justice Goldberg, made it clear that striking down a ban on contraceptives for married couples would not alter the ability of the states to ban extramarital sex or homosexuality.
I wrote an op-ed piece for the local newspaper (which I can almost guarantee will not be published) pointing out another part of Justice Goldberg's concurring opinion:In determining which rights are fundamental, judges are not left at large to decide cases in light of their personal and private notions. Rather, they must look to the "traditions and [collective] conscience of our people" to determine whether a principle is "so rooted [there] . . . as to be ranked as fundamental."
Sodomy is not part of the "traditions... of our people": quite the opposite. Whether a good idea or not, laws criminalizing sodomy are part of the traditions of the United States. To assert that there is a fundamental right to engage in sodomy (outside the bounds of marriage) is simply not based on the clear history of this country. Homosexual sex was prohibited everywhere in the U.S. until 1961; the repeal of such laws state by state has been an experiment, but it is definitely an innovation, not part of our traditions.
Another Defensive Handgun Use
These don't get much coverage nationally, but they happen frequently. This was the headline in the local paper, since being a gun nut state, we don't have much in the way of murder. The way the news story in the Idaho Statesman opens, you think this is a murder: Elton Crawford admits his nerves were on edge early Sunday.
Later in the story, however, we find out that Manca was defending himself from a knife attack by these two:
Shortly after 12:30 a.m., the private security officer pulled into the 7-Eleven at the corner of Curtis and Overland roads. He wanted a soda before he continued his rounds on the Boise Bench.
A man was lying in the parking lot. Another was on the sidewalk. Both were bleeding.
A third man was standing near the door, holding a gun.
The former Idaho City police officer jumped out of his Treasure Valley Security car, his own gun drawn.
“Drop the weapon,” he ordered Michael Manca, a 32-year-old Boise man.
Manca put the gun on the ground and complied with Crawford´s order to put his hands on the wall of the convenience store.
Killed in the shooting was Jack Jordan, 33. Police said he carried Florida identification, but it was not known whether he was living in the Treasure Valley or visiting. Lyle Myrick, 32, of Boise was shot in the neck and was listed in critical condition Sunday night at Saint Alphonsus Regional Medical Center. No charges have been filed against Manca, who was questioned and released. Police said it appears he was defending himself. Boise police spokesman Rich Wright said Manca recently applied for, but had not yet received, a concealed weapon permit from Ada County.
Interesting. They didn't even charge him with carrying concealed without a permit.
Myrick may face aggravated assault charges for initiating the fight outside the store, police said.
This is also a good example of why, when you approach the scene of a crime, that you must not read too much into the situation. There was a man dead on the ground, and a guy standing up with a gun. The guy standing up with the gun appears to have been the victim--not the criminal.
Some People Just Shouldn't Have Guns...
Yeah, like cops. I saw this in the local paper yesterday, and today it's in the Washington Post.Tacoma, Washington, Police Chief David Brame shot and killed himself on Saturday moments after critically injuring his estranged wife with a gunshot to the head, ending a bitter three-month divorce process, according to newspaper reports.
I wonder how much the prohibition on gun possession by those convicted of domestic violence might have encouraged Brame to end it all. Remember that the federal law on this doesn't have an exemption for cops, so a domestic violence conviction ends up a policeman's career.Brame's wife Crystal, who had accused him of pointing his gun at her, choking her on several occasions and threatening to kill her, was in "extremely critical condition" at Harborview Medical Center in Seattle, local media reported on Sunday.
22% of What Country's Population Would "Be Tempted to Carry a Gun" For Self-Defense?
If the law were changed to allow possession of registered handguns, would you be tempted to carry a gun for protection?
Yup. Britain. This survey is from the Observer, one of the British papers. Astonishingly, 68% support the use of deadly force to protect property, and 67% of the surveyed group wants the death penalty brought back. Not surprisingly, support for the death penalty is strongest among the older population (who can remember when Britain was a safe place), but even among those aged 25-34, the lowest support level, was still 55%.
Yes 22%
No 78%
Thanks to The Edge of England's Sword for the link.
Interesting the Different Points of View About The Sodomy Decision
Alan K. Henderson argues that the Supreme Court should uphold the Texas sodomy law, but uses an entirely different set of reasons than I do. More interesting is his claim that "Virtually no social conservatives clamor for criminalization of unmarried adult heterosexuals having sex." I don't know that this is true. I know that most social conservatives that I know would like such laws on the books, even if not enforced with any vigor, simply as an expression of social disapproval of extramarital sex.
I can't imagine any good reason for the police to be arresting any adult for consensual extramarital sex--even for homosexual sex. That doesn't mean, however, that the Supreme Court has an obligation to strike those laws down. There is also a case for keeping some things illegal, and it isn't "to send a message." It is to make sure that if there ever a dispute between two parties, that the law is clearly on the side of decency.
We knew a family when we lived in California. The mother had been molested as a child, but unlike her sister, who had been similar victimized by the same stepfather, and ended up a heroin addict and prostitute, this gal managed to hold a job, and otherwise seemed okay. The father was like many blue collar sorts where we lived; he wasn't well-educated; he wasn't smart; but he was a good and decent guy, doing his best to support his family in a place where $100,000 a year household incomes were typical, with predictable effects on families like this. Inevitably, the marriage collapsed. She decided that she wasn't happy, and rather than confront that her depression might have something to do with her molestation, she decided it was all his fault.
So, away he went. If I had to pick which was the more suitable parent to raise the kids, it would have been him--and my general preference is to trust the mother more. She wasn't evil, but she clearly had some significant problems. Within a few months of the father moving out, the little boy was trying to burn down the place that they lived--and it just got worse.
Almost every Saturday, Mom was out barhopping, bringing home a different one-night stand almost every time. The daughter was clearly disturbed by this, and the enormous amount of drinking that was going on. The daughter would show up at our house many Friday evenings, beg my daughter to sleep over--and then Saturday night. She would often not leave until 8:00 PM on Sunday night, and then, only because we became quite insistent about it. My wife compared this to "peeling the koala's claws away from the eucalyptus branch." We did our best to be a positive example and a weekend refuge, but it also became apparent that this liberated Mom to be even a bit more out of control.
Should Mom have been sitting in a jail cell? Of course not. But there are times that having a standard of appropriate behavior for an adult changes the equation in custody issues--and it should. There are also the occasional odd situations where someone's actions influence assessment of liablity--and having the law define, "This is not an acceptable behavior" is useful in those situations as well.
Where Do I Get This Notion Of Homosexual Behavior?
That's the question I'm getting from a few very upset readers.
Promiscuity Among Male Homosexuals
William H. Masters, Virginia E. Johnson, and Robert C. Kolodny, Human Sexuality, 4th ed., (New York, HarperCollins Publishers Inc.: 1992), page 404, included a table titled, "Sexual Partners Among Homosexuals." The results of the survey are fascinating, especially for those who think that homosexuals are "just like the rest of us." The survey group consisted of 574 white males, 111 black males, 227 white females, and 64 black females. They were asked how many homosexuals partners they had had during a lifetime. For the white males, 43% had 500 or more partners, and more than half had 250 or more partners; for the black males, 33% had 50 or more partners. Only 6% of the white males, and 11% of the black males, had less than 15 partners.
Another interesting question was "Proportion of partners who were strangers." For the white males, 79% identified "More than half" of their partners as strangers; 51% of the black males similarly identified more than half of their partners as strangers. A similar set of questions was asked about the number of partners "with whom sexual activity occurred only once." Again, the numbers are startling reminders of how anonymous and casual sex for homosexual men is: 70% of the white males, and 38% of the black males, indicated that more than half of their sexual partners were one time only. Only 1% of the white males and 4% of the black males reported that all sexual partners were more than once.
The number of partners with whom sexual activity "occurred only once" is really astonishing. Long-term, emotionally satisfying relationships? There may be male homosexuals for whom this true, but it would appear that they are very few and far between.
Now, this survey took place during the time when the AIDS epidemic got under way. Maybe things are dramatically different today (although I rather doubt it). But most male homosexuals back then were engaged in completely anonymous sex--and at levels that meant that AIDS spread rapidly.
Drug and Alcohol Abuse
Another source that I have relied upon is a study paid for by the San Francisco Department of Public Health: EMT Associates, Inc., Gay Men, Lesbians, and Their Alcohol and Other Drug Use: A Review of the Literature, (San Francisco, San Francisco Dept. of Public Health: 1991). On pages 1-17, that report discusses that it has long been known that homosexuals (male and female) abuse alcohol, cigarettes, and other recreational drugs at higher levels than the general population.
Child Molesters As An Active Part of the Gay Political Movement
Use dejanews.com to read through soc.motss (the homosexual social newsgroup) for the early 1990s, before they realized that non-homosexuals were reading it. Search for discussions of NAMBLA (the North American Man-Boy Love Association). You'll find little gems like this, that demonstrate that NAMBLA was an accepted part of the homosexual coalition:
The parade itself has a variety of political-related
contingents (the Act-Up contingent is huge), including
groups supporting people of color, PFLAG, Metropolitan
Community Church, Gay Officers Action League, Gay Teachers,
NAMBLA, etc., all who had to fight political battles (or
still are) to even exist. There is a moment of silence at
2:00pm to remember all of those who have died from AIDS
(a constant political issue on its own).
and
The SOC.MOTSS group (which, sad to say, I only marched w/for a block) was a
good group, if smaller compared to the groupies following every disco float
down 5th Avenue. I was soooooooo proud when I heard them chant, "We're here,
we're queer, we're nerds, get used to it." (and I haven't been called a
"nerd" since junior high; B.T.W. Tom L., you looked good! Mara, Greg P., et al:
Glad to finally meet all of you at the dinner). QUESTION: Why was
the NY Area Bi Network put right in between Lenora Fulani and NAMBLA? A sign
of the "ghettoization" some tri-state bi organizers were rumoredly worried
about, you think?
Here's another reminder that there are homosexuals who compare concern about child molestation to witch trials:People are outraged that NAMBLA meets in their library; people are
outraged that flag-burners can't be jailed; people are outraged at
a system that coddles criminals and runs country-club prisons. People
used to be outraged that communists controlled the media, that Spain
blew up our ship in Havana harbor, and that witches ruined the crops.
Another gem:Because I know that NAMBLA does'nt condone non-consensual relationships. I
have had some of the same misgivings as you about a "child's" ability to give
their consent, but I know that that ability is not determined by age, but by
maturity. Tony matured early because he had to take care of himself early.
I don't believe you can legislate maturity, every attempt so far has just
delayed the final moment when a person takes responsibility for themself
later and later into their lives, where it becomes more and more difficult.
This (IMHO) is one of the basic flaws in American society. We expect people
upon graduating from High School or College or upon a certain birthday to
suddenly take up all of the responsibilities we have been sheltering them
from, to all at once be "Mature", without giving them a chance to learn from
their own mistakes one at a time (hopefully where they can be handled),
instead of all at once.
I cannot ethically censure NAMBLA when I see so much more harm coming from
so many other areas. This is a personal decision based on my feeling that
people should be given responsibility for themselves and their bodies as
early as possible. As, with, almost all controversial issues this is a grey
area (but they're CHILDREN!), but I prefer allowing people to make their own
decisions to forcing my judgement upon them. Besides, the KKK, Aryan
Nations, White Aryan Resistance, Lyndon Laruche's Party, Committee for a
Freedom Free America, etc. each have an order of magnitude more members than
NAMBLA and I have no questions about opposing them.
Here's an excerpt about the Human Rights Campaign Fund (a gay rights group) and their support of NAMBLA:A few weeks back there was a brief thread here about HRCF and NGLTF. Someone
said he wouldn't give any money to HRCF because he didn't think they did
anything, I recall. There was some discussion about how HRCF works Capitol
Hill, mainly 'behind the scenes'. NGLTF is perhaps perceived as more visible
and activist - someone may have said 'opportunistic'. The two groups
definitely have different strategies. (For my own 2 cents, I'm not keen on
NGLTF's support of NAMBLA as a member of IGLA at this juncture in time). I
said I'd try to get more info.
I am thinking of putting a paper that I wrote some years ago up on the web. But the last time I exposed some of the information in it, I started getting death threats, obscene and harrassing phone calls to my wife and kids, and all the rest. I have written about some controversial topics over the years: gun control, affirmative action, slavery. I have occasionally received a phone call or an email disagreeing with me, or trying to persuade me otherwise, but generally polite. But write about homosexuality, exposing some of the unpleasant details that no one wants to talk about, and America's most out of control minority group will try to make your life hell.
