Investor Political Priorities - A Survey

Here we are, in the midst of a presidential campaign, trying to select a new leader for what is still the most economically powerful nation on Earth. The candidates are kissing all the babies they can get their palms on and smiling until their cheek muscles ache; but will they be able to produce any of the changes they talk about? Do we really want them to?

90% of all Americans are investors and, as such, there are issues that we need to hear about from the man who would be king. None of our could-be leaders are addressing the issues that would allow us to achieve our financial goals. What we all want is to keep more of what we make, and then to spend it as we see fit. It's not clear how the candidates intend to help us. Is investor enemy number one a tax, a budding foreign economy, a scarce commodity, the powerful institutions, lobbyists, index funds, or the politicians themselves?

While the campaigns focus on social issues, they purposely ignore the economic realities of their proposals. Politics and Economics are like oil and water; they don't mix well, but both are necessities. The very rich, and the corporations that spawn them, are the biggest contributors to the foundations that fund social change. Increasing their costs and raising their tax liabilities is not going to increase the numbers of jobs they provide or the number of dollars they contribute. Investor enemy number one is an ideology, a class distinction between the super-rich and the not-so-comfortable-yet. You don't help the middle class by stealing from the creative and successful. You do so by increasing their "keep".

Here's a list of candidates for the investor priority number one title. What do you think, and/or what would you add? Please help me prepare a ranking that I can publish before the November elections.

(1) Social Security Reform. If I were to place $2,000 per year in an investment vehicle with a guaranteed interest rate of just 3% per year, I would: accumulate enough money to generate significantly more monthly income than that provided by Social Security, develop significant cash values for my heirs, and have more spending money to pump up the economy. Nothing need be risked in the stock market. My boss would be able to hire additional workers, reduce prices, and increase dividends to shareholders (you). We can keep him from buying a yacht. Thousands of new jobs would be created in an old industry and in supporting areas.

(2) Corporate Income Tax Reform. Eliminating the Corporate Income Tax without enriching obscenely compensated executives could redistribute enormous amounts of spendable income to all employees, increase the likelihood of job growth in all businesses, reduce the costs of goods and services and, possibly, their prices, and improve payouts to shareholders. It would also reduce the amount of money spent frivolously for tax reasons alone. We can regulate the transition to make it produce these changes, and possibly to reduce the need for offshore outsourcing.

(3) Control Obscene Executive Compensation. This is nothing short of grand theft shareholder, and a basic source of the disrespect so richly deserved by many of today's corporations. Here's a great opportunity for jobs in a new regulatory agency and for public relations consultants. Arbitrary compensation limits would be set for all public companies, and cash only compensation would be allowed... no stock options, unqualified pension benefits, deferred compensation, vacation homes, golden parachutes, etc. Above a certain level, 75% of the excess compensation in any form would be donated in cash to the executives' favorite charities (directly from his or her paycheck) but the donation would not be deductible from any other taxes.

(4) Health Care Reform. Corporations provide health care benefits because it helps them attract and retain employees. The same is true of the 401(k) savings plans and other self-directed gambling devices that have taken the place of defined benefit pension plans. These benefits cut into cash salaries, profits, dividends, and jobs provided, but are thought to be worth the costs in improved morale and retention. Mandating additional or involuntary benefits for employees will either cut something or raise prices. Related issues that must be addressed if health care and/or insurance costs are ever to be brought under control: insurance fraud and tort reform. Known pre-existing conditions are not insurable risks that all insureds should pay for; they are a social welfare concern that must be dealt with by government agencies.

(6) Tort Reform. Lawsuit awards in all areas must be limited to amounts that are reasonable, and people must be held accountable for their own stupidity, irresponsibility, and clumsiness. Potential suits should be reviewed and possibly arbitrated by non-lawyers before going forward. If you spill hot coffee on your lap, be more careful next time. All costs, whether they are insurance settlements or legal fees, find their way into the prices we pay. It's just this simple, the deep pockets are always our own.

(7) Personal Income Tax Reform. Is it enough to say that we tax pension and other retirement income, including the sacred pittance from Social Security. The income tax needs to be revised, reformed, or replaced by something. Eliminating the tax on all forms of retirement and investment income, including capital gains, rents, royalties, etc. would have incredible positive effects (and would guarantee a Pennsylvania Avenue address for eight years). The next administration could earn another eight years by combining the various Flat and Fair Tax proposals. That could double total tax revenues, reduce price levels, create/save thousands of jobs, and expand the economy.

(8) Regulate The Regulators. Every scandal produces new levels of regulations and additional cadres of secret police who raise business costs in the name of compliance with da law. Countless hours of non-productive time are mandated by broad-brush policies and procedural requirements that do little to protect the consumer--- in many cases they simply annoy the people they are supposed to assist. Financial services firms, for example, employ thousands of people to protect the firm from the examiners, not to protect the client from unscrupulous employees. I've heard similar stories of the abuse of power that seems to be SOP in most regulatory agencies.

(9) Change Exchange Traded Index Funds. Index ETFs have replaced plain vanilla mutual funds as the most popular form of speculation in the financial world today--- even more popular than sub-prime mortgage paper was just a few months ago, and with the same risks. These are glorified gambling mechanisms whose price movements have little to do with the economics (or economies) of the companies inside. Stock prices are pushed up by demand for the indices, not by their fundamentals.

(10) Restore the Up-Tick Rule. The up-tick rule that applied to short selling since 1929 was eliminated in July of 2007; the markets have been feeling the impact ever since. Theoretically, if not actually, unscrupulous persons could bring target companies to their financial knees for their own purposes. In the wake of the sub-prime mess, for example, it became difficult for some companies involved to raise capital efficiently because of shorting tactics employed by hedge fund operators.

This is my short list for the presidential candidates. Where they stand on these issues will certainly influence our economic future. Which of these is most important? I think that either Social Security Reform or the elimination of all taxes on retirement and investment income would have the biggest and most lasting impact. What do you think? Really, let me know what you think.

Steve Selengut
Sanco Services
Value Stock Index
Author: "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read" and "A Millionaire's Secret Investment Strategy".

Setting Proper Priorities For Humanitarian Aid

Lets say somebody forced you to give 500 dollars away but gave you the option to choose who to give it to. Lets say they also gave you the option of giving same amount in the form of a gift or labor. Would you give it to your loved ones and/or friends, or would you give it to total strangers? It might seem like a no-brainer since you can help your family out with something they need, brighten the day of somebody you know, see tangible results and improvements right away, and even get a bit of that money back through improved relations and reciprocity. The benefit of improving a stranger's life, pales in comparison from the perspective of self interest.

We all know how people shriek when other people force them to give away their resources through the muscleman of the government. We are familiar how many Americans would rather give the same resources to somebody close to them (themselves or their families) than other fellow citizens. This is not an article about that. Neither is it about the philosophical debate on possibility of unselfish action. All human action is done to expand influence within the world in a variety of creative ways. Even something like suicide, that seems blatantly against the person's self interest, expands that person's influence after death since it is such a powerful act.

This article is about proper prioritizing of private humanitarian aid. This type of aid is considered non-coerced and voluntary giving of personal resources to others. Many individuals around the world, particularly Westerners, seem to have their prioritizes of this type of resource giving mixed up.

Let's start with describing 3 of these primarily Western humanitarians (although non-Westerners have been making inroads recently when it comes to giving):

1) Religious people - In United States in particular, they are a large number since poorer education in large swaths of the country allows such demographic to be numerous. They point to how much Americans contribute to private charity compared to other countries. They are these Americans. They say since Americans are so generous on average, compared to Europeans, government shouldn't get involved in humanitarian aid. A point is made that people who already give a lot would give more if it wasn't redistributed under the barrel of the gun and if citizens could personally decide on the target of the aid. They say that they don't want government to take fruits of their labor and spend it on practices that their internalized moral dogma prohibits. This point is as valid (and powerless) as a Green party member not wanting his tax dollars going to the military. The religious humanitarians don't see that funding for contraception and abortion for poorer American citizens produces Christian results. Government funding, that they are against, reduces poverty, disease, death, suffering, crime, and "ungodly" behavior that economically disadvantaged are more at risk for such as earlier teen sex.

Christians, if they are predisposed to giving, would rather give the money to their local church or religiously based humanitarian organization. These in turn can spend it on local or third world missionary work that uses food and medicine as an incentive to show up to church. Third world is often more of a focus for large churches than local humanitarian work since they can convert more desperate people abroad. A lot of the money does find its way to feed, clothe, and provide medicine when it's not used on stamping out fairy tale literature and mega church expansion. Let's leave alone for now the perpetuating cycle of poverty and misery that just feeding and clothing the poor creates.

2) Secular middle class humanitarians - These are a lot more numerous in Europe but are also prevalent in all Western urban areas. These people acquired just enough education about the international situation to be able to adequately compare their middle class lifestyles to the rest of the world. Many of these people have sufficient neural emotionality to feel above average levels of empathy for others. They get involved in raising awareness about the suffering but are less inclined to give actual money since that money does not strengthen the power of the church internationally as is the case with the religious people. Their contribution in food and medicine, does not come with additional benefits of imposing a moral worldview on the third world poor, and as such, has less influence. Secular humanists are strategically more predisposed to lobbying government to increase its aid through tax revenue although many undoubtedly give personally as well. The "bleeding hearts" as the rural religious like to call them, often have to pick and choose their humanitarian aid considering the amount of suffering in the world. They don't have a church to do the thinking for them so fads are created in terms which society to give to. Many also like to get involved in actually traveling to the third world and helping the needy themselves. That has the benefit of showing the target of resources spent. It also provides more self growth through an exciting well rounded foreign trip that is lacking with study abroad to safer societies.

3) Oligarchic philanthropists - We know about how charity can help with tax write offs and company image, but many philanthropists are genuinely helping third world peoples with tangible large scale schemes. They are the ones who start the organizations that the urban activists get involved in. Although the reasons, for starting the organizations, are often fad based or economically self serving to better public image, the end result is that billions of dollars flow to other countries.

All these humanitarians have their priorities seriously mixed up. It's not even the fact that they are just increasing poverty and corresponding suffering from generation to generation by disproportionate expenditure on food and medicine. 99% of the money does not go to actual utilitarian reduction of long term suffering such as hiring expensive Western teachers, bringing condoms, textbooks, and sterilization procedures.

The true outrage is that these people's only publicly stated humanitarian focus, is not their own families, communities, and countrymen. A middle class woman who writes a 200 dollar check to be spent on some tsunami relief does not use that money to buy a nice present for her mother, father, uncle, sister, brother, husband, and child. Sure, she might be wealthy enough to give all of them even nicer gifts but the fact remains that she could give to people actually close to her even more if she didn't write that check. Some things, are zero sum games, and a personal income is one of those things. Are all American families so smoothly functioning and so happy together that even a dollar can be spent to be sent abroad? Over 50% divorce rates seem to indicate the opposite. Does giving $3000 worth of personal labor to work for some humanitarian organization bring more joy than spending $3000 worth of personal labor to help out one's own flesh and blood? If it truly does, then logically, the foreign strangers are the real family who should be lived with.

One might argue that a person is single and hates his or her distant relatives. In that case, is there no suffering in one's own community? Why travel to a distant land when many American children can use a boost in contraceptive education or funds to get to college? Surely one's neighborhood and community can be well off and its members roughly co-equal. Then why not give to a domestic humanitarian organization that will bring needed resources to fellow tax payers, fellow language speakers, fellow contributors in one's country's competition with other states abroad? The suffering in the richest countries is of course materially different than suffering in the poorest but that doesn't mean vast differences in contentness levels.

A poor rural American, in Appalachia or New Orleans, might be 20 times better off materially than a rural man in a poor African province, but it doesn't mean the African is 20 times as psychologically distressed. Individual psychology is remarkably adaptive. Studies in psychology have shown that peoples' physiologies and their conscious appraisals of how content they are, are remarkably stable. A man who wins a lottery and a man who losses a leg return to roughly the same level of self reported contentness level after a few years. A man born in Africa , raised illiterate, and who did hard labor to survive can be just as psychologically content as a person who was born into poverty in New Orleans, worked hard to survive for many years, and then lost his wife in a divorce. An illiterate person who never left his region also does not have the self consciousness to really assess the hole he is in compared to those in wealthier countries to be too distressed about it. Yes there are actual famines, wars, and disease in Africa. However, unless 99% of aid is contraceptive and educational, the situation is just worsened since only that type of aid can decrease fertility rates and improve economic methods.

When millions of Americans are uninsured, borderline illiterate, have access to inadequate nutrition, are poor, and burdened with excessive birthrates, the sheer outflow of money to the third world is borderline treasonous. Richest countries becoming socially and economically destabilized can have drastic effects on the poorer societies. Large developing nations, like China, Brazil, India, and Russia, understand this and know that there are plenty of their own citizens who need aid even though many Africans and Central Americans are dirt poor as well.

There is a slogan that is very appropriate. "Think globally. Act locally." Lets start adhering to that. If one has to give, it is better to give to family and loved ones and then his countrymen. World government does not yet exist and as the economic crisis has shown there is plenty of rot within our own society that has to be addressed. Private outflow of money abroad for charity purposes has to be banned. Too much has left the country instead of being invested into infrastructure, economy, and country's citizens. Only national governments should be in control of giving proper developmental aid to other societies. The government should encourage humanitarian aid organizations to provide domestically and can create a list of targets for them. Maybe Bill Gates should be appointed as the economic developmental officer of Appalachian schools rather than be allowed to waste his wealth on bettering foreigners. Maybe the international community should finally pressure the Vatican on the condom policy so millions don't die from AIDS and don't leave many children to suffer as well. If it takes Iran level marginalizing and alienating of the Vatican, as well as refusal to meet with Vatican's leadership, so be it.

That's not to say that aid to other societies should stop completely but it should go through national leadership. Government has the power to attach proper strings to make sure fertility of third world poor is decreased and proper investments into schooling provided. Sometimes aiding poorer societies can help prevent destabilization on the richer country's borders. Treason is a very crude word and often misused. But when a grown man, who believes in ghosts, ignores the poor in his own neighborhood and gives money to help foreign poor through some third world church, treason is the only word that springs to mind. When an educated urban woman spends energy and her money to help foreigners and not her own family or fellow citizens, treason is the only word that springs to mind. Such sensibilities obviously have intention of betterment and help, but the priorities are disastrously misplaced.