Abolish Billionaires?

There are about 2,200 billionaires in the world, about one-fourth of those are U.S. citizens.

Farhad Manjoo recently wrote an opinion piece in the New York Times that engendered more than 1,500 comments. Most simply, he argued, we should abolish billionaires through much higher taxes and related policies.

When it comes to billionaires, I’m of a mixed mind. On the one hand, given rising inequality, I’m surprised more people aren’t agitating against members of the three -comma club. Not just writing commentaries, but taking to the streets Occupy Wall Street style.

On the other hand, as the philosopher Peter Singer points out, some billionaires are giving away the bulk of their wealth to philanthropy. Bill Gates, in particular, plans to give away 99.6% of the cash money I paid him back in the day for successive versions of Microsoft Office.

Of course, as Manjoo points out, we have to analyze whether the billionaires’ charitable giving is having positive effects or not. Anand Giridharadas style. As Manjoo explains, Giridharadas argues that many billionaires approach philanthropy as a kind of branding exercise to maintain a system in which they get to keep their billions. Especially when they put their largess into politics.

“. . . whether it’s Howard Schultz or Michael Bloomberg or Sheldon Adelson, whether it’s for your team or the other — you should see the plan for what it is: an effort to gain some leverage over the political system, a scheme to short-circuit the revolution and blunt the advancing pitchforks.”

Gates might be an outlier, but his giving is so exemplary, I’m less inclined to order a pitchfork from that billionaire with the online superstore.

Most Americans Support Warren’s ‘Ultramillionare Tax’

The title of a FiveThirtyEight feature:

“Sixty-three percent of Americans believe ‘upper income people’ pay too little in taxes, according to a new survey from Morning Consult. The poll also found that 61 percent of Americans either “strongly” or “somewhat” favor 2020 Democratic presidential candidate Elizabeth Warren’s tax plan, which would levy a new tax on households with a net worth of $50 million or more.”

More generally:

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Fund those Roth IRAs friends, like the ocean surface, taxes are going to rise.

“Warren’s tax plan has been described as an “ultramillionare tax” that aims to make the rich pay taxes on accumulated wealth. It would place a 2 percent tax on households whose net worth exceeds $50 million and then an additional 1 percent (so 3 percent total) on those worth more than $1 billion. The plan has faced some criticism, including claims that it’s unconstitutional. Interestingly, however, the support for the plan appears to be somewhat bipartisan, according to the Morning Consult poll: 74 percent of Democrats and 50 percent of Republicans said they strongly or somewhat favor the proposal.”

However, as Paul Sullivan explains here, Warren’s proposal will be very difficult to implement. Just to be safe though, I’m going to do everything in my power to keep my net worth under $50m.

Semi-related. As those who know me even a little can attest, I’ve done a lot of stupid things in my 56 years, but I’ve never threatened the world’s richest person with legal action. That’s next-level stupid.

Sentence To Ponder

From The Guardian. The report is from Oxfam, a British-based charitable organization:

“The growing concentration of the world’s wealth has been highlighted by a report showing that the 26 richest billionaires own as many assets as the 3.8 billion people who make up the poorest half of the planet’s population.”

Oxfam says between 2017 and 2018 a billionaire was created every two days. And then there’s this. Just 1% of Jeff Bezos’s (pre-divorce) fortune is equivalent to the whole health budget for Ethiopia, a country of 105 million people.

Related.

How To Improve Your Finances

Preamble. In what follows I make assumptions that do not hold for many people. Among the most glaring is that my intended audience is gainfully employed and/or they have enough passive income each month to meet basic needs with some left over. Another assumption is that everyone can improve their finances. If I’m wrong about you, I bet you know someone, maybe a young adult child of yours for example, who could use some help building wealth. Consider forwarding this to them if you think it merits it. Thank you.

Official start. Ever wonder why don’t more moderate to high earner families have more long-term financial security to show for all their hard work? In part because financial analysts and advisors make things more complex than they have to so that people will hire them to manage their money.

As a result of needless complexity, and the associated pursuit of the perfect portfolio, people loose focus on what matters most when it comes to building wealth over time, that is, how much they make and spend month-to-month. If asked, how much do you spend on average each month, how precise would your answer be?

Not nearly as precise as it would be if you backward mapped your expenses. Backward mapping, in contrast to budgeting, entails spending regularly without much attention to detail, then totaling everything up after the fact, or more specifically, at the end of each month. Think of it as an x-ray of current spending.

My expense spreadsheet has 7 columns and 12 rows. The columns are for 1) our primary credit card; 2-3) secondary credit cards used less often; 4) cash/checks/wired payments; 5) one-time expenses divided by 12 which include property taxes, home/auto/umbrella insurance premiums, and professional tax preparation; and 6) medical and dental insurance premiums; and 7) a column where I write what the largest expense of the month was in order to see the most expensive outlays of the year in-a-glance. The 12 rows are for each month of the year.

How to build in one-time expenses like a car purchase or new roof? If I buy a $36k car and sell a $12k one, at the end of the year I’ll increase the average monthly total for that calendar year by $2k.* Or maybe I’ll increase it $1k for two consecutive years.

We’re super lucky that we don’t have to budget. With backward mapping though, which doesn’t require much time with credit card statements and most other financial records on-line, I can tell you within a couple percent what our annual burn rate or overhead is. That’s half the battle.

Then comes income. Probably the younger you are, the simpler it is to tabulate. In my advanced age, my income spreadsheet has several columns because in addition to my salary, my university contributes to my retirement fund each month, and then there’s monthly interest from cash and bond investments, and quarterly dividends from stock investments. The wider your income spreadsheet the better. I know, I know, I need a “side hustle” column. I feel younger just for having written that.

Same as with expenses, I keep a running total month-by-month. Here I can be even more accurate than with expenses, even to the dollar. As a result of these monthly calculations, in two weeks, it will take me about 15 minutes to solve for “C” knowing “A” is expenses and “B” is income. If my income exceeds my expenses, “C” will be a positive number. If my expenses exceed my income, like for the federal government, “C” will be negative. Whichever it is, I will carry the number forward and keep a running total from year-to-year.

Building wealth depends upon creating savings on a month-by-month basis much more than fretting about what the market is going to do tomorrow and trying to craft the world’s most perfect portfolio. By far the best way to increase your net worth by $1,200 a year is to make sure your income exceeds your expenses by $100 month-after-month. By far the best way to increase your net worth by $12,000 a year is to do everything in your power to make sure your income exceeds your expenses by $1,000 month-after-month. By far the best way to increase your net worth by $120,000 a year is to make sure your income exceeds your expenses by $10,000 month-after-month.

If that’s so obvious, why do people spend way more time studying stock market gyrations than figuring out how to limit their expenses and increase their income?

If you do well and end up with a surplus of $1,200, $12,000, or $120,000 at the end of the year, invest 50% of it in low cost bond index funds and 50% in low cost stock index funds (+/- 25% based upon your age and risk tolerance). And repeat.

Invest knowing that the most credible analysts in the financial sector seem to be in agreement that future returns will likely pale in comparison to historical ones. For example, here’s Vanguard on 2019 and beyond:

“U.S. fixed income returns are most likely to be in the 2.5%–4.5% range, driven by rising policy rates and higher yields across the maturity curve as policy normalizes. This results in a modestly higher outlook compared with last year’s outlook of 1.5%–3.5%—albeit still more muted than the historical precedent of 4.7%. Returns in global equity markets are likely to be about 4.5%–6.5% for U.S.-dollar-based investors. This remains significantly lower than the experience of previous decades and of the postcrisis years, when global equities have risen 12.6% a year since the trough of the market downturn.”

Subtract 2-2.5% for inflation and another percent for taxes and returns may be 1-3% above inflation. And that’s not factoring in people’s tendency to trade too much with the associated costs that brings. Good luck depending upon your investment smarts to grow wealth.

Building wealth depends upon maximizing income and minimizing expenses a little or a lot. Of course, that depends upon more than using my suggested spreadsheets. Most likely, among other things, it depends upon the degree to which you grew up with role models who lived below their means; how specialized your knowledge and skills are; whether you live in a modest neighborhood; and ultimately, your capacity to delay purchases.

Lastly, one thing your financial planner won’t tell you. Personal wealth won’t amount to much if we don’t revive the Common Good. For us to flourish we need a federal government that can pass budgets without threatening to shut down. We need political leadership that young people can aspire to. We need labor unions to protect workers’ interests. We need health care that doesn’t penalize people of limited means or those with preexisting conditions. We need to partner with other countries to reduce greenhouse gases and global poverty.

Absent commitment to those things, wealth will elude us.

*get a load of this story

Maybe I’m Wrong

These days, when it comes to narcissism in the (dis)United States, maybe resistance is futile. Maybe I should go full-Trump and embrace myself even more fully.

And start a gofundme campaign. I have many legit needs that are definitely profound and kinda social if we’re being honest. For example, I’m running a little low on Christmas lights. Even more critical though, the Good Wife and I need to burnish our environmental credentials. Among our leafy friends, the Honda Pilot is a bad look.

So please help us buy a Rivian R1S SUV when it comes to market in late 2020. Read all about it here. Because I am not greedy, I am setting the target at the base MSRP price of $72,500. If your largess exceeds that, I will purchase roof racks, insurance, and electricity.

What do you get in return? The peace of mind that comes with knowing you have helped meet an unmet need of the fastest highest order. Thank you in advance.

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Go Fund Yourself

Narcissism takes many forms, some relatively subtle.

Like taking a perfectly good idea—direct person to person charitable giving—and ruining it.

Consider some scenarios:

  • Someone dies suddenly and the remaining partner is overwhelmed at the thought of providing for the children. He/she seeks funding for anticipated expenses including college tuition.
  • A non-profit seeks funding to buy tents for local, houseless men and women.
  • A land conservancy group seeks funding to buy and preserve even more environmentally fragile acreage.
  • A young man, from a family of limited means, seeks funding to study abroad.
  • A woman seeks funding to leave her job in order to be a professional triathlete.
  • A young woman is getting married abroad, but accidentally books the wrong tickets for two of her best friends. Now she “needs $1,200 to fix this mistake and encourages people to “Help spread the word!”

The first three, too legit to quit. The last three, distinctly illegit, well past time to quit.

For those still not clear on the difference between profound social needs and individual wants, here are eighteen more, cringeworthy, gofundme campaigns.

 

 

What Does Downtown Olympia’s Future Hold?

This could make a compelling documentary film.

Saturday night I attended an interesting five-person panel discussion at downtown Olympia’s hippy theater, a 94 year old building that shows independent movies, about the importance of cultural spaces in our fair city. The panelists were artists who spoke eloquently on the importance of the arts. One lived downtown and most worked there.

As an academic, it was glorious listening to one person after another actually honor their five minute time frame. Collectively, they stimulated my thinking not just about the arts, but about economic inequality, downtown development, and the future of these (dis)United States.

Here’s the conundrum. Olympia has long had a vibrant arts scene encompassing live music, allegedly more theatre seats per capita than any other 40,000 person city, murals galore, a vibrant farmers’ market, and well attended public art events. Many downtown buildings are historic, which the panelists all described as wonderfully unique and relatively affordable for artists to live and/or work in. The unique, historic, funky buildings they argued, are the very essence of downtown.

But lots of other more politically and socially conservative people in the surrounding burbs would describe the exact same buildings as run-down, gritty, and in need of serious investment. Some think downtown is too far gone, even unsafe, and avoid it altogether.

It was refreshing that downtown’s growing homeless population wasn’t mentioned once since it tends to dominate any discussion of downtown, but it’s one of the most common reasons some have soured on it. The focus was on low-income artists and others, but at some point obviously, the discussion has to expand to include the fate of the no-income walking wounded.

Meanwhile, in keeping with free-market capitalism, deep pocket developers eye downtown as a place to make money by flipping ancient, crumbling buildings that are too expensive to maintain. In some cases, by knocking them down and starting over, which of course enrages the art community and others of modest means. Shiny modern buildings mean higher rents, meaning low-income artists are priced out.

There are no easy answers on how best to move forward. The only thing I know for sure, the more voices that are heard before buildings are razed and rebuilt, the better. Make no mistake though, those voices will be wildly divergent.

I’m conflicted. Take the hippy, Capital Theater, as a point of reference. When a panelist “preached to the choir” by saying, “I’d much rather attend a movie at this theater than a neighboring multiplex,” the crowd applauded lustily. But all I could think was “I’d much rather attend a movie at the Grand Cinema in Tacoma, than at the Capital Theater.” Why? Because at the Grand Cinema (prices $8 matinee, $10.50 general; versus $8 and $9) I’m unlikely to tear my jeans on the springs in the seats as a Swedish friend of ours once did. And damn they’re uncomfortable.

Admittedly, I have a different sense of aesthetics than the typical Capital Theater member who is much younger than me and may live in a dorm with three other people at Evergreen State College. I appreciate historic, artistic, funky elements in buildings and downtowns, but I also like sitting in comfortable seats and not having to hope my timing is right for the one toilet.

Furthermore, new buildings, like new cars these days, are far safer. The future will bring tidal flooding and a major earthquake to downtown Olympia. Also, new buildings, like new home appliances these days, are also far more energy efficient. When well built, they also require far less maintenance, but even those cost savings aren’t enough to offset the land and building costs, which developers of course pass on to renters and/or customers.

There has to be a middle ground, I’m just not sure what it is. I do not think adding taxes to existing building regulations is politically viable, but could there be economic incentives for retrofitting and markedly improving old buildings instead of knocking them down? And what about a 1% add-on to require new building projects to include public art?

Ultimately, I suppose, the fate of downtown Olympia, and others, will come down to who is most successful in persuading the City Council to adopt modern building policies that somehow incorporate genuine respect for the city’s past. Even that though, won’t adequately address the concerns of downtown’s low-income residents.