Jane White's book America, Welcome To The Poorhouse is an angry rant that you just may agree with incessantly.
Author Bio: Jane White is Founder & President of Retirement Solutions, LLC, which promotes 401(k) reform and provides investment education.
Publisher: FT Press. A compact 247-pages in hardcover.
Summary: America, Welcome To The Poorhouse is one angry, no-nonsense book! Jane White blames more politicians than I can name for causing the mess we're all in. She plays no favorites and thinks both parties are corrupt. Phil Gram (R-TX) deregulating the banking industry is the genesis of this crisis, while Chris Dodd (D-CT) is blamed for carrying bank deregulation further by deregulating exotic financial instruments.
Review: America, Welcome To The Poorhouse
Jane even questions whether Bernanke knows anything about economics. One of my favorite assertion of her's is that big business owns both parties, and politicians are just playing puppets to their lobbyists.
In a great irony, Jane writes that Congress has a higher standard of living than the taxpayers who subsidize it. So true as the average salary for a House and Senate member is $174,000 a year, or 4X the US median wage. Meanwhile, as of 2006, 290 members of Congress were receiving an average pension of $61,000 a year! As a result, those jaded politicians stay in politics for way too long and take way too much of our money.
The solution for everything seems to come from putting lobbyists out of business by introducing campaign reform. Furthermore, we should refuse to contribute to Congress and instead, fund a citizen's revolt! Jane concludes by saying America needs to prepare for an “Economics Olympics” with higher education as the key to winning gold.
I found myself agreeing with much of what Jane says in America, Welcome To The Poorhouse. She writes with acerbic reality that just stuns the reader. It doesn't matter whether there's a Democrat or a Republican in the White House, money will eventually control their decision making. Since it's inevitable we will have self-serving, corrupt politicians, we need to do our best to educate ourselves on the economic realities of various policies.
A Taste Of What's Inside America, Welcome To The Poorhouse
Chapter 1: Why You Can't Retire From A 401(k) Plan: You Won't Have 10X Your Salary In Your Account At Age 65
* Australians have it good and we don't. The typical 30-34 Australian will have assets of around U$540,000 when they are ready to retire vs. $43,000 for the typical American. The reason for the difference is Australia's superannuation system where employers are required to contribute 9% of an employees salary up to $135,000 to his/her retirement fund.
Chapter 2: How To Save Wisely Until We Get 401(k) Reform
* One of my favorite parts of the book. Jane asks why there is a silly $16,500 cap on 401(k) contribution. I've written before that nobody is going to get rich and retire off $16,500/yr contribution for their careers. The Australians can contribute $150,000 a year for $450,000 total in three years after the age of 60. We have a preposterous $20,000 contribution cap over 60. What a joke! We need reform.
Chapter 9: How Credit Card Debt, Home Equity Loans Get You Over Your Head In Debt
* ARMS & 0% credit card balance transfers are bait and switch tools according to Jane, so stay away.
Further Reading
- Moving To Canada Is Out Of The Question
- Investment And Economic Outlook Post President Obama
- The State Of The Union Address 2015 Cheat Sheet
- When Will The Government Shutdown And Furlough End?
- Implications Of A US Government Shutdown
Share your thoughts on whether you think America really is in “the poorhouse”. In your comment, please share with us whether you think this downturn will permanently change consumption behaviors for the better, or whether we'll regress back to our levered spending ways.
To buy directly from Amazon click here:
Keigu,
Financial Samurai – “Slicing Through Money's Mysteries”
@Bob
Looks like the economy is raging back though Bob! 2009 is a bonus bonanza, and the job market looks to be tightening. I’m optimistic!
@Kevin@OutOfYourRut
I love how the government forgives tax on $38 billion in any profits for citigroup to save them billions. Coincidence gov’t owns 34% of the company? Nope. Everybody is in it together.
@Financial Samurai
FS–I think the rich/successful DO win. The moral of the subprime story is that using the legal and political systems to reorder reality won’t necessary produce a happy ending.
Kevin
.-= Kevin@OutOfYourRut´s last blog ..Ten Great Tips to Advance Your Career =-.
America is the poorhouse. We are in times like the Great Depression. The Great Depression caused the pre-boomer generation to be frugal. We are repeating history!
.-= Bob´s last blog ..Credit Card Rebates =-.
@ctreit
comment on #3.
I think it’s safe to say our government was already involved with health care quite a bit. Medicaid, Medicare and pricing. Also with rules and regulations to control health care companies, and not allowing national competition. To say our government will do a better job than the private sector is just plain hogwash. What’s the purpose to have government run health care? To increase quality of care, save costs
There already is rationing with private run health care and it will be no different with government run health care. Nothing is unlimited, costs will have to be controlled.
While for simple things (ie regular check ups) a government run plan might help save costs. The issue is the costly procedures and when you are near end of life is where you have dramatic costs. This is what’s bankrupting Medicare. How is our government going to save us money then?
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@Kevin@OutOfYourRut
It seems like the bottom line is that successful capitalists CAN’T win b/c being rich/successful puts you in a minority. “A protruding nail gets hammered down” is what the Chinese say.
@ctreit
The #1 thing I think is for us NOT to rely on big government or the private sector to take care of ourselves. We need to take care of ourselves. We can’t count on anybody else but our selves, and that’s why education is key.
@Kevin@OutOfYourRut
It’s good to hear from someone that was in the industry speak about the matter. To often, all we have to go on, is the sensationalism created by the media. And they tend to favor non-business party or underdogs, even when the business in question is in the right.
I’m sorry to say that, but I think a lot of business matters are “Catch 22” anymore.
.-= Don@MoneyReasons´s last blog ..Creating My Kid’s Christmas Money Fund =-.
1) There is no question that big business has politicians in their pockets. The insurance and pharma lobby for one is behind stalling health care reform. Being a lobbyist is one of the best jobs in the US. They make a ton more money than four times the national average, which is really not that much money for a politician when you consider politicians’ lifestyles (maintaining two homes, etc.) and the money they control – a budget of a few trillion.
2) How much does Bernanke know about economics? Probably more than Jane White does, or anyone of us does, which may still not be enough. After all, economics is a very fluid and imprecise science since it deals with human decision making.
3) We don’t like government involvement in anything, but it looks like the private sector has not worked out for us in many areas. Two examples. Health care: our health care expenses per capita are about twice as high as they are in other advanced countries, but key numbers like infant mortality and life expectancy are lower than the average of these countries. As a country, we get less from the private sector, but we get to pay almost twice as much for it. Retirement: Jane White’s purpose is reforming retirement programs. The private sector certainly has not served the public very well. – I think we should not be so scared of having the government involved in certain areas in which the private sector has obviously not done such a great job. The government’s involvement in other advanced countries seems to work pretty well. Maybe we should copy some of their programs…
@Jane White Wow, it’s Jane White herself!
I’m pretty impressed with what the UK legislature is doing right now wrt taxing bonuses over 25K pounds by 50%. Ouch.
I really hope we find a plausible way to fix the retirement crisis. What you write about regarding social security, 401k’s etc is quite true and quite scary.
Congrats on writing such a poignant book. Thanks for stopping by!
Best, Sam-urai
Thanks Financial Samurai for the wonderful review–and the intelligent comments! Please buy my book and give your Congressperson hell. I just got back from D.C. and met with a Congressional staffer who seemed indifferent to the financial/retirement crisis. I truly believe that the reason why France and the U.K. have already adopted financial services reform is because their politicians aren’t on the take. We’ve got to take America back.
@Moneyreasons
Your comment, “I think if Banks didn’t lend money to subprime, lawsuits would have ensued. ” is right on the money.
I was in the mortgage business in the 90s when subprime was snaking it’s way thru the mortgage world, and it was being driven by activists threatening lawsuits. The banks responded with good old fashioned risk based pricing, then called subprime because it was more expensive.
Then in the late 90s, early 2000s, the same activists threatened and brought lawsuits for discriminatory pricing, and state governments responded by passing fair lending laws that restricted the price and terms of subprime. Shortly after, we had the subprime mess. Now there is no more subprime.
.-= Kevin@OutOfYourRut´s last blog ..Fast Track to Frequent Flyer Miles =-.
@Financial Samurai
Not disagreeing on equality, but seems like people are confusing it as a right (unconditional) versus a privilege (conditional).
@Moneyreasons
To clarify, I don’t place blame solely on banks. I share your collective “sipping the corporate punch” mindset. My point was to highlight their influence on politicians in relationship to the book. On point #2… sub-prime is only a portion of the whole picture. The over-extending occurred across all levels of income. The sub-primes were just first the “party”. Since we hang in a teeter-totter balance, we still could see another wave of “prime” borrowers default (depending on what sources you read). You do address this with the “strategic defaulters”, but think sub-prime catch too much heat.
@Kevin@OutOfYourRut
Beyond retirement, another consideration people neglect is “end of life” costs. It appears people estimate retirement as a constant. Without being morbid, it can generally be said people experience a stage of decline near the end of their lives. This deterioration can happen quickly and drastically, resulting in a significant impact on finances. But no one seems to account for this! Think ancient village rituals (Eskimo elders on ice blocks) or The Giver (childish reference, but good book none the less).
I agree that people should be allowed to contribute more to 401k, really as much they can afford. I’m still shocked at the amount of people who don’t contribute anything to 401k. I just bumped mine up this month, the 2nd time this year. And that’s an interesting stat on Australian co’s. 9% match would be SWEET! jealous.
Sounds like a pretty interesting book. While I agree that both sides had a hand in wrecking our economy, I tend to disagree it’s because all politicians are self-indulgent bastards. While they sure as hell behave that way, I place the blame more on the political system itself. This isn’t to say there aren’t piles of corrupt politicians, but I do think some are trying to help.
I don’t think the US is in the poorhouse, sure we are in a horrible economic situation and raising the debt. But the debt is nowhere near out of control even if it rose further. If politics doesn’t bog down the country, we can get out of the mess in a, hopefully, short time.
As for consumption patters, the only way we (both individuals and businesses) wont regress to the old behavior is through either great self discipline (or management in the case of business) or through government regulation to stop the possibility of it from even happening (particularly in the case of heavy leveraged businesses).
@Financial Samurai
The current administration is too new. IMHO, the problems started a while ago, and slowly grew into this mess. It’s more than the previous administration. It’s kind of like in Chemistry class and mix the wrong chemical (political policies, greed and carelessness), then bang…, you get a explosive reaction. Kind of like a perfect storm case.
It’s complex that’s for sure! Definitely not a black and white issue, there are no real bad guys (except for some small mortgage lenders that were too greedy). I sure that none of the groups that I mentioned above tried to pull us down into a “Great Depression 2” like economy though (well except for those “naked short sellers” heh heh). Just kidding any “naked short seller” out there…
I do think it was stupid of Christopher Cox and his group to do away with the “Uptick rule”… the rule that was created to help prevent another “Great Depression”. Seems kind of ironic that a few months after they do away with that rule, bang… our market falls apart. When I heard that they were going that I thought to myself “WHY? That’s a huge mistake”. I still don’t know why they haven’t brought it back yet. They keep saying the will, but don’t (I think Barney Frank was the last to state that they were going to try to bring it back…). I think if they did, the DOW would again another 1000 or so points. While the “Uptick Rule” wasn’t perfect, it’s better than nothing.
Both sides (include us and the banks) contributed to this debacle though. I’m sure neither side envisioned this result.
Well, hopefully we’re past the worst part now (the current idea being that Recession is over). And the president seems very focused on job creation, another big positive! Although I am worried a bit about the deficit…
I’ve rambled enough… Thanks for a such and interesting post! I’m sure the book is an thought provoking read…
.-= Moneyreasons´s last blog ..Christmas Ebay Auction Mistakes =-.
@Moneyreasons
Spot on!
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@James You’re too kind James. If only we can emulate your site’s success. Can you send David back though? I think he might be still mad at us. :)
.-= admin´s last blog ..Tuition Hike For The Poor Is Like A Tax Hike For The Rich =-.
Don’t get what you’re saying. You are arguing that the gov’t should reduce capital gains tax, instead of allowing wealthier people to contribute more to their 401K?
What makes you think only wealthier people want to contribute more to their 401K? Presumptuous isn’t it? What makes you think a middle class earner, making $120,000 in household income and has minor expenses doesn’t also want to contribute $30,000-$50,000 to their 401k/annum?
I don’t think only those making more than $250k in annual house hold income want to contribute more. We should all have the flexibility to contribute more!
.-= The Genius´s last blog ..Boyer ’94 recognized as Virginia Business Person of the Year =-.
@Moneyreasons “Strategic defaults”, GREAT term! I gotta learn me some of that!
You bring a good point up regarding “if banks didn’t lend money to subprime, lawasuits would have ensued”. You know what that’s all about right? It’s about EQUALITY! And you know which party fights the hardest for the poor who are likely subprime borrowers? That’s right, the current administration.
Hence, are you blaming the current administation for all this mess more than the other administration?
.-= admin´s last blog ..Tuition Hike For The Poor Is Like A Tax Hike For The Rich =-.
Is Financial samurai becoming one of the best personal finance blogs on the web or what?
Nice summary.
Best,
James
.-= James ´s last blog ..Target-Date Funds =-.
Everybody makes it sounds like it’s those big bad bankers that caused all of this mess. But that’s not true.
Here is what causes “The Great Recession” and IMO the order of blame:
1.) The Government – (they were spewing a “house for everybody” poison…)
2.) The Media – (they present stories about how this buyer was turned down, and put a spin that’s not the real story. Just what they want the story to sounds like… no scruples at all. we should stop calling them “the news” and start calling them “The Fictional News”)
2.) The homebuyer – (We didn’t do our homework. We got in over our heads! The houses subprimers were bying was way to big of an expense to just blindly go forward. Part of the blame here also lies with the media though too. Seems like they were pushing us into unwise decisions. Let us also not forget the “strategic defaulters” out there, they are the ones that really can afford to make their house payments, but choose to default. We should all thank them for going there part to get out of this housing slump :|
3.) The Banks – (they started to believe that they could get rich off of the government changes. The started to think they were at a roulette wheel. They had a golden ticket, and started using it. Not to mention the derivatives)…
I think if Banks didn’t lend money to subprime, lawsuits would have ensued. Unfortunately, banks started to believed the poison they were drinking was good for them (and better than getting lawsuits), eventually coming to a drunken stupor-like state and let everything fly. I still can’t believe they didn’t require any proof of income for lending loans… That was pretty dumb of them… Lawsuits or no…
I’ll have to check out this book, sound like I’ll probably agree with her.
.-= Moneyreasons´s last blog ..Christmas Ebay Auction Mistakes =-.
@The Genius
Do revolutions start with such tiny minorities? You’ve taken a special poll and found that IQ correlates to desire for a higher 401(k) deduction?
To get back on track – for very high earners, the cap gain rate is a larger benefit than unlimited 401(k) deductions. The topic of a post I’ve been working on for a while now.
.-= JoeTaxpayer´s last blog ..Mind Mapping =-.
@Financial Samurai
Recently started reading this blog and hooked. FS – great job on content and focusing discussion.
Jane (author) correctly assesses that it is not the politicians themselves, they are simply conduits for corruption. You can turn this into a simple playground example. Let’s say the politicians are the bullies.
Big business and lobbyists are the real puppeteers in the game. They’re the teachers. Not simply turning a blind eye, they actually encourage the bullies.
We, the collective majority, are the sad kids who come home every day with a black eye and no lunch money.
And here’s the kicker, any “whistleblower” gets trampled immediately just like hall monitors.
Worst Metric: Not tying their benefits to our standards or vice versa. Without a common knowledge or vested interest, how can they truly how what’s “best” for us. That’s the most misguided paternalism I can think of.
A related example was a comment made by African author, Binyavanga Wainaina. The idea was that foreign aide actually hurts people when organizations, which are not connected to the communities, make decisions in “the best interest” of the people and then simply wipe their hands of the matter.
Solution: Hold politicians to standards of conduct governed by Hagakure. Dishonoring their Daimyo (us, the collective majority) should result in public Sepuka aired on CNN.
I’m hoping to launch my own site by the holidays. Maybe we can Shudo? *Had a laugh when I wiki’ed the word.
@JoeTaxpayer We need to have a political revolution. Educated people know that a 20K cap is unfair, and we need to offer more deductions for wealthier people. Trickle down economics and equality!