• Straight talk on mutual funds, bonds, real estate, and annuities
• Techniques for avoiding financial disasters
• Tools to help readers track their debt and create a plan for staying out of it
• Road maps to buying a home and saving for college and retirement

Today's Commentary: 09.16.05
A Socially Beneficial Bond

It is difficult to be on the side of the Bush administration when it comes to our global participation in the reduction of disease and poverty.

Our commitment to the Millennium Declaration is the primary reason that the President insisted on sending John Bolton to the United Nations. Boltonšs first job was to wriggle the administration out of as many promises as possible and renege on as many commitments designed to help solve the growing epidemic of poverty and hunger, to tackle ill-health, gender inequality, lack of education, lack of access to clean water and environmental degradation.

Instead of finding innovative ways to help foot a bill we can no longer afford under the crippling pressures of those pesky twin deficits, the Bush position has been based on promises and then a quick retreat from them. To find innovation, one needs only look at some of the other member nations, ones who realize that their position in the world extends beyond military might to humanitarian efforts at building a healthy world.

Finding a unique way to fund this noble effort, five European nations have decided to offer bonds totaling $4 billion to aid the Global Alliance for Vaccines and Immunization (GAVI). Already a pet project of the Bill and Melinda Gates Foundation, who have contributed almost $450 million to the organization, the additional money will help save more than five million children over the next ten years.

Gordon Brown, Britainšs Chancellor of the Exchequer said:

"By matching the power of medical advance with a wholly new innovative mechanism to frontload long term finance, the International Finance Facility for Immunisation (IFFIm) which we are launching here today will over time enable ten million lives to be saved and spare millions of families the agony of a loved one needlessly dying."

The five nations include The United Kingdom, which has pledged 35% of the total resources required for a US$4 billion IFFIm, which is equivalent to US$130 million a year, France, who has pledged 25%, equivalent to US$100 million a year, Italy has pledged 10%, equivalent to US$30 million a year with Spain pledging 3%, equivalent to US$12 million a year and Sweden has made a total pledge of US$27 million.

The White House has commented that this type of financial mechanism, one that Paul Kissack of the British Treasury hopes will catch on as not consistent with Congressional appropriations. Perhaps, but the global need does not go away because of a subtle shift in the blame. In this case, policy starts in the White House and is supported by the Congress, not the other way around.

This method of front loading funds is unique and welcomed by the organization. According to the Vaccine Alliance, since its inception in 2000, GAVI has reached almost 78 million children with new and under-used vaccines, and almost 8.7 million additional children with basic vaccines. It is estimated that by the end of 2004, immunization support by the Alliance in more than 70 countries had prevented more than a million premature deaths over the lifetime of children born between 2001-2004. GAVI has also accelerated introduction of new vaccines and is strengthening vaccine delivery systems.

When these bonds become available, we will let you know. Global poverty is that important. And as a side note, the current US contribution to GAVI runs around $60 to $70 million a year.

Today's Commentary: 09.12.05
To Turn Vice into Virtue

"...in a moment of divine intuition, the handy technique of protective rationalization" Joseph Heller wrote fifty five years ago about the AnaBaptist chaplain who discovered the flip side of truthfulness. He continued "It was miraculous. It was almost no trick at all, he saw to turn vice into virtue and slander into truth, impotence into abstinence, arrogance into humility, plunder into philanthropy, thievery into honor, blasphemy into wisdom, brutality into patriotism, and sadism into justice."

These words, found towards the end of Catch-22 are remarkable in their prophecy. It is almost as if he could have been written them about the compassionate conservative currently occupying the White House.

As the media criticism of the administration's handling of Hurricane Katrina reached full crescendo, revealing an administration adamant to shift the obligations of the federal government to the states even in times when the government is looked upon for guidance and help, it would be easy to join in with the chorus. Mr. Bush has become that poor confused chaplain, a man whose own epiphany took place five years prior to the hurricane making land. So yes, this is just like jumping on the bandwagon and it isn't.

Just about anyone can point at decisions such as Iraq, tax cuts, and the twin deficits and find fault. There is the high likelihood that because of those missteps Mr. Bush will probably not be treated well by history books. His current popularity ratings have fallen and will probably result in a low profile White House. And that can be seen as an opportunity.

In the absence of needing to keep the rabble happy, Mr. Bush may just embark on the final years of his term without caring one whit about the consequences of his actions on future generation, many of whom will be left with the bill. History, he may feel now can be damned!

The ability to turn bad news into no news is the one of the understated strengths of this administration. It enables them to sneak many unpopular policies through channels while America focuses on the obvious: the mishandling of the Gulf region, efforts to correct it and cronyism. It is not exactly on message but it will do just fine.

At almost the exact same time Hurricane Katrina was heading towards the history books with its pummeling of the gulf coast states, the Census Bureau was reporting that for the fifth straight year the poor have remained not only aggravatingly impoverished but have actually fallen further down the economic ladder. This story was buried in most newspapers and newscasts because of the storm but the subject of the report was definitely in evidence as the parade of survivors from New Orleans and adjacent areas became a televised embodiment of those that have been left behind by this administrationšs polices.

Bush's generous tax cuts, designed to give the wealthy the incentive to invest never had the desired effect of raising all economic boats. To listen to the administration tell the story though, the outward signs of job growth are a direct result of those tax cuts and it has more than made up for any decline in compensation and benefits to the family class. Jobs without benefits and wage growth, in other words are jobs worthy of notation nonetheless.

The Census Bureaušs report does not offer opinions as to why these folks remained largely under paid and under insured but some conclusions can be drawn without too much heavy lifting. One comes from the monthly jobs report that indicates that job growth has come at the expense of GDP growth. With the lion's share of new employment coming from service sector jobs and not manufacturing, income replacement can be expected to be lower. Where there are workers willing to work for less just to be employed, wages are usually the only lure necessary for employers.

Here's how it should have worked: the end of the recession should have led to an increase in wages not just jobs. In a normal recovery, companies would have begun to sense that the markets were growing stronger and as a result, begin to ramp up production to meet demand. The increased activity would have led to the rehiring of workers to produce the goods needed to satisfy the consumer. This, unfortunately, doesnšt happen all at once and in this case, hasn't happened at all.

The lag time in the above scenario is usually predictable and expected. As business activity picked up and productivity was streamlined by ever tighter cost controls designed to increase in profits, jobs should have been created, wages should have increased and as a result, the labor market would have tightened. But rather than spend it on capital development to create and expand those businesses and the resultant job force, companies hoarded the cash. They used the money for large stock buybacks. Add to that the incentive to cut costs even further, companies began to renege on their pension promises, health benefits and anything else that usually makes the employee a contented consumer.

Those cuts have begun to sting. In 2000, 63.6% of the companies offered health insurance benefits to their employees. That number fell to 59.8%, which left 16% of the population with no coverage. You have seen many of them in the past weeks wandering through the floodwaters, sitting on rooftops or staring through teary eyes at their lives in ruins.

Now the Bush administration has launched a quiet offensive on those poverty statistics and how they are compiled. There is a growing notion that the Census Bureau should gather information based on outlays, not, as the agency currently does on income. The Bureau focuses on income less any government assistance such as food stamps.

Focusing on spending suggests that the poor aren't as poor as we originally thought. If they were so impoverished the argument will go, how are they able to spend an average of $10,000 more than the reported income? That unaccounted for income amounts to about $850 dollars additional cash a month above the average income ($8,201 per year) for the bottom fifth of the households in this country. .

This new effort at discounting just how impoverished the poor really is done so with the suggestion that they are far better off than their counterparts from years past. In previous decades, the poor did not possess as many goods as they do now. If you only look at those comparisons, the conclusion could be drawn that that they are better off.

Cellular and quality-of-life technology has also become increasingly inexpensive freeing many of the nation's poor from the constraints of past generations. Efforts at minimizing the plight of the impoverished in this country by suggesting that infant mortality is down, more cars are owned than in previous decades and far fewer families are crammed into multi-family living spaces does not point to an end to poverty in this nation.

While we are all distracted by the shoveling of aid money into the hurricane ravaged areas of the south, the deficit expands further. As focus on the clean-up of that region distracts us, Congress will be quietly attempting to make the Estate Tax permanent . Considering the political fallout that may follow this recent disaster, Republicans may not have enough of a majority to carry the effort forward after the '06 elections so there is no-time-like-the-present mentality developing among law makers.

The folks who find the so-called "death" tax counterproductive use arguments that suggest that is will stifling entrepreneurship while disrupting inheritable wealth for small family farms and simply create revenue through double taxation. Preservation of wealth is not only a noble cause for those that have gathered riches beyond most people's imaginations but a full time job as well. With great dexterity, these super rich, the fortunate 500 wealthiest families have managed to keep alive the possibility that making the law permanent would be fiscally prudent.

On the other hand, the supposedly imprudent and selfish among us understands that those taxes would help pay for that ever-increasing deficit. There is no promising that the party in control would not commandeer those funds for other purposes in years to come when the law is no longer in effect, but the optimist in me thinks that the money will be used to pay down those obligations. We just need to wait until 2011 when the current law expires. That expiration date by the way was used to keep the numbers in line, an accounting solution designed to appease the other political party and a sleight of hand done so based on a simple assumption.

That bold assumption: It was hoped that the economy would have been sufficiently recovered and the President's political capital would have noticeably appreciated so that making the tax permanent would be a mere formality. Neither seems to be the case these days.

Not renowned for good economic assumptions, this administration has long list of forgettable financial accomplishments to their credit. Iraq has been a drain on any and all available cash of unanticipated proportions. The attempt to dismantle Social Security also fell flat when the facts were presented, parsed, and eventually discarded. Now Katrina's aftermath has the administration spending money it doesn't have while accepting overseas donations to offset the cost.

That's embarrassing on a global scale. Our recent actions in the United Nations and our dedication to ending global poverty have been embarrassing enough (we are currently sidestepping every promise the Bush administration has made so far) without parading our ignorance of our own poor on every set on the planet.

While the administration appears to be turning arrogance into humility, we commoners shouldn't lose sight of the goal to end poverty. It does affect us all.

The poor are not better off by any measurement taken. They are still impoverished and occupy one-fifth of the population of the world's richest nation. Many of poor are the disparaged workers so often mentioned around the time the jobs numbers are reported, an already undercounted group in terms of real employment who reside in the types of communities Mr. Bush originally ignored, flew past and then finally visited with witticisms and promises of cash. It is any town U.S.A.

So before the President decides that giving 1.25% of the tax payers a break that is unnecessary for economic growth, one that promises nothing but entitlement for the children of the tax payers, and gives away a revenue boosting sum in excess of $480 billion to a group that will save it rather than spend it, he should review the miles of Katrina tape with the sound turned down.

I wouldn't want him to hear America speaking to him. Knowledge is not just a dangerous thing; it is also something that damages that well-honed sense of "protective rationalization".

BlueMoney Report

The Blue Money Report
Financial Commentary covering a wide range of topics concerning money, investing, and how it effects the average investor and their financial health.

It is the World of Money and Investing Explained.

Our Publication
If you are interested in providing your readers with our syndicated column, you can request it here