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by Michael Rogan
Special to Tropical Breeze
Recently, professional negativity monger
and social blight Ralph Nader threw his political hat into the ring
when he announced he was, yet again, going to run for President.
During the announcement, Nader quoted a poll (whose results are not
yet published, which may make him psychic) that had found that
nearly three in four Americans were dissatisfied with the economy.
Though I am known for being an optimist, I briefly wondered if that
could possibly be true. I decided to examine the facts.
The media's job is to perpetually harp on
what is wrong, economically, societally and more, because they know
we are drawn like moths to the flame to bad news. Politicians,
especially in election years, like to stress and distort bad news
to their own political advantage. But 75% of Americans are unhappy?
Could I be that out of touch? Or is this another case of what you
think you know that just isn't so?
We have all heard that mortgage
delinquencies are at record highs. But they are still less than 1%
of all mortgages. So at a time that home ownership is at an all
time high of nearly 70% of Americans, 99% of us are not in trouble
with our mortgages. The unemployment rate is now up to 4.9%. When I
was in college in the early 1980s, my economics professors taught
us that full employment was 94%, meaning the unemployment rate
should never be expected to drop below 6%. Add to that relatively
low inflation and interest rates, and it's hard to imagine
three-quarters of us are upset.
Maybe it's time to focus on the
messengers of doom and gloom. Since they stand to profit from
making us feel bad about ourselves, let's interrupt a common story
with some facts. It has become such common knowledge that Americans
are poor savers that we take it for granted. We take as fact that
as a nation we are awash in credit card debt, and are all spending
beyond our means. Problem is, we're not. For one thing, there is
more than $7 in bank accounts today, for every $1 owed on a credit
card. Is credit card debt at an all-time high? Yes, but so is the
amount of money in bank accounts.
Another problem is the "government math"
used to calculate savings. Seems the government doesn't count the
value of your home, your investments, or, most importantly, your
retirement accounts. The government calculates "savings" by
subtracting household spending from after-tax income. That equation
dates back to the Depression era, when it might have made more
sense -- long before the creation of IRAs, 401(k)s, and even
pensions. These days, most of us consider our wealth to be the sum
of our investments, retirement accounts, and real estate (which,
for most of us, means our primary residence). The government only
counts money in bank accounts! Worse, the government's equation
would frown upon actions that most of us would consider to be
prudent financial moves. For example, if you had money in a savings
account and one day you decided to withdraw that money and pay down
or pay off your mortgage, the government would count that as
spending! Worst of all, not only do they not count your retirement
accounts, but each time you contribute to your 401(k), you actually
increase your spending because you are reducing your after tax
income!
So, let's revisit the fact that Americans
are lousy savers. In the past decade alone, the value of our
retirement accounts has risen by more than $8 trillion. The total
in those accounts is nearly $18 trillion. It isn't a coincidence
that our national savings rate peaked shortly after the creation of
401(k)-type plans and has declined ever since. It is BECAUSE of
these plans and the faulty equation that the "savings" rate has
declined as the popularity of these retirement plans has grown.
You know that other figure the press and
politicians throw at us to make us feel bad -- the national debt?
The horrible burden that we are leaving to future generations? The
total national debt stands at $9 trillion, or barely more than we
managed to sock away into retirement accounts in only 10 years. And
remember, that doesn't begin to count the equity in our homes or
even any other investments. A better measure of how we are doing
could be found in the government's "household" net worth figures
or even the "financial" net worth figures. There, you would find
that the total financial net worth of Americans (a figure that
counts your mortgage but excludes your home equity) is 50% more
than the next four richest nations combined.
I suppose we could guess that the media
and the government don't want us feeling too good about ourselves,
lest we get lazy and complacent. Maybe they fear we won't be
motivated if we realize we are doing much better than we thought.
But, in my experience, getting people to feel lousy about things
isn't too motivating either.
Michael Rogan is president of Rogan &
Associates Financial Planners, a locally-owned financial planning
brokerage firm based in Safety Harbor. He brings nearly two decades
of financial expertise to the local airwaves on the radio show,
Financial Planning for Life, heard at 11 a.m. weekdays on AM 1250
WHNZ. For more information, call 727-712-3400 or visit
www.RoganFinancial.com.
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