Lazy Man and Money

Inflation Thoughts – Part 2

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Phew, we made it through Christmas. My wife got back 7 days before, so we crammed as much Christmas in as we could. She’s still working on sending out the holiday cards. Our 7-year-old is turning 8 in a few days, so we don’t have a lot of time to relax until after that.

I was still able to follow most of the news and the big topic on the financial front is inflation. It’s a big topic to get into during this holiday week, so I’ll be keeping this as quick and light as possible. Before Thanksgiving, I wrote about inflation blame and fixes. It may be helpful to read that article first and I still stand by everything in it. It covered a lot of reasons for inflation. If you are just curious about reasons why gas is so high read this. In any case, it’s worth another look because we got more inflation numbers and once again inflation went through the roof. Some polls are saying that inflation is a bigger threat than COVID.

As I mentioned last month, we haven’t felt the effects of inflation too much. Our mortgage stays the same and cars are paid off. Our food is a little more expensive, but we still have a chest freezer full of food that we are trying to eat down. Every time we make a little progress I find some good deal at Aldi or our local Shaw’s supermarket and it fills up a bit again. There are certainly fewer deals to be found nowadays, but we shouldn’t be forced to pay high prices for quite some time. Our gas prices are up, but I’m not sure if they are that much more than last year. I expect to spend $250 during the winter and that’s what we’re spending. Maybe as it gets colder in February we’ll have some $300 or $350 bills that hurt.

I realize that we are not most people. We probably have it better than 90% of the people. If you have to renew a rental lease or buy a car you’ll feel the pain of inflation. I want to be clear that just because we don’t personally feel it, it doesn’t mean it doesn’t exist and it doesn’t mean it can be a big problem.

I was talking with a friend about this and she was worried about how people on lower incomes are going to deal with inflation. After all, if you make a big income you can withstand food that is a little more expensive. If you are on a low income a raise in rent can be very tough.

I didn’t want to dismiss those concerns, but I think lower-income people have had some positive changes lately. The Child Tax Credit has reduced child poverty tremendously. For people on a limited income, several thousand dollars goes a long way to offset inflation. Unfortunately, that’s going away soon since it seems we can’t get 51 senators to agree to continue it. Also, the Child Tax Credit only helps if you, umm, have children of course. It doesn’t help senior citizens for one example. Senior citizens collecting Social Security will see an increased paycheck in 2022. I’m reading that it will be a 5.9% increase which should counter the effects of inflation.

Another thing to factor in is that we’ve seen a good deal of wage growth lately. I’ve read a lot of stories about it on a national level. Locally, in Newport, Rhode Island, nearly every place (has a help wanted sign promising $15/hour and several with bonuses. That includes fast food, gas stations, and places like that. I know that wages haven’t grown everywhere, so those areas that aren’t keeping up would be the ones I would be concerned about.

There’s another thing about inflation that isn’t getting much attention. When I started this blog back in 2006 the accepted average inflation calculation was about 3.5% or 4%. It was just assumed that would be the long-term inflation number. We’ve had 15 years of about 2.2% inflation according to some government numbers. When I ran the math it showed that prices could DOUBLE overnight and we’d just be where we all thought we would have been years ago. Is it possible we got too used to low inflation? Are we giving back a small fraction of the great, great fortune we’ve had over a long time? If so, is that so bad?

Finally, there’s another thing to consider. It seems that many Americans are doing fairly well. Holiday sales were up the most in 17 years, “fueled by purchases of clothing and jewelry.” That’s usually a sign the economy is doing quite well or at least that consumers aren’t stressing about putting food on the table.

So what do you think? Is inflation a reason for huge concern? Is it temporary, while we work through the Great Resignation caused by COVID? Is it mostly media coverage because people have price shock at the stores? Let me know in the comments.

Inflation Blame and Fixes

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Politics plays a role in macroeconomic issues such as inflation. I understand that some readers don’t want to read about more politics, but it is necessary to discuss the financial topic that’s on everyone’s mind.

Inflation is here. I’ve always said that I’d find some way to adapt to inflation. I’ve since come to realize that isn’t always possible. However, we’ve been doing fairly well to battle inflation. Take most people’s “big three” expenses:

  • Housing – Our housing costs aren’t rising as our mortgage has stayed the same. We haven’t needed too many services such as plumbing, but I think we’d see rising costs there.
  • Transportation – Our cars have been paid off for a little while now. The price of gas is high, but we are still working from home and not driving very much.
  • Food – The price of chicken hasn’t risen nearly as high as the price of beef. We’ve been eating more chicken for a while now. It’s starting to get boring, so I may need to pony up for more beef. Ground beef is still cheap. I can notice prices are higher, but Aldi still keeps prices fairly low.

As bonus, computers are very cheap despite a lot of talk about how chip shortages are supposed to make them expensive.

As you can see, things have been good for us, but I can see how it is bad for others. I’ve seen rent go up. People trying to buy cars have to pay more now too. If you have a long commute the price of gas can be very challenging.

I hope you are only seeing mild effects from inflation. It might help you feel better to blame someone. However, blaming doesn’t make things better. We need true solutions.

Blame Joe Biden for High Inflation?

There are a lot of people looking to blame Joe Biden for inflation. While the President of the United States has a lot of power, he doesn’t control everything. He promised to end COVID through vaccines, but there are still a lot of people who haven’t taken them. Also, the delta variant made things ten times worse.

Consumers are upset that gas prices are rising. However, NPR explains quite well, Biden, or any US President can’t do anything about gas prices. Biden wasn’t the cause and can’t fix high gas prices. Over the long term, Biden’s policies on electric vehicles and solar power would drastically cut the cost of commuting.

What about food prices? The Conversation says that fuel prices, bad weather, and COVID are to blame. We covered fuel prices. Scientists have conclusively shown time and again that “bad weather” is due to climate change. Biden has pushed for better climate change policies, but again, this is a long-term solution. We might never be able to reverse the damage climate change has done, but the more action we take and the earlier we take it, the better we’ll be in the future. Finally, the closer we get everyone to being vaccinated, the fewer effects of COVID on the economy. Biden has done everything he can to try to get all Americans vaccinated.

What about housing prices? The American Action Forum explains that it’s all about COVID. There’s a combination of unprecedented demand and a labor shortage to create new housing. It seems like this was a limited-time phenomenon – I haven’t seen prices go up in a few months. As mortgage rates rise, prices likely fall and maybe get more acceptable.

Taking all these together, I don’t think it’s fair to blame Joe Biden. Any US President would have seen the same circumstances leading to the same inflation. However, there’s one last thing out there…

Biden (and his administration) approved a $1.9 trillion COVID stimulus package. This was on top of the 2.2 trillion CARES package and a $900 billion bipartisan stimulus that Trump signed in late December 2020. At the time Trump was disappointed that more money wasn’t given in the form of direct payments and called it a “disgrace.”

So putting specific politics aside, it’s easy to say that both parties agreed to put a lot of money out there. I don’t think this was a bad thing, it helped many people get by during a global crisis. There have been some very positive things to come out of it such as child poverty rates dropping to 5.6% from 14.2%. I’m not going to criticize the stimulus because I think everyone made the best choice they could at the time and I’d rather err on the side of helping people in a crisis and worry about inflation now.

All that said, it does need to be noted that there’s a lot of money out there and fewer products available due to the supply chain.

The Real Blame for Inflation?

Robert Reich, a contributor to The Guardian gives his compelling analysis for inflation, big corporate America. Specifically, he points out how industries have consolidated over several decades. This has left little competition. For example, he points out that Proctor & Gamble and Kimberly-Clark control the diaper market. When P&G said they were prices, Kimberly-Clark did the same. P&G’s profits are extreme, they don’t need to raise prices. P&G had enough money to spend $3,000,000,000 to buy its stock back. He gives a similar example with Coke and Pepsi.

What can fix this problem? He says the answer is better antitrust law. If that’s indeed a solution, the Biden administration is the first one I’ve seen in a long time that is looking to real antitrust action.

CNN has an inflation explainer. It places all the blame on COVID and getting vaccines, the result of going from 0 to 100 in the blink of an eye.

Final Thoughts on Inflation

Inflation is complicated. It doesn’t seem like there is a short-term solution. The good news is that the economy looks like is back on track. In addition to that, the stock market is hitting new all-time highs seemingly every week now. I know that there’s more to the economy than the stock market and retail sales numbers, but it also seems like Americans have more savings than they’ve had in years, maybe decades. Combine that with the aforementioned drop in child poverty and I feel like the economy is in a very strong place.

I’m even more optimistic about the future. The longer-term solutions (limiting climate change problems, limiting reliance on fossil fuels) seem to be heading in the right direction.

Maybe I’m looking at things through rose-colored glasses? What do you think? Let me know in the comments below.

Let’s Fix the National Debt

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Everything seems to be political nowadays. Wanting clean air and water and avoiding massive natural disasters is political in the United States, while hundreds of countries agree that climate change is a global problem. (Of course, the United States isn’t the only place it is political, but I wanted to point out that there is incredible agreement across essentially all countries will all types of backgrounds and politics.)

It’s okay for some things to be political though. For example, today’s topic, fixing the National Debt is going to be political. The good news, for me at least, is that I don’t have to get swept up into the politics of working with everyone and getting the votes to make it all happen. It’s nice to have the easy job, but it doesn’t pay nearly as well as those D.C. politicians. It’s just another of life’s trade-offs.

(As a side note, I’m “rushing” this article out quick. Due to Hurricane Henri, I have some extra yard work to do. Some of these political discussions can get nuanced and I admit that I don’t have the time to research everything extensively. Consider this a throwback to blogging days of 2006 where blogs were intended to be a quick way to share ideas without the need for outlines, editors, publishers, etc.)

Why the National Debt is So High

The national debt has never been higher. We’ve added to it with Tax Cut and Jobs Act and COVID aid in recent years. Most of the tax cuts went to corporations. The hope was that companies would use the money to invest in innovation, lower our (already very low) unemployment, and boost wages. For the most part, companies executed large share buy backs which helped their stock prices. On a personal level, our net worth has more than doubled in the less than four years it’s been around. When corporations get rich, those who are shareholders share in that prosperity.

It feels as if the Tax Cut and Jobs Act simply added a few trillion out of the national debt and gave it to investors. It was an indirect transfer and surely some jobs and wages were boosted, but that was a small part. The Trump tax cuts will add $4 trillion to the national debt over by 2026 so it seems safe to say that we’ve some of that.

The National Debt has gone up around $5 trillion dollars since March of 2020. We can pretty clearly put most of that on COVID, except for the overlap with the aforementioned tax cuts. Some could argue that we didn’t need to borrow this much money. I’m not going to dig into that argument. Both Democrat and Republican administrations have borrowed for COVID, so I think it’s fair to just accept it was appropriate.

Five Steps to Fix the National Debt

  1. Don’t Fix It

    2. We’ve had a national debt for a long time now and we still keep plugging away. It’s not like personal debt where your credit card bills just keep crushing you. Japan’s national debt vs. its GDP is huge (over 250%) much bigger than ours (~130%). It seems like they are still going and haven’t sunk into the ocean yet.

    I’m sure there are plenty of people who have great macroeconomics degrees and education, but I’m not one of them.

  2. Reverse the Tax Cuts

    3. As much as I like having doubled my net worth, if we want to fix the national debt, this is the place to start. There are companies that can use tax write-offs to pay nothing.

    The argument against more corporate taxes is that companies will just go to another country. This has already happened for years as companies have moved some of their assets to Ireland. I think the answer is that the laws need to be fixed. Apple by any stretch of the imagination is a Cupertino, CA-based company and shouldn’t be able to move their tax structure to another country without significantly selling their main headquarters and moving all their employees (or rehiring) in another country. Apple simply isn’t going to do that, so it’s okay to raise corporate taxes.

    This same argument comes into play with income taxes. People will just go live in other countries. It’s not easy to move away from family, friends, and familiarity. There will certainly be some people who do it. I argue that the people who are very, very wealthy can afford to live wherever they want to. It’s not like anyone has proposed a 90% tax rate where someone may say, “I’ll give up this position that makes me millions and take my chances in a new country.”

  3. Cut Military Spending

    4. As a pseudo-military* family, I hope I can say this without too many arguments. The United States spends the most money on the military. We spend three times as much as China who is #2 and 10x as much as the #3 country (Source.) If we got our military spending down to China’s level, we’d have a half-trillion dollars each year to apply to the national debt.

    That might be a drastic cut, so we won’t assume that we’ll save 5 trillion over 10 years. Maybe 3 trillion over 10 years is possible though.

  4. Implement a Wealth Tax

    5. Elizabeth Warren has been championing the idea of a wealth tax in addition to our income tax. It may sound like a radical idea, but we’ve only had an income tax for a little more than a hundred years. Income tax was a radical idea back then and now it seems normal.

    Why a wealth tax? For years the very wealthiest people have been able to manipulate the tax system to avoid paying taxes. This was covered ProPublica’s Reval of the Wealthiest People’s Taxes. Peter Thiel himself may avoid paying taxes on billions his Roth IRA.

    The Tax Act breaks for corporations went to those who owned the most corporate stock making multi-millionaire (or billionaire) CEOs. When we double our net worth it is a big deal for us personally, but it pales in comparison to the tens of billions that Elon Musk or Jeff Bezos add to their net worth.

    While we can (and should) fix the income tax system, the ship has already sailed on that money. A wealth tax would only impact around 70,000 of the United States’ 328 million people (Source). It’s such a small percentage that it’s hard to imagine. It’s about 1 in 4700 people. I doubt any of those people are reading this article.

    It’s not too radical to implement something that is estimated to bring in $2.75 million in revenue over ten years. It certainly won’t fix the national debt by itself and admittedly Warren’s goal would be to spend that revenue to fund other programs.

  5. All of the Above

    6. If we decide to make fixing the national debt a priority (and that’s a big if), then it’s possible we can lower it 7-8 trillion dollars over the next years with a variety of programs. It won’t be easy, but nothing is easy when we are talking about tens of trillions of dollars. There’s a saying that you can turn an ocean liner around on a dime and that’s the case here.

    I know this is a big and very complex topic and this only scratches the surface. I know that many people, probably everyone reading this, has bigger problems on their mind. What do you think? Is it worth putting this kind of effort into fixing the national debt? Did my writer’s block become completely transparent as I didn’t cover much personal finance in this article? Let me know in the comments.

    * My wife is in the Public Health Service which isn’t technically considered military, but has military officer designations, grades/pay, base access, etc. When I read the CARES Act last year, it seems to have been upgraded to full military status, but I think I’m misreading it as no one (even PHS) seems to acknowledge it.

Post-COVID Industry Analysis

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Today’s article comes from long-time contributor, Kosmo. I added some of my own thoughts near the end.

The COVID-19 vaccine is nearly ready for prime time.  By the end of the year, the highest risk patients will be getting vaccinated.  It will probably be at least a couple of months before my wife and I will be eligible for shots, and even longer for the kids.  But at some point, things will begin to get back to normal – or as near to normal as possible.  Some industries are going to see longer-term effects and will be transformed – either positively or negatively – by COVID experience.

The winners

Delivery

Delivery services have seen a huge surge during the pandemic.  Employees of these businesses have performed a valuable service by limiting the number of people who need to be inside stores and restaurants.

My family has made heavy use of delivery services.  We haven’t been inside a restaurant since March – but we’ve had many meals delivered since then.  In fact, we’re getting fried chicken delivered in about fifteen minutes.  For us, it’s basically cost neutral when compared to dining out.  The tip for delivery is roughly the same as an in-restaurant tip.  There’s a delivery charge, but that’s offset by not paying for four drinks.  I’ll drink 50 cents worth of generic cola instead of paying $2.19 in a restaurant.  The guy who runs the dominant local delivery service is an acquaintance from our neighborhood, so it’s nice to be able to help out his business at the same time.  I’m sure we’ll continue to use delivery more – and dine in restaurants less – even after COVID passes.  The food is always hot and tasty, and it’s faster than eating in a restaurant.  Also, a restaurant is no longer blacklisted simply because one of us doesn’t like the food.  My wife and kids can get Mexican food delivered, and I can throw a Totino’s pizza in the microwave.  (Totino’s says not to microwave them, but just nuke them for 4:30, rotating once.  Almost as good as using the oven.)

Pickup

The cousin of delivery is pickup.  Not every restaurant in the area has delivery services, but many of them have pickup.  Order online and have them bring the food our to you.  Personal interaction – 15 seconds.  Even less exposure if you have them just put the back seat.

I’ve only been inside a grocery store a half dozen times since March.  Twice were because the drive-through prescription window wasn’t functioning.  If we spend $35, we can get free pickup.  Submit the order online and have a store employee figure out where everything is and get it ready for you.  Although there have been some occasions where this has ended up taking way too long (hours, in a couple of cases), it’s been a very positive experience overall.  I’m going to avoid the inside of grocery stores even after this is over – I’ll happily let someone else do the work.  This means that we’ll be doing the bulk of our grocery shopping at that store.  Prior to the pandemic, we’d mostly shopped at their competitor.  The competitor – a somewhat smaller chain – simply doesn’t have the space to allow for pickup.

We’ve also used pickup from other stores, ranging from Target to Hallmark.  Instead of dragging all four of us for a marathon Target trip, we just enter the order over the course of several days, then I run down and pick it up with it’s ready.

Digital distribution

My daughter takes private art classes.  The art studio was shuttered by the pandemic, but the business didn’t die.  The owner pivoted to Zoom classes, and also recorded a series of lessons that could be purchased individually.  The great things about the recorded lessons are that the bulk of the effort is upfront.  Her cost – in terms of labor and dollars – is nearly the same whether she sells a particular lesson to one customer or a thousand.  It also expands her audience.  You might not be free every Thursday from 7-8 PM, but you can consume a canned lesson at your leisure.  Obviously, it’s not exactly the same as a live class, and her pricing does reflect this.

It’s important for these “winning” companies to realize that although their business will remain strong in the future, it will likely slide from the current peak.  Those companies should position themselves to shrink their footprints a bit in the future so that they’re not trying to support their current overhead with fewer orders.

Neutral

Corporate-owned chain restaurants can come out of this in okay condition.  On the one hand, business is suffering.  On the other hand, many of their Mom & Pop competitors have been wiped out by the pandemic.  Even smaller chains have shuttered some of their locations.  The larger chains may have suffered losses in the short term, but when they return to full capacity, the landscape will have changed.  Not only will there be fewer Mom & Pop’s and fewer locations for smaller chains, but there will also be a reluctance for entrepreneurs to launch restaurants for a few years.  After all, there’s no guarantee that we won’t see another pandemic like this next year – or even five years into the future.  This will allow the larger chains to grow their market share.

The losers

Mom and Pop Restaurants

A lot of Mom & Pop’s have been completely wiped out by the pandemic.  Even chains with multiple locations have been affected.  A local sandwich place that served premium hot sandwiches closed.  The quasi-Italian place near my office also closed.  My office complex has a few thousand people.  It’s on the outer edge of the metro areas, without much of a residential population.  The Italian place was probably drawing about 90% of its business from my office.  My office has been shut down since March.  We’ll be working from home through at least the end of June.  Even after we do return, we’ll probably only be in the office a fraction of the time.  The restaurant’s clientele vanished overnight.

Commercial real estate

I’ve been reading the tea leaves to see what my employer will do in the future.  My best guess is that the company will strongly pivot to work from home.  Perhaps 10-20% of the time in the office.  They’ll probably use a “hotel” cube format, reduce the overall footprint, and sell off excess real estate.  I think a lot of companies will do this, particularly in areas with high real estate costs.  Why pay for a Manhattan cubicle for an employee if they can be just as productive in their hometown of Manhattan, Kansas?  In my option, demand for commercial real estate is going to plummet.

Corporate cafeteria, cleaning, custodial

My office complex has two cafeterias.  My employer contracted with a third party to provide cafeteria services.  Those people haven’t been working since March.  My guess is that we’ll only have one cafeteria in the future.

Likewise, my employer contracts with third parties for cleaning, custodial, security, and a variety of other services.  As commercial real estate goes from occupied to vacant, these industries will also take a hit.

Editor’s Thoughts

Kosmo has an interesting perspective that I never thought about with delivery services and dining. One of the main reasons I go to restaurants is to get out of the house and be part of the community. I’ve been working from home for 13 years now, and I think most people can now relate that you sometimes have to get out. My tastebuds are more of the Tortino’s and generic soda variety that Kosmo mentions in the article, so I don’t mind a difference in the food itself much of the time.

I completely understand the draw of not having to do grocery shopping. For many people, it must be great to reclaim that time. Personally, I enjoy grocery shopping. I love looking for bargains. I love doing mental calculations and comparisons. I love having “me” time away from the kids outside of the house.

I don’t know how I feel about digital delivery. It seems saturated. I’ve got an endless number of FinCon (personal finance group) talks from 10 years that I know I will never watch. I got a deal on Masterclass and I’ve only watched a little of it. My wife is very much against paying for Zoom karate classes for the kids.

My kids’ school recorded a lot of videos last year for distance learning that they can reuse again, but I don’t think they do. Khan Academy and numerous other places have online lessons. If there was a universal search engine and these got combined under one umbrella for a low price (or free like Khan Academy) it could be really useful. I believe that digital delivery is the key to providing free college in a way that doesn’t get caught up for decades of politics.

Your thoughts

What are your thoughts?  Which segments of the economy have been decimated by COVID-19, and which segments will emerge is a reasonably good position?

Vote Biden for the Economy

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Joe Biden economyI usually don’t write political posts. I don’t think I wrote one in the first 8 years of Lazy Man and Money. I’ve probably averaged one every couple of years since. This article is a frank talk about the United States economy though, and it’s a discussion that is worth having whichever side of the political spectrum you are on.

I’ve been planning this article for over a month now. Unfortunately, every time I try to sit down to write it either life interferes or the nature of this article changes.

Fortunately, we have almost completed our 1031 exchange (expect a larger update around the end of the month). I can’t wait for the political news cycle to take a break for a day or two, so I’ll just have to go with it. It’s 2020, so we know the next catastrophe is just around the corner.

I had almost published this before the first Presidential debate. I shelved it for a couple of days so that everyone could focus on finding the best way to move to Canada.

In any case, when I started this, there was one area where Trump had the slimmest of advantages in the polling – the economy. Voters felt that Trump was the best for the economy. Going back to Thanksgiving last year, my mother felt this way too. She seemed surprised that I was a democrat. I think her reasoning was that I write about personal finance and economy, so I must be for Trump. I do like value fiscal responsibility (as we’ll find out), but there are other things to take into account when voting for President of the United States.

Those non-financial things are important, but they are outside the scope of this article. That means that I won’t cover Trump caging children, tear-gassing peaceful Americans, bragging about sexually assaulting women, being credibly accused of sexual assault dozens of times, inability to understand second-grade science, aligning with our enemies of Russia and North Korea, nepotism, violation of the emoluments clause, impeachment for trying to get a foreign country to attack Americans, racism, supporting white supremacists, telling members of US Congress to go back to their country, misinformation/disinformation/”alternative facts”, voter suppression, calling our war heroes losers, or trying to end health care for millions and millions of Americans during a pandemic.

I may have missed a few things, but I think you get the idea.

Before I get into the economic case to vote for Joe Biden, we have to recognize that we have a two-party system. We can’t simply say, “Well, I like Mark Cuban, because he would be the best candidate and vote for him.” I suppose you may be able to write his name on the ballot, but it is just as useful not to vote at all at that point. When you only have two choices, it’s completely valid to vote for the lesser of the two evils. Maybe you don’t like eating liver and lima bean soup, but it becomes attractive when compared to dog poop soup. Thus, it is just as useful to point out why Trump is bad for the economy as it is to point out why Joe Biden is good. You don’t want to get stuck eating dog poop soup for four years, do you?

I don’t want to suggest Joe Biden is bad for the economy. He’s actually put together a lot of policies that will help many low-income Americans. That alone would create and increase business opportunities for even more wealthy Americans.

Let’s get started:

Trump and Unemployment

Trump seems to measure the economy in two ways. The most common one is the performance of the stock market. Another way he does it is by measuring unemployment. First, let’s look at the stock market.

Trump and Stock Market Performance

The stock market has done well under Trump. I don’t think anyone can argue that. However, it’s important to note that the stock market had been doing very well for six years before Trump. In fact, there have been a number of monetary policies from both parties to juice the stock market and economy in general. You may remember a series of quantitative easing and “Cash for Clunkers.”

The Trump version of those two stimulus programs was the Tax Cuts and Jobs Act of 2018. It managed to cut taxes for corporations and those in the top tax brackets the most. People in lower tax brackets also saved on taxes, but not as much. It has been widely reported that many public companies used the tax savings to buy back shares of stock. This has the effect of making the owners of corporate stock wealthier.

While surely jobs were created, unemployment was already very low at the time. One could argue that a more effective policy would have been to raise the minimum wage. While that may have helped out many Americans it would have likely hurt the stock performance of companies that rely on that cheaper labor.

That naturally brings us to…

The Economy is more than the Stock Market

Here’s how Joe Biden describes the economy:

“Throughout this [COVID] crisis, Donald Trump has been almost singularly focused on the stock market, the Dow and Nasdaq. Not you. Not your families. If I am fortunate enough to be elected president, I’ll be laser-focused on working families, the middle-class families I came from here in Scranton. Not the wealthy investor class. They don’t need me.”

Admittedly, here at Lazy Man, I am mostly focused on the stock market economy. That’s what allows me to make my money work for me (creating the whole “Lazy” brand). However, I do recognize that there are millions and millions of Americans who are left behind by the stock market economy. As my friend Jim Wang of Wallet Hacks concludes in his stock ownership analysis: “When the stock market goes up, 75% of the Americans don’t participate in any meaningful way.”

Joe Biden wants to undo most of Trump’s tax cuts. That may seem unpopular because most people like low taxes. Unfortunately, sometimes the unpopular choice is the best choice.

The problem with Trump’s lower taxes is that the government has to do more with less money. Predictably services get cut. In 2018, the government decided to disband the “Directorate for Global Health Security and Biodefense” team, which would have certainly been useful against the COVID-19 pandemic we are experiencing today. To pick another example, Trump proposed eliminating funding for PBS. Is it important to you that Jeff Bezos makes a few billion more dollars because Amazon has to pay less corporate taxes at the expense of excellent children’s programming like Sesame Street and Daniel Tiger? (PBS is much more than that obviously, but that programming was critical in our family.)

The other thing about lowering taxes is that it increases the national debt. I’m not a fan of debt. The Committe for a Responsible Federal Budget lists four main consequences of a large national debt:

  • Lower national savings and income
  • Higher interest payments, leading to large tax hikes and spending cuts
  • Decreased ability to respond to problems
  • Greater risk of a fiscal crisis

I feel like we are seeing the consequences of spending cuts and the lack of ability to respond to COVID today.

If corporations pay more taxes instead of buying back stock, we can fund great, popular, endangered programs like Social Security.

Trump and Unemployment

Trump has often said that he’s been great at reducing unemployment. That’s true. This graph shows unemployment went from about 10% when Obama inherited the subprime mortgage mess from Bush’s administration. He was able to steadily get it down to 5%. Under Trump unemployment continued its path down to 3.5%. Both presidents deserve credit when it comes to unemployment.

Of course, we all know what happened in 2020. COVID-19 happened. Unemployment spiked to nearly 15%. Trump didn’t create COVID-19, but he made it worse than it needed to be. I’ll get that a little later.

CEOs for Joe Biden

Companies can’t depend on Donald Trump. Believe it or not, it was only about 6 weeks ago that Trump called for a boycott on Goodyear tires. I can’t imagine another President of the United States openly trying to kill an iconic 100+ year-old American business. If the company posed some kind of threat to consumers, I can see it happening, but it doesn’t make sense to pick on a company that makes tires.

Before that, Trump asked people to boycott Harley Davidson. What did Herley Davidson do to deserve this treatment? They complained the tariff war caused them to lose $1.4 billion dollars. That’s the second 100-year old transportation manufacturing company.

Many of America’s CEOs are endorsing Joe Biden. They say that Trump’s response to COVID has made business terrible. Almost all of these very smart group of CEOs say that Trump’s lack of response hurt their ability to run their business. Other countries were able to open up. Other countries had fewer cases and deaths. The United States didn’t.

COVID-19 and the Economy

I’ve dug into Trump quite a bit now for his COVID-19 response. I personally blame him for countless tens of thousands of deaths because he wouldn’t say, “You should all wear a mask for two weeks. If you do that we can get back to work.” It took a long, long time for him to warm up to masks. And while he may carry one around with him for the show, he clearly doesn’t use them when he should. Of course, the COVID-19 superspreader event at The White House over the last 10 days is evidence of that.

Trump’s hatred of masks came at a tremendous economic cost. Back in late June, Goldman Sachs said that a a national mask mandate could slash infections and save economy from a 5% GDP hit. A growth of 5% to the GDP is huge – roughly a trillion dollars (using 2018’s GDP numbers of $20 trillion). Imagine saving a country a trillion dollars, not to mention more than a hundred thousand lives, with a simple stroke of a pen or two… and refusing to do it without explanation.

That’s not the kind of behavior of a person who is “good with the economy.” My 6-year old could have made the obvious economic decision that Trump couldn’t.

In sharp contrast, Joe Biden predicted all this mess would happen under Trump back in late January. Yes, that was 6 weeks before the US shut down in the middle of March. At the time only 80 people in China had died… there were only 5 cases in the United States. He wrote about the things he would do in an USA Today Op-Ed.

Wouldn’t you like to take your DeLorean back to January and see how things would have faired with a president who had a plan, even before it started to spread throughout the United States?

Trump’s “Businesses” and Taxes

Let’s turn our attention to Trump’s businesses and taxes. I think that’s where many people get the false impression that Trump is good with money. He’s not good with money. He’s a disaster. He inherited around $413 million from his father. According to that New York Times article, he was a millionaire by age 8 in 1954. A million dollars in 1954 certainly goes a long way, but the money kept coming over the years.

You could compare Donald Trump to Paris Hilton – an extreme case of trust-fund baby turned into a reality TV star. Trump doesn’t have a lot of profitable business ventures on his own. The biggest one was The Apprentice, which again was based on a false narrative that he was good with business despite all the bankruptcies. The next biggest source of income for him was selling his fraudulent luxury lifestyle to MLM/pyramid scams (Source). As every reader of Lazy Man and Money should know, I’ve spent thousands and thousands of hours fighting those kinds of pyramid scheme fraud companies.

We learned a lot when Trump’s tax information came into focus a two and half weeks ago.

Trump for years has been said a lot about his taxes that don’t add up. When he was accused of not paying much in taxes, he’d claim that was because he was smart. That’s tacitly admitting that those accusations were correct. Minimizing taxes is something that I’ve praised in this space – it is indeed a smart thing to do if done legally. However, Trump has also said that he’s paid a lot in taxes. Obviously, you can’t be paying “almost nothing” and “a lot” at the same time.

Trump has also claimed that he can’t provide his taxes because they are under audit. The IRS has said that this is simply not true – anyone can show their own taxes. It is an excuse that he uses hoping to pacify people who may not be educated enough to know the truth.

I think we kind of knew what going on with Trump’s taxes, but New York Times reveal of his taxes confirmed what we thought. Trump doesn’t pay much in taxes. In ten out of 15 years he paid nothing. As President, he paid $750. While this could be legal, I look for a higher bar from a US President. He’s been charging US taxpayers to fund the Secret Service staying at his hotels. It costs millions and millions of dollars and the hotels are cashing all those checks. In return, he contributes $750 – when he contributes at all.

If you pay more in taxes than Trump and receive the worse health care you should not vote for him. It’s that simple.

One of Trump’s tax deductions included $70,000 for his haircuts during The Apprentice. We’ve all seen his hair, that isn’t $70,000 hair. A smart person doesn’t pay $70,000 for that kind of work. The Apprentice should have its own hair and make-up people that are funded by Mark Burnett. A reasonable person would say that doing some kind of financial favor and probably getting something in return. Is it even legal to deduct a $70,000 haircut? Let’s look at the first sentence of IRS guidelines:

“To be deductible, a business expense must be both ordinary and necessary.”

Is it ordinary for a male television star to spend $70,000 on their hair themselves? (I differentiate between male and female because we all know that women pay an extraordinary pink tax for hair cuts.) I don’t think $70,000 on top of The Apprentice’s own staff is very ordinary. I also don’t think it is necessary – people still watch America’s Got Talent and Howie Mandel has no hair. A $70,000 hair cut was never necessary for the success or failure of The Apprentice.

It doesn’t seem legal to me, but I’m not a lawyer.

One thing I can say is that the IRS doesn’t have the power to audit ultrawealthy people like Donald Trump. I know that sounds weird, so here’s the proof:

“For starters, [the ultra rich] can devote seemingly limitless resources to hiring the best legal and accounting talent. Such taxpayers tend not to steamroll tax laws; they employ complex, highly refined strategies that seek to stretch the tax code to their advantage. It can take years for IRS investigators just to understand a transaction and deem it to be a violation.

Once that happens, the IRS team has to contend with battalions of high-priced lawyers and accountants that often outnumber and outgun even the agency’s elite SWAT team.”

That certainly sounds like Donald Trump to me.

Additionally, the IRS admitted that it simply doesn’t have the funding and resources to audit the ultra-wealthy.

The average person may think of the IRS as this all-power entity, and it is to the average person. To the people with hundreds of millions of dollars, the IRS is more of an annoyance like a fly in the room.

Trump Ends Stimulus Bill Negotiations

In the latest development (10/5/2020), Trump Tweeted an end to the stimulus bill negotiations. The stock market tanked. This is another case where everyone was left puzzled. The Federal Reserve Chair had earlier said it was of extreme importance to get it done. It seemed that some progress was getting made. A stimulus bill would look very good for Trump politically with less than a month until election day.

The markets don’t like uncertainty. Trump has been nothing but uncertain. At any moment he could Tweet any kind of crazy thing. Everyone has to run around like chickens with their head cut off to make sense of that crazy thing. It’s dangerous to the economy to have that kind of extreme, unstable, liability.

In this case, many experts thought that the point of the Tweet is to get the Senate focused on the political job of confirming Amy Coney Barrett to the Supreme Court. At a time when many Americans need financial help, Trump was turning his back on them.

Of course, a few hours later Trump demanded that a stimulus bill gets on his desk so he could sign it right away. At this point, everyone had a choice: 1) run around with their heads cut off again or 2) simply ignore the President of the United States. That’s a lose-lose situation. It simply isn’t productive and it’s terrible for America.

Final Thoughts

After nearly 3,000 words (around 4x longer than my typical article), I’m not sure there’s too much to more say. I realize that much of this article has been more why not to vote for Trump’s economic platform instead of why to vote for Biden’s. I wish I had more time to get into the merits of Biden’s economic policy – it is a good one. I could probably round a good 4000 words in total.

For now, I want to make sure people understand that Trump being a businessman is simply a show and an illusion. When it comes to helping Americans economically, he failed the biggest test. He could have used an ounce of prevention early and saved us multiple tons of cure.

Update – Experts all know that Biden is best for the economy. See this article about six [bipartisan] former secretaries of Commerce endorse Joe Biden. Specifically, they say, “We believe that a Biden presidency will mark the return to the certainty and security that our economy needs to thrive.” That’s one of the points I tried to make in the article