I thought about this as I read the comments left on a post from Randall Forsyth about the failings of the cash for clunkers program. Forsyth points out some of the unintended consequences of the actual program and then the lack of lasting economic benefit. We learned under Bush that short term stimuli do not have lasting impact. I'm not sure why this is so difficult to grasp.
The reason for the title of the post comes from one reader who said he was "more than a bit resentful" that he having taken responsible actions like buying a Honda and saving money is not a beneficiary of any of the government programs that have been enacted since the crisis started.
The commenter is correct about the inequity of the various attempts to fix things. It does appear that bad behavior is being "rewarded" by having access to mortgage adjustments (if this is really going on in a meaningful way) and whatever else is being attempted.This is where the idea of staying on your own mat comes into play. Chances are that if you have accumulated some savings you feel some sense of accomplishment and security which is not bad. If you have a mortgage you can easily afford and never had to worry about not being able to pay then you avoided a mountain of stress. Again, not too shabby.
If you have savings and a mortgage you can easily afford (or have paid off your mortgage) then part of you wants to avoid the types of stress that goes along with being over leveraged or living paycheck to paycheck. Clearly this type of security is worth something and to paraphrase Woody Allen there is never a time where more savings made the situation worse.
Prudent financial behavior helps reduce or avoid all sorts of stress and worry regardless of whether the guy down the street got a principal reduction and a new Toyota Yaris. Bad behavior/poor decision making has always and will always impede economics. You can either let it bother you or you can stay on your own mat.
39 comments:
I very much identify with Honda Guy and believe, moreover, that I'm going to be penalized by interest rate inflation to pay for the bad behavior of others. Mebane Faber has a closely-related CNBC video interview with Julian Robertson posted. It's worth watching and thinking about the implications for investing.
I also identify with Honda guy in that I believe some sort of means testing will be implemented for social security that will affect anyone not 55 or older today.
I've responsibly saved, paid off the mortgage, etc, etc but in the end, Joe Hack who enjoyed himself in the sun and spent all his bucks may not have that much less in monthly receipts. Then we'll be reading articles about how everyone who saved diligently were chumps and deprived themselves over the years, etc.
Then a new cottage industry will be born showing people how to scam the system...maybe by giving away $XX to get you under the threshold so you can get full benefits which, added to what you have left over, you'll end up with more $XX each month. Yada, yada, yada, rant over.
DE
I really have to disagree with you today Roger.
It is very important in a democracy like ours that the Honda guy and others express their disdain for our representatives constantly doing boneheaded things like rewarding misbehavior. If we just sit idly by and say nothing the government will increase these waste full programs 5 to 10 times what they already have done.
Their is nothing wrong (and everything right) with individuals wanting reasonable rational rules and regulations from their government.
I hope the good rational people start complaining more (maybe write your congressman)
A lot of the "haves" are quick to say that we are rewarding bad behavior for the "have nots" or punishing those that did the right thing.
As if everyone getting a new car through the clunker program were evilly scheming all along to steal our tax dollars. Or everyone who went and bought a mortgage they couldn't afford fully knew what they were doing and gambled their life on the chance that the government would penalize others. Some of them were careless or stupid sure but not all can be painted with a broad brush.
Why should I being single be penalized with more taxes then married people? I don't have any kids either but don't get that tax deduction. Why am I penalized for the bad behavior of others? That argument could be spun off into a thousand different ways.
Roger as for your post I think the stress free yoga example is perfect. I've been pretty good with my finances and have a smaller house then some of my friends and I don't have the newest of cars.
However on the other hand I don't live paycheck to paycheck trying to catch up on bills and debt. That's a stress free position I am happy for.
Roger. I also identify with the Honda guy, but I am also thankful for what I have, the great country I live in (the US), the opportunities, the successes, even the poor decisions (lessons learned), etc.
Being out yesterday, I just read the column and comments (from yesterday). A hearty, and late, congratulations on 5 years of blogging from one who has learned much from you and the commenters.
Somewhat related to the questions of why you do it (please don't stop) and your favorites (I have not yet, but will go back and read them), are there any gems of knowledge (investment, which may or may not have made money, or otherwise) that you have taken from commenters that you would be willing to share?
Thanks, again,
JCarr
Brilliant post Roger. Ok, it was only good! Seriously though - the idea of building margins into your life (not only financial) can paper over a world of errors. Leaving room for unexpected expenses in a household budget is not only prudent, sometimes it can keep sanity in tact!
I appreciate the "stay on your own mat" concept. As a distance running junkie, the biggest mistake I see people make during road races is trying to beat a person in front. If the focus is on the course itself rather than other competitors, runners will find they will improve their position over trying to beat someone else. The corollary to "stay on your own mat," investing and life is unmistakable.
disagreement is good! it really boils down to not wanting to stress about things beyond my control..except the Red Sox in October. Paying off a modest house and saving a little bit does not require being wealthy. A neighbor was foreclosed and for him it sucked, it was ruinous. For whatever reason (maybe timing?) there was no bailout. Personally I would never want to sweat something like that out.
JCarr nothing comes to mind off the top. The Raftery post was just fun and there might be something wrong with the picture. Blogging is a fun endeavor, usually, makes a contribution (even if it is a contrary indicator) and has opened doors to a lot of fun things that I would not have otherwise been able to do (go on the exchange floor a few times, go on TV every so often, bend the ear of some interesting people etc).
Excellent post Roger and I fully concur but you can see from the original story as well as some comments here why the politics of resentment and self-righteousness is successful.
There is a strong streak of Calvinist moralizing in America that the unfortunate probably deserve what they get (unless they are of our tribe) but since we can not even reliably capture and convict criminals it is doubtful any judgment of what someone 'deserves' will be accurate even when their act appears egregious (as it surely will given the sensationalized zest with which our news media and politicians retell the story in the own words, not infrequently, using their own facts).
Stay on your own mat (but I would add it does you no harm and possibly much good to reach over and assist when a neighbor loses balance if only because you may be the one to stumble next).
RW a life of service, YES! obviously that plays a big role in the Nusbaum house (dog rescue for Joellyn, firefighting for me) and hopefully readers of the blog likewise. a life of service can be independent of "getting your knickers in a twist" (as one former colleague used to say) about certain things like someone trading in the ole Coupe de Elegance for a Yaris.
I believe Coupe de Elegance is a Frank Costanza reference.
I also help with rescue dogs and i disagree with you. It is not about somebody deserving their fate or other such nonsense arguments.
It is simple like with dogs. You reward bad behavior and you can expect more bad behavior. You reward good behavior and you will get more good behavior.
i don't think i said anything about anyone deserving some fate.
Roger
No you did not, but I do think some of the other posters had nonsense arguments.
I am still against any programs that reward bad behavior from joe six pack to the head of a big bank. These rewards need to stop as they will become habit forming.
the crux of the many who have disagreed with this post (myself included) is that we pay taxes which the government uses to bail out the irresponsible. If someone put a gun to your head and said give me money so I can give it to those other guys, he would be thrown in jail. But it seems to be OK for the government to do the same. Thanks for a great and controversial post. And keep up the good work.
I think someone kind of said what I wanted to say, but not being on any government tit is reward enough for me. Anon 7:44 makes a great point about rewarding bad behavior. So long as we continue it, so will the bad behavior. Americans are a whiny bunch and government cheese seems to quell that for a bit. Cheese and whine. Man, I'm in rare form today. But really, we're not solving any of the underlying behavioral problems. As a result, they continue to get worse. I'm just waiting to see when the economy turns if the savings rate will drop. I really hope it doesn't.
For the "Calvinists" that cry foul over the various bailouts - unfortunately it is the system in which we live. The beautiful, yet ugly, part of the American enterprise system is that we are able to participate in the system. If you feel strongly enough, do something! Call your congress-person, heck, run for congress! But in the meantime, stay on your mat and offer a balancing hand if you are able or inclined.
wont the turning of the economy (70% consumer) have to include a decline in the savings rate?
Paul (a former coworker who taught me a thing or two) you apparently had a second cup this morning, nice!
For a robust recovery, I think the answer is yes, Roger. There are a number of consumer-related headwinds at work here (no pun intended)--high unemployment, wage reduction among the employed, reduced home equity, etc.--in addition to a higher rate of savings. Personally, I'm in the camp of a less-than-robust recovery.
wont the turning of the economy (70% consumer) have to include a decline in the savings rate?
Does it have to? I would say 'no'. Presumably a lot of the problem w/ consumer spending is job losses or the fear of losing one's job. I think once people get jobs again, they'll spend. The question is, will they also save?
Will it go down? Probably. So I guess it's important to monitor how much.
Stay on your own mat sounds like a reason to stop others from expressing their opinions concerning government policies (bad policies).
Peoples free speech about government boondoggles should not be discouraged.
8:23, 1+1 does not equal eleven.
I'm surprised with all the rhetoric today there is not a mention of how luck plays a role in our lives. Bad Behavior is a misnomer in many cases as many people, trying to do the right thing experiecne bad luck.(Warren Buffet has done several pieces on this subject.) In our own case, my wife and I worked hard, saved and lived below our means. We achieved a pretty good financial status because of it. However, we have accumulated significant wealth over and above those efforts due to good luck. Just as some folks experience bad luck, there are others of us that can truly claim to have experienced good luck.
I like reading this blog because of the emphasis you put on responsible financial behavior. That's the way I live too but Anon 8:25 has a great point about luck. My wife and I have worked hard but we've been very lucky as well. Realizing how lucky you are helps keep you modest too!
The problem is who sets the rules people are supposed to obey and who punishes them when they don't do what they are supposed to? In the absence of a superior moral position, executive/judicial institutions and a greater capacity for force I mean. Pretty difficult to conceptualize that system without some moral imperative, a "deserve" of some kind if you will, much less justify the content of training but the real point probably is: Who decides and who benefits?
As Paul wisely points out, the nature of our system dictates that complaints be registered, usually via a representative, and that representative may not listen unless there is either a contribution to his or her next election campaign or enough voters make it clear he or she may be replaced unless some attention is paid and a response delivered. Takes some organization; individual complaints, registered or not, tend to produce indifferent or contrary results.
But all this moral philosophizing does make me recall that nearly perfect scene between Clint Eastwood as the bounty killer William Munny and Gene Hackman as the sheriff Little Bill in the movie, "Unforgiven." It played masterfully because Eastwood does not portray Munny as psychopathic, amoral or even particularly cruel: He slaughters everyone in the bar because he has set himself that task and is nerveless in battle; Little Bill lying wounded on the floor gasps, "I don't deserve this," and Munny simply looks at him with a kind of cold pity before finishing him off saying, "there is no deserve." A little tough on average life expectancy perhaps but it's certainly simple enough.
Roger's metaphoric summation is not for everyone I'm sure but a focus on ones own life (and dedication to service) seems quite compact and relatively easy to follow, avoiding stepping on other folks' mats while offering service at need (and doubtless reserving right of push-back if someone steps over uninvited). One could do worse.
For myself, I have to echo Anon 9:10AM (and Don): I've been skillful but also lucky and am very grateful for both; some days at least am not entirely certain I earned all of it either.
I think Roger has it right: first mind your balance on your own mat. Secondarily you can agitate for whatever societal or political change you want to see - but first mind your balance!
Today's post ties in closely with yesterday's about Japan; the long reigning Liberal Democratic Party of Japan stayed in power for so long by delivering "stimulus dollars" to the right constituency at the right times. This didn't build a robust economy though.
"The American Republic will endure, until politicians realize they can bribe the people with their own money." ~ Alexis de Tocqueville
Posters today seem to be arguing for and against a "helping hand". I would like to suggest a distinction between a helping hand freely provided by a neighbor or stranger and a entitlement/stimulus provided by the government. You can be in favor of one or both of these - but they are very different concepts.
"We have the right as individuals to give away as much of our own money as we please in charity; but as members of Congress we have no right to appropriate a dollar of the public money." ~ Davy Crockett
Oh puhlease, not the 'luck' nonsense again.
I like the Chicago maxim regarding public expenditures:
"What's in it for me?"
Obviously, so do many other Americans.
Given that there are vastly more stupid-reckless-unlucky voters than smart-prudent-lucky ones, why would your Congressman care? Why do you think that the stupid-reckless-unlucky are being bailed out in the first place?
Isn't democracy great?
Luck nonsense?
So do you believe everyone who is poor is that way because of their own fault and everyone who is rich is self made?
Oh so my neighbors who bought a house for 350k and refinanced it for over 500k and bought a pool, furniture, two 50+k cars were not irresponsible they were just unlucky. I should feel sorry for these poor unfortunate souls.
The banker who put billions and billions of crap in an SIV off balance sheet because they knew it was crap that needed to be hidden were not irresponsible they were just unlucky. I guess I should feel sorry for the head of the bank also.
If you keep on rewarding irresponsible behavior you had better start expecting more of it or you are severely do not understand.
anon 10:20n thats a very true and very sad point
Roger - Wow, you certainly hit a nerve with this post!
We all make decisions based on the thought, "what's in it for me?" and Honda guy is no different than over-leveraged guy. The difference is ones tolerance for risk and skill at risk management.
Maybe if we practiced the fine art of "staying on our own mat" and ran the course rather than against other racers, we could drop the zero-sum game and all profit? Just a thought...
(cup #3 Roger)
hitting a nerve; must be the log cabin Libertarian in me
Or that backhoe job you keep talking about.
there is a waiting list to buy the backhoe for whenever it might be for sale. seriously.
With the construction economy in doldrums why bother with a waiting list for a backhoe? Plenty of heavy equipment available cheap these days, particularly in Phoenix and surrounding burbs.
Friend and I were looking at an excavator just last month going for only $6k (guy was through with it and ready to pass it on but the cost of moving a machine that size was considerable). Bet you could find a used backhoe/front-loader in running condition for under $10k to start practicing with or, even better yet, have your neighbor teach you while he's able; get some friends/neighbors to join you in sharing expense/learning and it could make for some interesting and potentially useful afternoons.
"...log cabin Libertarian in me"
What?
Log cabin Republicans are gay Republicans as they say Lincoln was gay.
What the heck is a log cabin libertarian? And is there any possibility the pretty wife of yours may be available :)
Luck nonsense?
So do you believe everyone who is poor is that way because of their own fault and everyone who is rich is self made?
EVERYONE? No. Most people, absolutely! So if you agree that the philosophies that are discussed here give you a 5-20% chance of staying out of poverty because most of what you get in life is based on luck, then sure, let's tailor our entire society around redistribution and punishing the "lucky" for their ill gotten gains.
Otherwise, let's stop with the 'luck' silliness.
I have no actual facts to back up how many people are affected by luck vs their own choice at having caused their poverty anymore then your "most" comment. Just personal experience. And I won't call your post nonsense at the same time.
"unlucky", "unfortunate", "have nots"...I agree with Bill B., the vast majority of "have nots" have not because of their own decisions, not because of a sickness, calamity, or victim status.
Note, I said "vast majority", because there are indeed some folks who are unfortunate and deserve our help, but they are not a majority.
On Maslow's hierarchy of needs, a huge swath of our population is perfectly satisfied at the first few levels, preferably on someone else's dime. Esteem and self-actualization aren't 'needs' to these folks.
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