Split Personality

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You may have noticed that I’m not exactly ideologically consistent.

In some posts you will find me waxing poetic about global warming, avoiding prejudice, income inequality, progressive taxation and the need for more upward mobility built into the structure of our society.

Why don’t we just call this character, “Gand-me.”

gandhi2

Gand-Me at your service…

In other posts you will find me scheming to hide every possible dollar of my income in tax-sheltered retirement funds, deifying Mitt Romney’s mysterious ability to get $102 million into an IRA, and waxing poetic about the ability of an early retiree with spending discipline to never pay taxes again.  (Go ahead click the link, it’s a great article on Go Curry Cracker.)

Shall we call this character “Mitt Romn-Me?”

images (4)

Name’s Romn-Me, good to meet ya!

So the obvious question is, what’s the justification?

Is this a simple case of hypocrisy?

Is the Gand-Me-esque high-minded rhetoric just a thin veneer papering over the real substance of my being; naked selfishness and greed (A la Mitt Romn-Me?)

It could be, but obviously that’s not how I see it. After all I want to sleep well at night.

And as it happens, I do have a justification, and it goes something like this.

In your own personal financial life, it is better to be hard-nosed, ruthless and ever cognizant of your own bottom-line.

No one cares more about your money than you do. And if you delegate the responsibility for your money to others, you’re placing yourself at real risk for being taken advantage of.

So when you’re dealing with how to manage your own money, you should always look to put yourself in the most advantageous position, seize opportunities that are there for you, and be ruthless, just as Mitt Romney was as he crafted his impossibly large IRA.

But when you’re thinking politically, it makes sense to have a broader focus. Your goal should be to create the best possible society for everyone, while being cognizant that most individuals are ruthless bastards (just like you.)

In other words, its better to try to model yourself after Gandhi or Mandela in the voting booth.

Regulation makes sense, because we we are all trying to position ourselves in the most advantageous way possible, and we need an impartial umpire to keep the peace and level the playing field.

Carbon taxes make sense, because it takes the  real risk of financial loss, to make us avoid expediency in our daily routines, and change our behavior for the betterment of the society as a whole.

Progressive taxation makes sense because everyone is trying to get what is best for themselves, and the rich undoubtedly have influence in proportion to their wealth. This creates incredible inertia for the concentration of wealth, and income inequality, which is (I would argue) bad for the health of society as a whole.  True progressive taxation acts as a needed counterbalance to this.

So while I applaud fiscal conservatism in the private arena, I find it distasteful politically.

As far as I can see, supply-side economics is a pretty fairytale that we wealthy tell ourselves in order to justify our own desire to not pay taxes. It quite simply doesn’t square with economic reality on any measurable level.

On the other hand, moral purity, it seems to me, is a quick pathway to the poorhouse when it comes to making personal financial decisions.

Put simply, it is the role of government (and by extension us as citizens,) to create the most just and beneficial society possible.

And just as simply, it is the role of the individual to act in a rationally self-interested way and to vigorously pursue his own interests.

I want not to be poor, or morally bankrupt, so I’m comfortable with these internal inconsistencies.

So I admit it. I have a form of multiple personality disorder. But as far as I can see, it’s better than the alternatives.

After all I am no more likely to begin to believe in political fairytales, than I am to go on a hunger strike.

I am eager to hear your criticism of this philosophy.

Agree, or disagree, your comments are welcome below.

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10 Responses to “Split Personality”

  1. Robert January 20, 2014 at 7:42 am #

    Since you are being a wee bit political about this, let me share a couple links.

    First, Mitt Romney’s IRA strategy has been strongly criticized by tax experts who wonder why he’d convert capital gains into ordinary income! But how he did it is reasonably explained by his equity capital business opportunities as explained here. http://www.theatlantic.com/politics/archive/2012/09/whats-really-going-on-with-mitt-romneys-102-million-ira/261500/

    Second, don’t forget about Hillary Clinton’s cattle futures trading. 10,000% returns in 10 months?! That beats Romney’s rate of return by a mile. http://www.washingtonpost.com/wp-srv/politics/special/whitewater/stories/wwtr940527.htm

    What do you think is worse? Using your privileged position as an equity capital executive (a position you earned by taking the risk of founding the company and creating the opportunities that you and your partners enjoyed, however privileged your start thanks to your dad) to make highly leveraged trades in your IRA, or using your privileged position as the wife of a state governor to enjoy trades made on your behalf by those whose business would profit from favorable state executive actions? Both are benefiting from privilege, but I think the latter has more trouble passing the smell test.

    Anyway…I think Mitt Romney would have made the better president. The poor execution we’ve seen from this White House wouldn’t have happened on his watch, I don’t think. I’m no LDS/Mormon, but I have to say I am impressed with the organization in that denomination. It has spawned a number of successful entrepreneurial businesses. Something about the Utah pioneer spirit, I guess. Or maybe the belief that someday they’ll be gods of their own worlds motivates them to develop management expertise here! But seriously, go down and visit an LDS cannery and church offices at a larger LDS church. I have done it a couple times because they will sell my wife and me bulk bags of whole wheat grain at the cheapest prices around, which we use for our own home-ground, home-made bread (the best!). We have found them very generous and helpful to non-members like ourselves, and we’ve not even gotten the missionary calls we worried would surely follow! But what really impressed me was seeing the highly organized systems they have in place to help members economically. The cannery idea and food storage builds self-sufficiency and the idea of having a safety-cushion for times of job loss or other troubles while encouraging healthy eating and saving money (imagine how many credit card debt spirals might be avoided if everyone did that?). The church offices had a regular employment office that offered counseling, interview coaching, training, etc. to help unemployed members find a job. They teach the skills that people need to find work, and they support one another in that. The LDS emphasis on the family (polygamy jokes aside!) is another strength; economic studies have shown that married couples are way ahead economically vs. divorced/single parents. The LDS emphasis on missionary service prepares young people for interacting with the public, develops sales skills, and in the case of foreign mission service, teaches a foreign language and cross-cultural skills; all of these are beneficial in business. LDS young people generally stay away from addictions (contrast that idea to legalizing marijuana at the same time we have instituted free mental health care via Obamacare; I know a young schizophrenic who got that way with marijuana use–we all get to pay for his treatment). And one of the features of LDS is volunteerism; I understand that the congregational clergy are volunteers as well as the rest of the members in their roles. I suspect that breeds a much more grassroots, egalitarian attitude than the pompous clerical attitudes of some more hierarchical denominations with professional clergy. Am I ready to convert to LDS? Not even close! They have some strange beliefs. But given all these characteristics, I was really interested to see what an LDS president might offer this country. I felt like the culture and skillset might translate into some serious economic improvement that was more than window-dressing and monetary manipulation but was based on actually educating people and helping them find gainful employment, encouraging small businesses and entrepreneurship. I’m sorry he lost, but it isn’t surprising.

    • Miles Dividend M.D. January 20, 2014 at 8:56 am #

      Robert,

      Bring it!

      I think you missed my point about mitt Romney’s IRA. I admire it. I would like to think that if I were in a similar position to him I would have a similar IRA. He’s a clever dude when it comes to his personal finances, that’s for sure.

      The problem I have with mitt Romney and his ilk is that they display blind spots as big as Texas in their political philosophy.

      Mitt Romney is not happy paying an effective tax rate of 12% or less. His attitude seems to be “nobody has it harder than the rich.”he wants to change laws to push his tax rate lower while simultaneously pulling the plug on the social safety net.

      All the things that have made this country great, be they FDR’s Social Security, Eisenhowers interstate system, Lyndon Johnson’s Civil Rights Act, and Medicare, these are all anathema to the supply siders.

      As to the LDS, my problem with mitt Romney has nothing to do with his religion, it’s his politics. In fact, one of the only Republicans that I respect(And respectfully disagree with), is Jon Huntsman, a fellow LDS practitioner.

      Finally, is not difficult to find politicians of any persuasion guilty of corruption. Power corrupts. And corruption is distasteful, regardless of who commits it.

      Keep it coming,

      AZ

      • Robert January 20, 2014 at 10:00 am #

        –I didn’t think (or accuse you) that Romney’s religion was a concern to you. I was just commenting on how I think aspects of LDS would have made his a very interesting and potentially economically/socially transformational presidency.
        –State intervention is sometimes necessary, but should be minimized. It is certainly subject to the Law of Unintended Consequences. That is true of the programs you mentioned. Not saying they didn’t do good, but do consider the downside: SS is now part of a massive debt problem; interstate highway system has been mostly positive but has transformed America in some bad ways as well, as sprawling suburbia and climate change evidences; the Civil Rights Act I won’t comment much on, but has had some unintended consequences as well, one of which is the conversion of the South to the GOP and the GOP to a party heavily influenced by religious fundamentalists; and Medicare has had consequences such as decreased availability of doctors in small towns as they increasingly decline Medicare patients.
        –The other issue with state programs like SS or Medicare is that they start small but then grow. Politicians can’t resist patronage. Lyndon Johnson was an expert at it–read “Path to Power”. The more people dependent on them, the more power they have, and the more power they have, the more people they make dependent on them. A vicious cycle. So a system like SS that originally only covered a small fraction of people because life expectancy back then was low now covers a large number of people. Very little adjustment has been made for increasing life expectancy and funding hasn’t been increased much either. So the economics are blowing up in our faces. Medicare is blowing up due to medical inflation–technology can blow up medical costs yet who is going to tolerate the ‘death panel’ to do a cost/benefit analysis or say that your family member can’t be treated? These are all unintended consequences, or at least not adequately accounted for when these programs were established. Yet politicians love them for the patronage. Romney was not far off the mark on his 47% comment though he misplayed it. The truth is that the majority of voters now are either government employees or on government entitlement programs (ranging from SS to Medicare to farm support to food stamps). The Economist had an article a year or two ago graphically depicting the rising percentage of voters in the US in this category over the past few decades and argued that we had reached a tipping point. Once the majority of voters are in this class, scaling back government will be well night impossible.

        • Miles Dividend M.D. January 20, 2014 at 5:36 pm #

          Robert,

          First things first. I am quite confident that we are in agreement on most really important issues.

          As for our politics, my sense is that you are of a libertarian bent, which I can understand. As for me, I’m a liberal, pure and simple. These are the prisms through which we see our respective worlds.

          I have no doubt it would be a lot of fun to sit down with you over a beer and hash all this stuff out. And that at the end of it neither one of our political views would be very much changed.

          I will respond to your above post point by point later.

          But first let me clear the air. I’m just responding to your points. I’m not accusing you of anything, nor do I feel you’re accusing me of anything.

          Debating this stuff is fun, but it’s certainly not worth alienating each other when we have more in common than not.

          Enough diplomacy.

          On with the war!

          AZ

          • Robert January 20, 2014 at 8:34 pm #

            I agree with about everything you just said. Including that I have a Libertarian bent. About the only thing I don’t agree with is having a beer with you. I don’t drink! LOL.

            You said, “bring it on” so I did. But I don’t want us to get side-tracked from what this blog is about, and I agree with you that we are unlikely to change each other’s mind. A little dialogue is fun; a lot gets tedious. I’ll probably let you have the last word and leave it at that (for now!). :-)

          • Miles Dividend M.D. January 20, 2014 at 9:20 pm #

            Let’s make it coffee.

            Alexi

        • Miles Dividend M.D. January 20, 2014 at 9:17 pm #

          Robert,

          My take on your points.

          State intervention is sometimes necessary, but should be minimized.

          This is opinion, no more, no less. And one that I disagree with. If the state can do more good than harm, there is no imperative for it not to do so.

          It is certainly subject to the Law of Unintended Consequences. That is true of the programs you mentioned. Not saying they didn’t do good, but do consider the downside:

          This is true, Robert. But equally true is the converse: State non-intervention is also subject to the law of unintended consequenses. The dominant ideology of laissez faire economics of the past three decades, has resulted in a stagnant economy, guilded age levels of income inequality, and a corrupt political and judicial system where money equates to speech. I do not believe that these were the intended consequences of Reaganomics, but they were the unintended consequences,

          I would never claim that there were no downsides to medicare, medicaid, the interstate highway system, SSI, or even the civil rights movement. I do eagerly proclaim that they were greatly good on balance and I am glad they exist. If you wish to live in a world without these; so be it. Come out and say it, and let the public decide if they agree with you.

          Medicare has had consequences such as decreased availability of doctors in small towns as they increasingly decline Medicare patients.

          Show me the Retiree that wishes there were no Medicare and I’ll show you a Koch brother. This claim just does not pass the sniff test. Madicare is HUGELY popular with seniors. I see them every day at work.

          So a system like SS that originally only covered a small fraction of people because life expectancy back then was low now covers a large number of people. Very little adjustment has been made for increasing life expectancy and funding hasn’t been increased much either. So the economics are blowing up in our faces.

          The fact is, there is a SSI trust fund surplus currently because the Baby boom generation contributed more than necessary. There will be a deficit in the future because of the the aging of the baby boom generation if we make no adjustment. It’s possible to fix this any number of ways (raise the FICA cap, liberalize immigration, cut benefits, raise the retirement age etc….) we just have to decide how to tackle it.

          Romney was not far off the mark on his 47% comment though he misplayed it. The truth is that the majority of voters now are either government employees or on government entitlement programs (ranging from SS to Medicare to farm support to food stamps). The Economist had an article a year or two ago graphically depicting the rising percentage of voters in the US in this category over the past few decades and argued that we had reached a tipping point. Once the majority of voters are in this class, scaling back government will be well night impossible.

          Romney was completely off the mark here. This argument seems to assume that high levels of government employment guarantees democratic votes. Simply not true. In fact the states with the highest percentage of government employment are the states that voted for Romney!

          http://www.nytimes.com/2013/09/28/business/the-most-republican-states-tend-to-rely-more-on-government-jobs.html?_r=0

          In addition retirees (Medicare, and SSI beneficiaries) are also more conservative than the general population and in fact voted for Romney.

          Also the focus on the “takers” who pay no income tax ignores the inconvenient truth that most “takers” have higher effective tax rates than Romney, himself! (they still pay FICA, sales taxes, SSI taxes etc.)

          As far as I can see, supply side economics benefits noone but 1%ers (like me), which is why Republicans consistently try to suppress the vote, raise distracting social issues, and jingoistically promote military intervention. It’s all to distract from the fact that conservative economics is largely welfare for the rich.

          And here’s the most important bit. None of any of this should influence how we make our day to day decisions in our personal lives or finances.

          We should all save more, invest passively, and take advantage of all of the wonderful opportunities in the miles game!

          Warm Regards,

          -Alexi

  2. AdamRx January 20, 2014 at 10:41 am #

    Alexi, I discovered your blog thanks to your interview with MMS. I have been interested in financial indepence for some time, but have not pursued it much outside of reading some of Mad Fientist’s articles. I am old in the miles game, and also in healthcare. I have some questions for you regarding family travel to Kyoto, and your thoughts on such things as 529C plans for your kids college funds. Would you email me at your convenience? Enjoying catching up on your past posts, Adam

    • Miles Dividend M.D. January 20, 2014 at 5:38 pm #

      Adam,

      Will do.

      AZ

  3. walterj January 21, 2014 at 10:58 am #

    There is a well known quote from Judge Learned Hand:

    “Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.”

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