Tag Archive | "credit"

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Is Meritocracy Dead in America?

Posted on 10 April 2011 by Editor

Originally posted 2009-06-29 20:46:54. Republished by Blog Post Promoter

It was a beautiful day on Long Island today, as my daughter fussed over her cap and gown, getting ready for her high school graduation. The rite of passage that is the graduation ceremony was to be the highlight of our day, the last ritual before going away to college and beginning her new academic and social life away from home and the heretofore familiar surroundings. As most fathers are at this stage, I am very proud of her and her achievements to date and am confident she will do great in college.

As we arrived at the school athletic fields where the ceremony was to take place for the over 600 graduating seniors, the school principal and various dignitaries from the board of education were all lined up to fulfill their respective roles in the process. Among them the familiar face of Charles (Chuck) Schumer, the senior senator from New York was to give the commencement speech.

Opening the ceremony, the senator started with his speech, and I was surprised to hear the exact same one I heard 2 years ago at my older daughter’s graduation. Thinking this to be a bit odd and frankly somewhat lazy, I paid little attention to the drone of “how I became a senator” until the speech’s concluding remarks. The culminating point of the speech was Schumer’s self-aggrandizing statement of having successfully sponsored a new $2,500 tax credit program for middle-class families. Under the program, which will run for 2 years, families will be entitled to claim a $2,500 tax credit per each student enrolled in college, provided that their income meets certain maximum threshold provisions, which he stated would be capped at $200,000.

“For each of you earning less than $200,000, you will now be able to afford to send your children to college,” said the senator. “For those of you making $200,000 and above – well, God bless you.” The audience reacted with an energetic applause to this not so subtle example of class warfare rhetoric.

Setting aside the inaccuracy of the qualifying income limit (according to our research, when combined with the HOPE credit and other tax laws, the qualifying income limit may in fact be $60K for single and $120K for families), the principle notion of government sponsorship of college education based on financial need as opposed to merit should be of some concern.

By targeting the nation’s financial resources on programs which aid less affluent prospective students, we have fundamentally abandoned any notions of meritocracy and replaced them with a need-based social construct. While clearly a popular position among most Americans since it is portrayed as a caring gesture of the government (who would object to receiving a seemingly free gift or in this case benefit, i.e. the proverbial something for nothing?), we should examine its consequences, as in most cases many of them end up being unintended and in the greater context, undesirable.

Should the affluence level of the student’s family be the driving measure in the allocation of government subsidies for the student to attend college?

We are conditioned to answer this question in the affirmative, since in our politically correct dialect the less affluent are part of an affirmative action class. It is therefore our societal obligation, we are taught, to provide access to our nation’s financial resources on a preferred basis to those who are most in need of them, without regard to their individual contribution or their ability to make best use of such resources.

To what degree do we value fairness in the distribution of government financial aid for college education, or does the principle of equality trump all others?

As modern day Americans we don’t seem to place much value on fairness in the manner in which government serves its people. I’ve written on the distinction between equality and fairness in the June 13, 2000 article “Let’s not Confuse Equality and Fairness”. The article exposes our progressively degenerating definition of equality from what was our Founding Fathers’ original intent (equality of opportunity and not that of outcome) to the present socio-marxist interpretation of “… to each according to his needs.” In the long run, the dogmatic adherence to equality according to one’s need necessarily must lead to a polarization of the society and, instead of creating the intended harmony between income classes, it creates an increasingly greater rift between them. Meritocracy has to be, to a dominant extent, interwoven into the decision process in order for a society to survive and thrive.

Since we are now competing for minds in a global economy, how do we rank in their midst?

Since we’ve conceded that the optimal distribution of resources to produce the most effective outcome (only achievable through a merit based allocation) is not the goal, we therefore accept mediocrity as a satisfactory outcome. This, beyond any other force, is likely to have the most far reaching impact on the quality of citizens our education system produces over the long run. Comparing our policies with those of China, India and most European countries, where college entry is earned primarily through exceptional performance, the divergence in the intellectual quality of their college graduates as compared with those coming out of US schools is already becoming more apparent.

Many who would not consider themselves to be affluent, have historically not been able to qualify for any meaningful financial aid precisely because of their tax dollars being dispersed according to an equality formula that has very little, if anything to do with the benefit that the dollars spent will produce. In the case of my daughter, who graduated high school in the top 5% of her class of over 600, her acceptance into a number of very good schools was not matched with any meaningful financial contribution from the government. We ended up making a reasonable compromise, but I have not yet come up with a good way of explaining to her why her excellent performance and exceptional efforts were not recognized by the government of a country of which she will once be a leader.

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Quotation of the Day:

“Let us think of education as the means of developing our greatest abilities, because in each of us there is a private hope and dream which, fulfilled, can be translated into benefit for everyone and greater strength for our nation.”

John F. Kennedy (1917 – 1963)

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Our Values and Our Progeny

Posted on 10 April 2011 by Editor

Originally posted 2009-05-30 21:02:40. Republished by Blog Post Promoter

One of the greatest gifts we can pass on to our children is the portfolio of values that we spend our life’s years developing. And we hope that, as our children weave their way through the obstacles that they will undoubtedly face in their own lives, they will not only apply the values they’ve assimilated from us, but indeed grow them and, by so doing, create an even greater value legacy to pass on to their own offspring.

Impact of Observed Behavior on our Children

Our children are keen observers of life around them. They astutely learn from all that we do and they are much more apt to learn from observing of our actions rather than listening to our words. And contrary to general beliefs, over time they will more deeply assimilate behavioral traits from figures of authority, more so than from their friends and peers. To older teens and young adults such authority figures include not only parents, but also teachers, professors and coaches (especially those that are particularly liked and respected), and revered political figures. To many in the 18 to 24 age bracket, President Obama is certainly looked up to as such an authority figure.

So when a President holds such esteem in the minds of our young, as parents, we should be keenly astute about the messaging and actions that such a figure communicates to our children. Are his words and actions consistent with those that represent our values? Are the messages he communicates through the public media the same or at least closely aligned with the messages that we espouse on our children?

A Dangerous Message

In a speech on May 14, 2009 in Rio Rancho, New Mexico President Obama addressed the “crisis” in the consumer credit card industry, proposing sweeping new legislation to make the use of credit cards more consumer friendly. This he presented in a two part interaction with a local town hall audience. In the first, read directly from a teleprompter, he laid out his three principal pillars of the plan – simpler and easier to understand terms and conditions of credit, extended grace periods before assessment of penalties, and significant advance notice of changes in future credit terms. All, most would argue, reasonably prudent steps to aid consumers in the use of such credit facilities. The youtube video of the town hall meeting can be found at this link.

In the second part of the town hall meeting, the President went off the teleprompter and addressed direct questions from the audience. And there a troubling tone of the misguided intent behind the proposed plan became visible. The undercurrent in most all of the President’s responses can be encapsulated in the following:

* taking on consumer credit is an entitlement to which all citizens should have equal access
* access to credit should not be predicated on the consumer’s financial condition
* the credit issuers (i.e credit card companies) are the root cause of the overwhelming majority of cases of consumers’ credit excesses; the consumers share little if any blame for their own misfortunes
* there is an unfair class struggle going on between those with good and those with poor credit; this should be addressed by making credit equally accessible to all and on the same terms

One of his responses went as far as to firmly assert that credit should be available to all consumers, and particularly those who are not able to afford to cover their current expenses! As we pause to reflect, the magnitude of these assertions comes into focus, and we begin to deeply ponder the consequences of such a dogma.

Dissecting the Message

Credit is not a societal entitlement. It is earned, over time, as a result of fiscally responsible behavior. It is the reward for having made a positive contribution to one’s financial well-being. It is the leverage that we build for ourselves through the disciplined balancing of our earning and spending habits and of consistently meeting our obligations. No one is entitled to credit and it is not a right of passage.

Q: But are we not striving to create a society where everyone is treated fairly and equally? Should’t everyone have access to the same elements of quality of life (such as credit)?

A: No. Equality and fairness are not the same concept. In fact, in many situation they are impossible to achieve at the same time. One could argue that equality aligns with fairness only when decisions are based on a measure of quotas. In a merit-based environment, we inevitably find equality and fairness at opposite poles. To cite examples, the lottery would represent a quota situation – a fair and equal distribution of a chance to win a defined amount of money. On the other hand, high school seniors competing for entrance into Ivy League schools would represent a merit-based situation – there is no equality in the skills of the candidates, yet they end up being fairly distributed among schools of various levels of prestige.

Q: And which is overriding when both fairness and equality can not be achieved at the same time?

A: If we continue to believe in our founding principals, those which have served our nation for over 230 years, creating heretofore unprecedented prosperity for its citizens, the answer is remarkably clear. When our overriding objective is equality, the best outcome we can expect is uniformity and complacency. When our goal is fairness, we unleash great human potential that desires to distinguish itself from the equality of the masses and to soar high above mediocrity. Societal equality is an unbalanced state for the human mind to exist in. Fairness is a state of mind which reflects a peaceful and motivating coexistence among people.


What values do we want to espouse on our children? Do we want them to accept equality as a universal truth? Is the goal that we set upon them to strive to blend into the mass of equality? Should they be taught to await the improbable lottery event as the only means of possibly distinguishing themselves while staying within the dogma of fairness and equality?

The President’s message is teaching our children the worst possible lesson at a time when they are most vulnerable to misguidance and most susceptible to false promises How disenchanting is for our new generation of leaders to be taught that their aspiration in building their adult lives should be limited to becoming equal with others; that the results of their efforts will be no richer than everyone else’s.

We welcome your comments and suggestions, either directly inline, or via email to editor@nakedliberty.com.

Next week: “The Split Personality of the Common Man” addresses the inherent struggles between a desire for independence and acquiescing to become dependent.

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The ‘Another Fine Mess’ That is California

Posted on 10 April 2011 by Editor

Originally posted 2009-06-21 23:59:11. Republished by Blog Post Promoter

As Featured On EzineArticlesIn the immortal words of Laurel and Hardy: “Here’s another fine mess you’ve got me into.”

And there’s probably no better way to describe the situation that California, this once prosperous state, which from the days of the gold rush has attracted millions to its Pacific shores has found itself in. Its golden image, once a magnet for the ambitious, talented or simply enchanted by the beauty of its land and people, is now tarnished by years of fiscal mismanagement and irresponsible government spending.

It is wondrous indeed to note how a state with such riches in natural resources and richness in the diversity of its people can find itself in such financial ruin. The state of California (which if it were a country would be the 8th largest economy in world) has found itself unable to fund its current fiscal deficit exceeding $24 billion and service its debt of over $72 billion to its bond holders. By any standard definition of insolubility, the state of California is bankrupt. And while teetering on the brink of being in default of its obligations, interestingly the state’s constitution explicitly does not allow it to declare bankruptcy – a curious dilemma.

The reasons which have brought California to this sad financial state are well known and documented. Summarized, it could be captured in the simple premise of having made too many promises without the wherewithal to deliver on them. These include promises made to government employees, such as in cases of retirees ending up with multiple pensions, some in the six figures. They include overly generous social programs, extending across citizens and non-citizens alike; lax enforcement of state entitlements; increasingly hostile tax burden on businesses including a state sales tax approaching double digits. Also most would target the ineffective state constitution which mandates a 60% majority in the state senate to enact major financial reform. By all practical terms such majority has been virtually impossible to achieve, resulting in stalemate on any attempts to curb the state’s insatiable spending appetite.

Whereas the causes of the states virtual collapse can (and will be) studied by many social economist and political analysts, the practical matter of how to address the dilemma and provide a sustainable solution to the California crisis remains. Prior attempts by its governor Schwartzenegger to seek a federal bailout have fallen on deaf ears of President Obama, and rightfully so as the precedent set by such action would be dangerous and ridden with consequences beyond our ability to predict. Furthermore, no constitutional authority has either originally or through any amendments been granted to the federal government to provide for such a bailout.

So what options exist for California? The ones most commonly discussed include:

1. Providing government credit guarantees of California’s debt have been floated (CBS News Story) but generally discounted as too temporary and not addressing the core of the state’s fiscal crisis. Furthermore, guarantees of such an amount could negatively impact on the credit rating of the US government, which itself is struggling with mounting debt and looming inflation. As traditional with the democratic liberal wing, its chief democratic rep. Barney Frank of Massachusetts, chairman of the House Committee on Financial Services is in support of such measures.

2. Allowing the state to default on its obligations has also been floated, but appears to have the support of only the most extreme faction of constitutionalists. Opponents argue that this would undoubtedly create a dangerous ripple effect throughout the US economy, the cost of which would potentially exceed any bailout which would be offered to the state.

3. Aggressive tax increases (primarily in the form of sales taxes) to compensate for the precipitous fall in tax revenues have the support of many of the liberal democrats in the state senate. However, under the terms of the state’s Proposition 13, their enactment has become a virtual impossibility due to the 60% majority provision. Furthermore, California residents have over the last years become increasingly more vocal against that state’s excessive tax rates, further diminishing the possibility of any such actions.

What is discouraging is that no significant momentum exists behind a movement to address what is the root cause of the state’s troubles – state government inaction and excessive tax burdens. In order, first the state needs to procedurally address the ineffective provisions of its state constitution, including Proposition 13. Armed with new powers to reduce the tax burden on its citizens and enterprises, a well targeted reduction in state business taxes, and either personal income taxes or sales taxes would restore vibrancy to the California economy and begin to again attract new investments and spur an influx of productive sectors of the population back to the state.

While in 2005 the US Census was projecting California as one of the states with highest growth rates, in the recent years of financial turmoil the opposite has begun to occur, with residence relocating to less tax onerous states, among them Florida, Nevada or Texas, each with no state income tax.

Tax incentives (instead of tax penalties) have time and again shown that the empowered individual and the entrepreneurial nature which he harnesses are the most effective tools to bring about economic growth and financial health. California would do well by heeding to one of its greatest son’s prolific advice:

“I don’t believe in a government that protects us from ourselves.”
“The best minds are not in government. If any were, business would hire them away.”

 Ronald Reagan (1911 – 2004)


It would be wise for the California governor and state senators to read their state motto (“Eureka”) and in it recognize that the solution to their state’s woes has already been found, tried and proven. All they need to do is act on it.

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We welcome your comments and suggestions, either directly inline, or via email to editor@nakedliberty.com. If you would like to have your article published in Naked Liberty, please contact the editor at the above email address.

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