NeffZone: Money Matters

The song goes something like this: "Money can't buy everything it's true. What it can't buy I can't use. So give me money, that's what I want." All of us are interested in money to some degree, but if you delve too deeply into the subject you risk getting a headache.

For example, according to the National Priorities Project, tax cuts for the wealthiest five percent of Americans cost the U.S. Treasury $11.6 million every hour. In 2011, that top 5% will get an average tax cut of $66,384. The bottom 20% will get a cut of $107.

To put that in perspective, the non-partisan Center for Budget and Priorities says "the cost of tax cuts for upper-income earners is as big as the Social Security shortfall over the next 75 years." Citizens for Tax Justice claims that "if the U.S. reverted to Clinton-era marginal tax rates the U.S. Treasury would net an additional $72 billion annually."

When you think about these figures, it looks like taking more money in would be to the benefit of the government and by extension all citizens in this fair land. That might be true if our leaders were not inclined to just give away the cash. And I'm not talking about using your tax dollars to aid disaster victims around the world.

According to the Congressional Research Service the countries who hold the largest amount of U.S. Treasury securities (which they had to purchase) were: China ($1 trillion), Brazil ($193 billion), Russia ($127 billion), India ($39 billion), Mexico ($28 billion, and Egypt ($15 billion). This is how much in debt we are to those counties.

At the same time, we are sending foreign aid to those same countries: China ($27 million), Brazil ($25 million), Russia ($71 million), India ($126 million), Mexico ($316 million), and Egypt $255 million).

So, let's sum this up. We send foreign aid to these countries. They can then buy U.S. Treasury securities with the money we sent them. We are then in debt to them. Is your head hurting yet?

Okay, you say, this makes no sense. We need to run the country like a business. No business would make such an arrangement. Well, not so fast.

This week Goldman Sachs, one of the largest Wall Street investment houses, reported losing $428 million in the third quarter of 2011. Any sane person would assume that this would mean a tightening of belts at Goldman. Ah, but sanity does not enter into this equation.

The Daily Beast reports that through the first nine months of 2011 Goldman set aside $10 billion for bonuses to its employees. That works out to $333,000 per employee. These would be the same employees responsible for the third quarter loss. Says the DB: "That's the beauty of working at a major investment bank. Performance doesn't matter nearly as much as just showing up."

You might wonder what these folks are going to do with all that bonus money. I can't be absolutely sure, but I have an educated guess. A New York Times headline summed it up: "Luxury Goods Fly Off Shelves." The article goes on to report how Big Apple bonus babies are spending their loot: Chanel tweed coat $9000, Bianca platform pumps $775, Mercedes-Benz S-class sedan $200,000, Louboutin suede boots $2,495, Crème de la Mer facial cream $1,650 for 16 ounces. The list goes on. Tiffany's sales were up 20% last quarter. Oh my aching head!

All the money news is not bad though. It looks like some good news is coming down the pike for we commoners. A report out this week from Families USA details how federal health care reforms will affect Michigan families (http://familiesusa2.org/assets/pdfs/health-reform/helping-families/Michigan.pdf).

The bottom line is that from 2014-2019 federal reforms will mean health insurance savings for families. Households earning between $50,000-$100,000 will save $1,316 per year; $30,000-$50,000 will save $1,651; households earning less than $30,000 will save $3,175. It's not enough to buy $1600 face cream, but it's a nice chunk of change that could ease your headache.