Book Review & Giveaway: “America, Welcome To The Poorhouse”

poorhouseAuthor Bio: Jane White is Founder & President of Retirement Solutions, LLC, which promotes 401(k) reform and provides investment education.

Publisher: FT Press.  A compact 247-pages in hardcover.

Summary: This is one angry, no-nonsense book!  Jane White blames more politicians than I can name for causing the mess we’re all in.  She plays no favorites and thinks both parties are corrupt.  Phil Gram (R-TX) deregulating the banking industry is the genesis of this crisis, while Chris Dodd (D-CT) is blamed for carrying bank deregulation further by deregulating exotic financial instruments.

Jane even questions whether Bernanke knows anything about economics.  One of my favorite assertion of her’s is that big business owns both parties, and politicians are just playing puppets to their lobbyists.

In a great irony, Jane writes that Congress has a higher standard of living than the taxpayers who subsidize it.  So true as the average salary for a House and Senate member is $174,000 a year, or 4X the US median wage.  Meanwhile, as of 2006, 290 members of Congress were receiving an average pension of $61,000 a year!  As a result, those jaded politicians stay in politics for way too long and take way too much of our money.

The solution for everything seems to come from putting lobbyists out of business by introducing campaign reform.  Furthermore, we should refuse to contribute to Congress and instead, fund a citizen’s revolt!  Jane concludes by saying America needs to prepare for an “Economics Olympics” with higher education as the key to winning gold.

I found myself agreeing with much of what Jane says.  She writes with acerbic reality that just stuns the reader.  It doesn’t matter whether there’s a Democrat or a Republican in the White House, money will eventually control their decision making.  Since it’s inevitable we will have self-serving, corrupt politicians, we need to do our best to educate ourselves on the economic realities of various policies.

A TASTE OF WHAT’S INSIDE:

Chapter 1: Why You Can’t Retire From A 401(k) Plan: You Won’t Have 10X Your Salary In Your Account At Age 65

* Australians have it good and we don’t.  The typical 30-34 Australian will have assets of around U$540,000 when they are ready to retire vs. $43,000 for the typical American.  The reason for the difference is Australia’s superannuation system where employers are required to contribute 9% of an employees salary up to $135,000 to his/her retirement fund.

Chapter 2: How To Save Wisely Until We Get 401(k) Reform

* One of my favorite parts of the book.  Jane asks why there is a silly $16,500 cap on 401(k) contribution.  I’ve written before that nobody is going to get rich and retire off $16,500/yr contribution for their careers.  The Australians can contribute $150,000 a year for $450,000 total in three years after the age of 60.  We have a preposterous $20,000 contribution cap over 60.  What a joke! We need reform.

Chapter 9: How Credit Card Debt, Home Equity Loans Get You Over Your Head In Debt

* ARMS & 0% credit card balance transfers are bait and switch tools according to Jane, so stay away.

RULES FOR THE GIVEAWAY: TWO BOOKS TO WIN!

* COMMENT: Share your thoughts on whether you think America really is in “the poorhouse”. In your comment, please share with us whether you think this downturn will permanently change consumption behaviors for the better, or whether we’ll regress back to our levered spending ways.

* TWITTER: If you have Twitter, feel free to follow us, Twitter the post and comment that you’ve done so.

* ENLIST: Sign up for our RSS Feed and comment to let us know.

Kelly and Geek were the big winners last week.  Will you be the next big winner announced in the next Katana wrap?

To buy directly from Amazon click here:

“America, Welcome to the Poorhouse:” What You Must Do to Protect Your Financial Future and the Reform We Need

Keigu,

Financial Samurai – “Slicing Through Money’s Mysteries”

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Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. Gordie Rogers says

    I’m not American, but from what I’ve read from many Americans who are concerned is that it does appear that there are bigger business interests controlling your government. The fact is that America could be independent and support itself without going into debt with an adjustment. Jesse Ventura, former pro-wrestler even said that the Democrats and Republicans are like two professional wrestling and it doesn’t matter much who wins.
    .-= Gordie Rogers´s last blog ..Lifestyle Design – Three Ways To Know You’re Ready! =-.

  2. Jesse says

    Recently started reading this blog and hooked. FS – great job on content and focusing discussion.

    Jane (author) correctly assesses that it is not the politicians themselves, they are simply conduits for corruption. You can turn this into a simple playground example. Let’s say the politicians are the bullies.

    Big business and lobbyists are the real puppeteers in the game. They’re the teachers. Not simply turning a blind eye, they actually encourage the bullies.

    We, the collective majority, are the sad kids who come home every day with a black eye and no lunch money.

    And here’s the kicker, any “whistleblower” gets trampled immediately just like hall monitors.

    Worst Metric: Not tying their benefits to our standards or vice versa. Without a common knowledge or vested interest, how can they truly how what’s “best” for us. That’s the most misguided paternalism I can think of.

    A related example was a comment made by African author, Binyavanga Wainaina. The idea was that foreign aide actually hurts people when organizations, which are not connected to the communities, make decisions in “the best interest” of the people and then simply wipe their hands of the matter.

    Solution: Hold politicians to standards of conduct governed by Hagakure. Dishonoring their Daimyo (us, the collective majority) should result in public Sepuka aired on CNN.

    I’m hoping to launch my own site by the holidays. Maybe we can Shudo? *Had a laugh when I wiki’ed the word.

  3. says

    @Gordie Rogers Hey there mate! Jesse Ventura is a smart man! It seems to me that we can either be optimistic and believe the people will rationally choose a good leader, who will do good. Or, we can be pessimistic and think it doesn’t matter who we choose, s/he’ll fook it up!

    Very cool you’ve been teaching English in Tianjin for the past 6 years Gordie. Have you told all your students about your site to practice English? Ever get the itch to hop over to North Korea and take a look since it’s so close? :) Love your latest guest post btw! Sam-urai
    .-= admin´s last blog ..Tuition Hike For The Poor Is Like A Tax Hike For The Rich =-.

  4. says

    Sounds like overall things I agree with. Financial education IMHO is desperately needed, but not from our government! I hope to achieve this with my blog.

    Overall the general population will resort back to our spending ways, this is because the government wants you to be in debt and based upon it’s economic policy it makes sense to have debt.

    I’m already following ya via Twitter (maybe even hounding :- ) ), does that count?

    I’ll take a Kindle edition please. Books are so 1990′s :-)
    .-= Investor Junkie´s last blog ..Lending Club Review – How to Become a Bank =-.

  5. says

    @Investor Junkie Education really is key, although I didn’t believe so during college. And then of course i was nervous during the LAST downturn and went back to grad school. I’m glad there’s no such thing as a part-time PhD program, or else I would have joined!

    Still not sold on the Kindle, sorry! I love the way a book feels and smells. There’s something about turning the pages of a nice book that makes it a forever favorite. Besides, people can steal a book from me on the beach no big whoop. A kindle, maybe a bigger whoop. Sam-urai
    .-= admin´s last blog ..Use The Sandwich Method To Provide Constructive Criticism =-.

  6. Jane says

    The sheer amount of wealth in the United States — factories, farms & mines, human capital, and all the rest — is so great that America is hardly in the poor house. Whether Americans will use their productive capital to stay out of the poor house is still open for debate. Given the wealth and income inequalities in the U.S., it is hard to see most people consuming at anywhere close to modern standards without occasionally resorting to indebtedness. Lowered rates of return on capital and low interest rates make high levels of investment leveraging attractive, both for reducing capacity through buy outs of competitors and for increasing capacity should signs of greater consumer spending appear. I don’t really see a significant deleveraging of America in the decades to come.

  7. Daniel says

    More than America being in the poor house, I think that there is a great divide between the rich and poor in the U.S. Maybe for the next few years, people will be more careful with their money, but one the next boom hits, there’s no doubt that people will jump at the opportunity to spend.
    .-= Daniel´s last blog ..Credit Series: Debt Usage =-.

  8. Neal@wealthpilgrim says

    Somebody really clever once said that we usually get the government we deserve. It was either Lincoln or Churchill I believe.

    I think that’s true.

    Let’s take our own medicine like big boys and girls. Own up to our own responsibilities – be willing to pay the price for our own mistakes. Let’s be willing to go without because we can’t afford it….and then demand the same thing from our government.

    We elected the jerks sitting in DC. Are we willing to elect someone (finally) who has the #$%@ to say “No….we really can’t!”
    .-= Neal@wealthpilgrim´s last blog ..41 Year Old Must Find A New Job Fast – Six Tactics To Make It Happen =-.

  9. says

    Joe – You don’t think a 22k contribution limit over 50 is shamelessly too low? 22k is only like $100,000+ less a year than what the Aussies can contribute! At least we can find solace that their tax structure is just as prohibitive as ours!

  10. says

    Neal – Winston Churchill sounds like a smart man. I wish I could interview him as I agree too.

    I’ve been taking my medicine far too long. Just open me up and say “aaaaaahhhh”.

    Stand up and fight! May we never surrender!

  11. says

    I would love to say that everyone in this country’s consumption has been permanently changed, but I don’t think that’s the case. I think there are still too many people that buy too much Stuff, and place more value on Stuff than on anything else. It’s sad, really.

    I don’t know if I could read the book though- my anxiety may get the best of me! ;)
    .-= Mrs. Money´s last blog ..Can Doing What You Love Become a Chore? =-.

  12. Kevin@OutOfYourRut says

    The current 401k program has people overconfident in their future ability to save. The 10x annual income sounds about right, but if you’re only saving 10-15% of your income, how do you get there especially in an on again, off again stock market.

    The other issue is inflation. Even if you can save 10x income by 65, what will it be worth by then? And what will it be worth 10, 20 or 30 years into retirement? People are living that long these days.

    Best to have at least a part time career plan to go with that 401k!
    .-= Kevin@OutOfYourRut´s last blog ..Fast Track to Frequent Flyer Miles =-.

  13. says

    @admin

    I admit it ignores the top 5% or fewer. In any change to code, one needs to ask what the impact is to revenue (i.e. tax revenue) vs benefit to the people. A Laffer curve in action. Are we going to offer a new deduction to the well-off while in the midst of the current crisis? Me, I’d love a higher limit. Make it 25% of gross income with no cap for all I care. It just won’t happen.
    .-= JoeTaxpayer´s last blog ..Mind Mapping =-.

  14. Jesse says

    @admin

    Recently started reading this blog and hooked. FS – great job on content and focusing discussion.

    Jane (author) correctly assesses that it is not the politicians themselves, they are simply conduits for corruption. You can turn this into a simple playground example. Let’s say the politicians are the bullies.

    Big business and lobbyists are the real puppeteers in the game. They’re the teachers. Not simply turning a blind eye, they actually encourage the bullies.

    We, the collective majority, are the sad kids who come home every day with a black eye and no lunch money.

    And here’s the kicker, any “whistleblower” gets trampled immediately just like hall monitors.

    Worst Metric: Not tying their benefits to our standards or vice versa. Without a common knowledge or vested interest, how can they truly how what’s “best” for us. That’s the most misguided paternalism I can think of.

    A related example was a comment made by African author, Binyavanga Wainaina. The idea was that foreign aide actually hurts people when organizations, which are not connected to the communities, make decisions in “the best interest” of the people and then simply wipe their hands of the matter.

    Solution: Hold politicians to standards of conduct governed by Hagakure. Dishonoring their Daimyo (us, the collective majority) should result in public Sepuka aired on CNN.

    I’m hoping to launch my own site by the holidays. Maybe we can Shudo? *Had a laugh when I wiki’ed the word.

  15. says

    @The Genius

    Do revolutions start with such tiny minorities? You’ve taken a special poll and found that IQ correlates to desire for a higher 401(k) deduction?
    To get back on track – for very high earners, the cap gain rate is a larger benefit than unlimited 401(k) deductions. The topic of a post I’ve been working on for a while now.
    .-= JoeTaxpayer´s last blog ..Mind Mapping =-.

  16. says

    Everybody makes it sounds like it’s those big bad bankers that caused all of this mess. But that’s not true.

    Here is what causes “The Great Recession” and IMO the order of blame:
    1.) The Government – (they were spewing a “house for everybody” poison…)
    2.) The Media – (they present stories about how this buyer was turned down, and put a spin that’s not the real story. Just what they want the story to sounds like… no scruples at all. we should stop calling them “the news” and start calling them “The Fictional News”)
    2.) The homebuyer – (We didn’t do our homework. We got in over our heads! The houses subprimers were bying was way to big of an expense to just blindly go forward. Part of the blame here also lies with the media though too. Seems like they were pushing us into unwise decisions. Let us also not forget the “strategic defaulters” out there, they are the ones that really can afford to make their house payments, but choose to default. We should all thank them for going there part to get out of this housing slump :|
    3.) The Banks – (they started to believe that they could get rich off of the government changes. The started to think they were at a roulette wheel. They had a golden ticket, and started using it. Not to mention the derivatives)…

    I think if Banks didn’t lend money to subprime, lawsuits would have ensued. Unfortunately, banks started to believed the poison they were drinking was good for them (and better than getting lawsuits), eventually coming to a drunken stupor-like state and let everything fly. I still can’t believe they didn’t require any proof of income for lending loans… That was pretty dumb of them… Lawsuits or no…

    I’ll have to check out this book, sound like I’ll probably agree with her.
    .-= Moneyreasons´s last blog ..Christmas Ebay Auction Mistakes =-.

  17. says

    @Moneyreasons “Strategic defaults”, GREAT term! I gotta learn me some of that!

    You bring a good point up regarding “if banks didn’t lend money to subprime, lawasuits would have ensued”. You know what that’s all about right? It’s about EQUALITY! And you know which party fights the hardest for the poor who are likely subprime borrowers? That’s right, the current administration.

    Hence, are you blaming the current administation for all this mess more than the other administration?
    .-= admin´s last blog ..Tuition Hike For The Poor Is Like A Tax Hike For The Rich =-.

  18. says

    JoeTaxpayer :@The Genius
    Do revolutions start with such tiny minorities? You’ve taken a special poll and found that IQ correlates to desire for a higher 401(k) deduction?To get back on track – for very high earners, the cap gain rate is a larger benefit than unlimited 401(k) deductions. The topic of a post I’ve been working on for a while now.JoeTaxpayer´s last blog ..Mind Mapping

    Don’t get what you’re saying. You are arguing that the gov’t should reduce capital gains tax, instead of allowing wealthier people to contribute more to their 401K?

    What makes you think only wealthier people want to contribute more to their 401K? Presumptuous isn’t it? What makes you think a middle class earner, making $120,000 in household income and has minor expenses doesn’t also want to contribute $30,000-$50,000 to their 401k/annum?

    I don’t think only those making more than $250k in annual house hold income want to contribute more. We should all have the flexibility to contribute more!
    .-= The Genius´s last blog ..Boyer ’94 recognized as Virginia Business Person of the Year =-.

  19. says

    @admin
    The current administration is too new. IMHO, the problems started a while ago, and slowly grew into this mess. It’s more than the previous administration. It’s kind of like in Chemistry class and mix the wrong chemical (political policies, greed and carelessness), then bang…, you get a explosive reaction. Kind of like a perfect storm case.

    It’s complex that’s for sure! Definitely not a black and white issue, there are no real bad guys (except for some small mortgage lenders that were too greedy). I sure that none of the groups that I mentioned above tried to pull us down into a “Great Depression 2″ like economy though (well except for those “naked short sellers” heh heh). Just kidding any “naked short seller” out there…

    I do think it was stupid of Christopher Cox and his group to do away with the “Uptick rule”… the rule that was created to help prevent another “Great Depression”. Seems kind of ironic that a few months after they do away with that rule, bang… our market falls apart. When I heard that they were going that I thought to myself “WHY? That’s a huge mistake”. I still don’t know why they haven’t brought it back yet. They keep saying the will, but don’t (I think Barney Frank was the last to state that they were going to try to bring it back…). I think if they did, the DOW would again another 1000 or so points. While the “Uptick Rule” wasn’t perfect, it’s better than nothing.

    Both sides (include us and the banks) contributed to this debacle though. I’m sure neither side envisioned this result.

    Well, hopefully we’re past the worst part now (the current idea being that Recession is over). And the president seems very focused on job creation, another big positive! Although I am worried a bit about the deficit…

    I’ve rambled enough… Thanks for a such and interesting post! I’m sure the book is an thought provoking read…
    .-= Moneyreasons´s last blog ..Christmas Ebay Auction Mistakes =-.

  20. Edwin says

    Sounds like a pretty interesting book. While I agree that both sides had a hand in wrecking our economy, I tend to disagree it’s because all politicians are self-indulgent bastards. While they sure as hell behave that way, I place the blame more on the political system itself. This isn’t to say there aren’t piles of corrupt politicians, but I do think some are trying to help.

    I don’t think the US is in the poorhouse, sure we are in a horrible economic situation and raising the debt. But the debt is nowhere near out of control even if it rose further. If politics doesn’t bog down the country, we can get out of the mess in a, hopefully, short time.

    As for consumption patters, the only way we (both individuals and businesses) wont regress to the old behavior is through either great self discipline (or management in the case of business) or through government regulation to stop the possibility of it from even happening (particularly in the case of heavy leveraged businesses).

  21. says

    Especially when you consider our unfunded liabilities how can anyone seriously say that the U.S. is in the poorhouse. Talk about over leveraged!

    I don’t believe, but I hope this turmoil has forever changed the consumers spending and more importantly borrowing habits.

    While it is a painful transition, just imagine of our entire nation got their debt under control and then learned to save like the Chinese. It would cause anemic growth for an extended period of time, but eventually we would all feel comfortable enough to spend money on not only what we need but even a little on our wants. Then we would have a truly stable economy!
    .-= LeanLifeCoach´s last blog ..The Standup Act (H.R. 1895) =-.

  22. Charlie says

    I agree that people should be allowed to contribute more to 401k, really as much they can afford. I’m still shocked at the amount of people who don’t contribute anything to 401k. I just bumped mine up this month, the 2nd time this year. And that’s an interesting stat on Australian co’s. 9% match would be SWEET! jealous.

  23. Jesse says

    @Kevin@OutOfYourRut

    Beyond retirement, another consideration people neglect is “end of life” costs. It appears people estimate retirement as a constant. Without being morbid, it can generally be said people experience a stage of decline near the end of their lives. This deterioration can happen quickly and drastically, resulting in a significant impact on finances. But no one seems to account for this! Think ancient village rituals (Eskimo elders on ice blocks) or The Giver (childish reference, but good book none the less).

  24. Jesse says

    @Moneyreasons

    To clarify, I don’t place blame solely on banks. I share your collective “sipping the corporate punch” mindset. My point was to highlight their influence on politicians in relationship to the book. On point #2… sub-prime is only a portion of the whole picture. The over-extending occurred across all levels of income. The sub-primes were just first the “party”. Since we hang in a teeter-totter balance, we still could see another wave of “prime” borrowers default (depending on what sources you read). You do address this with the “strategic defaulters”, but think sub-prime catch too much heat.

  25. says

    @Moneyreasons
    Your comment, “I think if Banks didn’t lend money to subprime, lawsuits would have ensued. ” is right on the money.

    I was in the mortgage business in the 90s when subprime was snaking it’s way thru the mortgage world, and it was being driven by activists threatening lawsuits. The banks responded with good old fashioned risk based pricing, then called subprime because it was more expensive.

    Then in the late 90s, early 2000s, the same activists threatened and brought lawsuits for discriminatory pricing, and state governments responded by passing fair lending laws that restricted the price and terms of subprime. Shortly after, we had the subprime mess. Now there is no more subprime.
    .-= Kevin@OutOfYourRut´s last blog ..Fast Track to Frequent Flyer Miles =-.

  26. says

    Thanks Financial Samurai for the wonderful review–and the intelligent comments! Please buy my book and give your Congressperson hell. I just got back from D.C. and met with a Congressional staffer who seemed indifferent to the financial/retirement crisis. I truly believe that the reason why France and the U.K. have already adopted financial services reform is because their politicians aren’t on the take. We’ve got to take America back.

  27. says

    @Jane White Wow, it’s Jane White herself!

    I’m pretty impressed with what the UK legislature is doing right now wrt taxing bonuses over 25K pounds by 50%. Ouch.

    I really hope we find a plausible way to fix the retirement crisis. What you write about regarding social security, 401k’s etc is quite true and quite scary.

    Congrats on writing such a poignant book. Thanks for stopping by!

    Best, Sam-urai

  28. ctreit says

    1) There is no question that big business has politicians in their pockets. The insurance and pharma lobby for one is behind stalling health care reform. Being a lobbyist is one of the best jobs in the US. They make a ton more money than four times the national average, which is really not that much money for a politician when you consider politicians’ lifestyles (maintaining two homes, etc.) and the money they control – a budget of a few trillion.

    2) How much does Bernanke know about economics? Probably more than Jane White does, or anyone of us does, which may still not be enough. After all, economics is a very fluid and imprecise science since it deals with human decision making.

    3) We don’t like government involvement in anything, but it looks like the private sector has not worked out for us in many areas. Two examples. Health care: our health care expenses per capita are about twice as high as they are in other advanced countries, but key numbers like infant mortality and life expectancy are lower than the average of these countries. As a country, we get less from the private sector, but we get to pay almost twice as much for it. Retirement: Jane White’s purpose is reforming retirement programs. The private sector certainly has not served the public very well. – I think we should not be so scared of having the government involved in certain areas in which the private sector has obviously not done such a great job. The government’s involvement in other advanced countries seems to work pretty well. Maybe we should copy some of their programs…

  29. says

    @Kevin@OutOfYourRut
    It’s good to hear from someone that was in the industry speak about the matter. To often, all we have to go on, is the sensationalism created by the media. And they tend to favor non-business party or underdogs, even when the business in question is in the right.

    I’m sorry to say that, but I think a lot of business matters are “Catch 22″ anymore.
    .-= Don@MoneyReasons´s last blog ..Creating My Kid’s Christmas Money Fund =-.

  30. says

    @Kevin@OutOfYourRut
    It seems like the bottom line is that successful capitalists CAN’T win b/c being rich/successful puts you in a minority. “A protruding nail gets hammered down” is what the Chinese say.

    @ctreit
    The #1 thing I think is for us NOT to rely on big government or the private sector to take care of ourselves. We need to take care of ourselves. We can’t count on anybody else but our selves, and that’s why education is key.

  31. says

    @ctreit
    comment on #3.

    I think it’s safe to say our government was already involved with health care quite a bit. Medicaid, Medicare and pricing. Also with rules and regulations to control health care companies, and not allowing national competition. To say our government will do a better job than the private sector is just plain hogwash. What’s the purpose to have government run health care? To increase quality of care, save costs

    There already is rationing with private run health care and it will be no different with government run health care. Nothing is unlimited, costs will have to be controlled.

    While for simple things (ie regular check ups) a government run plan might help save costs. The issue is the costly procedures and when you are near end of life is where you have dramatic costs. This is what’s bankrupting Medicare. How is our government going to save us money then?
    .-= Investor Junkie´s last blog ..American Express Merchants Win 10k Promotion =-.

  32. Bob says

    America is the poorhouse. We are in times like the Great Depression. The Great Depression caused the pre-boomer generation to be frugal. We are repeating history!
    .-= Bob´s last blog ..Credit Card Rebates =-.

  33. says

    @Bob
    Looks like the economy is raging back though Bob! 2009 is a bonus bonanza, and the job market looks to be tightening. I’m optimistic!

    @Kevin@OutOfYourRut
    I love how the government forgives tax on $38 billion in any profits for citigroup to save them billions. Coincidence gov’t owns 34% of the company? Nope. Everybody is in it together.

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