I had the opportunity to interview Jane White, author of America, Welcome to the Poorhouse. In this post, I intend to offer my review of the book as well as analyze her arguments and statements made in the interview.
Although White does an excellent job of raising the right red flags, there are several flaws in the changes proposed in her book. For the most part, I found that her argument lacks a strong understanding of economics as well as a false sense of entitlement.
For example, White proposes that companies be required to match 9% of an individual’s annual salary into a 401(k) plan. However, she fails to calculate the economic impact on companies. Further, she believes that any company with slim margins should layoff part of the staff in order to pay the 9% to others. Effectively, White will have slowed corporate growth and increased the unemployment rate.
Further, White strongly believes in the social contract or that the wealthy are responsible if not obligated to subsidize expenses such as college education for lower income tax payers. Why am I entitled to a part of the earnings of another individual? Now don’t get me wrong. It is my personal belief that individuals with excess income should seek out good opportunities to help others. However, I do not believe that the government has the right to dictate how that excess income is spent especially when you consider the inefficiencies in our government.
Further, White asserts that primary and secondary schools are free so college should be too. That comment is wholly unfounded in truth. For example, I paid my property taxes this past November. Approximately 90% of the bill went to the local primary and secondary schools. In fact, I will more than pay for the expenses associated with my children (especially since they are both under two).
White also asserts that corporations deceive Americans. She repeatedly refers to credit card promo offers and loans such as ARMs as bait and switch tactics by banks. Bait and switch assumes that an individual believes that he or she is receiving Good X when in fact Good Y is delivered. A credit card promo offer does not satisfy that condition. A promo offer is just that, a temporary promotional offer. There is no false representation. I do agree that too many individuals fail to fully appreciate the cost of the interest after the promo period, but that is the fault of the individual. Besides, the larger issue is why someone is using a credit card to begin with. If you do not use them, then a promo period is not really an issue.
Last, though certainly not least, White fails to estimate the financial and economic impact of the large tax burdens that she is proposing. In fact, she fails to recognize in several instances that a tax burden will even result from her proposed legislation. Case in point: She suggests that the government fund the 9% match for small companies. However, she denies that tax payers will have to fund the match. If that is not the case, then the government will have to simply print more money and cause inflation.
I agree with White that change is greatly needed in America. We must change our spending and saving habits. White does a fine job laying out how we arrived at the situation in which we find ourselves. I also agree that there are bills that Congress should pass. However, I do not agree with what White is proposing. I believe that there are too many unresolved issues surrounding her suggestions that could be potentially detrimental to our economy and society.
I do not believe that the government is responsible for my or anyone else’s retirement. I believe that we as individuals need to make the necessary changes in our homes and not blame corporations or require the government (i.e. other tax payers) to bail us out.
Further, White suggests that we should expect the government and other tax payers to pay for our college education. Yet, she never suggests that families adequately save by using 529(b) accounts for example. As I mentioned at the beginning, White believes that the government, wealthy citizens, and corporations are responsible for our financial well-being and that we are mere victims without any power to prepare and pay for identifiable financial events ourselves.
In summary, this book speaks as if Americans are incapable of making good decisions and that we are constantly being lied to by corporations and politicians. While I am not so naive to think that either group always has my interest at heart, I do firmly believe that I am responsible for my own decisions. If I decide to use financial instruments such as credit cards or ARMs, then I am responsible for understanding the terms. If I do not understand, then I’m the fool for not asking more questions. I do not need the government to coddle me as White suggests.
But maybe you’ll disagree. I recommend reading White’s America, Welcome to the Poorhouse for yourself and arriving at your own opinion and conclusions. To purchase the book, visit Amazon.com.
Disclosure: I received a free issue of this book in order to write a review. I was in no other way compensated nor was I given any instructions per my review.