Why Government Should Get Out of the Business of Being in Business

In business you must be creative and adjust to changes in technology and improvements or you will not survive.

A good example of this is the vinyl record industry. A client of mine in Pennsylvania worked in this industry from 1974 until 1983.  He denied the fact that cassette tapes were becoming more popular and that eventually his job would end.  But sure enough, it did.  He was so angry when he lost his job and income that it took him one full year to accept this event and move on to different employment. 

Here’s how the vinyl record industry declined as new audio technology and innovation pushed its way into the market:


As you can see, businesses must be creative, adaptive, and competitive if they want to survive.

Not so for government.

Take the Civil Service as an example.  For 133 years the Civil Service has grown and taken on a life of its own.  It has unions and lobbyists and no one is able to fire someone in the Civil service if they are poor performers. 

Here’s what Wikipedia says about the Civil Service an how it came to be and why its very structure promotes stagnation and inflexibility within government operations and employment:

1.  The Pendleton Civil Service Reform Act (ch. 27, 22 Stat. 403) is a United States federal law, enacted in 1883, which established that positions within the federal government should be awarded on the basis of merit instead of political affiliation. The act provided selection of government employees by competitive exams, rather than ties to politicians or political affiliation. It also made it illegal to fire or demote government officials for political reasons and prohibited soliciting campaign donations on Federal government property. To enforce the merit system and the judicial system, the law also created the United States Civil Service Commission. This board would be in charge of determining the rules and regulations of the act. The Act also allowed for the president, by executive order to decide which positions could be subject to the act and which would not. A crucial result was the shift of the parties to reliance on funding from business, since they could no longer depend on patronage hopefuls.

2.  In 1877, there was growing interest in the United States concerning the effects of the spoils system on the American political system. New York Cityestablished the Civil Service Reform Association to help address the issues, which would lead to several other organizations like it showing up in other cities. The presence of these organizations was one of the first steps in trying to up end the spoils system in America.

3.  The assassination of President James A. Garfield moved the Civil Service Reform from city organizations to a leading topic in the political realm. President Garfield was shot in July 1881 by Charles Guiteau, because Guiteau believed the president owed him a patronage position for his “vital assistance” in securing Garfield’s election the previous year.[4] Garfield died two months later, and Vice President Chester A. Arthur acceded to the presidency. Once in office, President Arthur pushed through legislation for civil reform.

4.  On January 16, 1883 Congress passed the Civil Service Act, which is sometimes referred to as the Pendleton Act after Senator George H. Pendleton of Ohio, one of the primary sponsors. The Act was written by Dorman Bridgman Eaton, a staunch opponent of the patronage system who was later first chairman of the United States Civil Service Commission. However, the law would also prove to be a major political liability for Arthur. The law offended machine politicians, or politicians who belong to a small clique that controls a political party. These politicians realized that with the Pendleton Act in place they would have to find a new means of income, since they could no longer count on donations from the wealthy hoping to receive jobs.

5.  The Act initially covered only about 10% of the U.S. government’s civilian employees. However, there was a provision that allowed outgoing presidents to lock in their own appointees by converting jobs to civil service. After a series of party reversals at the presidential level (1884, 1888, 1892, 1896), the result was that most federal jobs were under civil service.

In 1952, 1 in 22 workers were employed in the government but today it’s 1 in 3.8. This means that government hiring  is out of control.  If a business needs to make a profit to survive and thrive, how can it possibly do so if it must pay for so many government workers with a ratio of 1 to 3.8? 

It is time that government turned a profit and was in constant risk of going broke so that it would be forced to move with the times, cultivate creativity and ingenuity, and thrust from its midst poor performers — until then, we risk running the true grit of this country, private enterprise, into the ground.

Are You Aware of the “Rats” All Around You?

Obama ran his campaign on all the good “changes” he would bring if elected. Well, it’s eight years later and my oh my, how he has changed things and probably not in a way that most people were hoping for or expecting. His official executive orders (which have been titled as such) have exceeded most presidents, but in addition to these orders he has issued tons of executive orders masquerading as “presidential memorandums.” 

Using data from the American Presidency Project at the University of California:  Santa Barbara, the Daily Dot ranked all the U.S. presidents by the number of executive orders they have issued while in office.  With Obama’s Presidential Memorandums instead of orders, Obama has been able to fly past Congress with more “orders” than any other president.  

What kind of changes has Obama brought into the country?

  • He has increased healthcare costs by double in most cases.  
  • He has kept our borders open so enemies can easily come to the United States and kill people.
  • He has changed the debt of our nation from $9 trillion to $20 trillion in just eight short years.  This means it took 232 years for our nation to create $9 trillion of debt, but only eight years under Obama to add an additional $11 trillion.
  • He has lost the respect of many other countries with many of his screen-shot-2016-09-30-at-1-14-29-pm
    presidential memorandums.  This photo of a nuke bomb in a parade in Russia with, ”This bomb is for Obama” printed on it illustrates this lack of respect.   To me it says a lot about how Obama has made changes with potential enemies.

How could one person have such a gigantic impact on our nation in such a short time?  The answer is straightforward and simple.  We have become a nation of spoiled brats who have sat back and allowed these despicable changes to take place while we pursued more “stuff.”  

  • We want things before we can afford them.  
  • We want things just to have them.  
  • We want, want and want some more.  

Spoiled brat means a person in engrossed in their own self, or more specifically, in their smart phone! 

A few years ago, while traveling in New York City, I had time to wait on the street corner for a taxi to arrive.  The street was hustling and bustling with at least twenty people crisscrossing the sidewalk right in front of me.  I was taking in all the huge billboards, strange sounds, and diversity of people when I saw a large rat scurry out from a brick that had been kicked to the side; the rat was attempting to grab some popcorn that had spilled on the sidewalk.  It darted out and back between many people walking along the sidewalk for a distance of ten feet, over and over again.  I was shocked at how close people’s feet came to touching the rat!  I pointed to the rat and was going to scream to the people, but then I could see they were completely oblivious to anything except their own lives. They were all on a mission and focused so much on what they were doing and where they were going, they never saw the rat.

Our nation has become so busy, so engrossed in their personal lives, they do not pause long enough to the see the activities of the “rats” that have taken hold of their personal lives, families, communities, and country.  I don’t know what this means for our future, but it cannot be good.  So much has been said about change and how the only constant is change, I think we need to be very clear about our own values and our objectives in order to deal with the changes taking place around us that we are not even aware of.

My suggestion is to slow down and really listen.  We can all take more time to see what is really going on around us, to help others in need, take more time to help a child, to get our own families in order.  When our life is over, what will matter most?  I hope you will take five minutes to answer this question and then make changes to your own life that will help you be proud of what you’ve done, who you’ve influenced, and most importantly, what you’ve become.  

For help changing your financial world and getting it organized visit  

Money Is Emotional, at Every Level

I have discussed how emotional money can be many times now.  Emotional issues circling around money have been going on for thousands of years.  Well, here is a huge emotional event that I wrote about a year ago, how in the near future cities, counties and state governments will not be able to afford the pensions they are obligated to pay:  Pensions Are Creating a Huge Financial Risk.  It is easy to agree to pay something in the future to get elected today, but when time passes, the future elected officials are in a hard spot.  They have a mess to clean up they did not create.  This is a very emotional issue that will bring a lot of trouble and heartache to a lot of people.

I ask, how do you think the people living in Stockton, California liked their garbage sitting on the curb and not being picked up for weeks due to government woes over pensions and inability to pay government employees to provide basic services. Some of Stockton’s citizens were so mad they  talked about burningScreen shot 2016-08-31 at 4.13.36 PM down the mayor’s house. The mayor had no choice… he filed bankruptcy and pushed off the debts of the city, plus all the pension payments for previous employees and was able to pay to get the garbage cleaned up and restore other services.

My second question is, how do you think the retired Stockton city employees felt after they worked a lifetime and then their pension got pushed off with a bankruptcy?  Emotionally charged?   YES!  Do you think they will vote for that mayor or county commissioner again?  NO!

Who is to blame?  Who can be held responsible?  Do you hold employees responsible for pushing elected officials to give them raises, give them strong pension plans, to give them 401(k) contributions beyond anything you see in the private sector? Of course these past employees are really the responsible party to their own loss of income!  They pushed and prodded and threatened not to support, or not to vote for this official or that official until they got what they wanted.  Do you think these past employees realize they were the cause of bankrupting the city of Stockton?  Of course not. The current mayor cannot go back in time and see how much pressure was brought to bear to give them strong pensions and pay raises.  This is a perfect illustration of why money is so emotionally charged.

It has always been said throughout my lifetime that if you can get a government job, you are set for life.  This may no longer be the case.  Be aware of what is happening right now in IIlinois, and California and watch how Detroit and other cities filing bankruptcy handle the mess created by former employees. It is sure to get worse.

As elections draw near and healthcare costs soar, watch how everything plays out financially for the nation.  All the big health insurers have pulled out of the Obama exchanges.  One of these providers lost $2 billion this year! 

How will all this affect you… personally? The only way to weather what’s coming is to get in control systematically  using time-proven financial principles. Answer a few questions and test yourself for self-reliance:

  1. Do you save money on a regular basis?  
  2. Do you argue about money with your spouse?  
  3. Do you have a simple will or trust?  
  4. Do you have a pension plan and is it fully funded, or just numbers printed on a paper?  
  5. How much consumer debt do you have?
  6. Do you have any emergency savings?

Your answers to these questions will give you an idea of how healthy you are financially.  For more help go to and learn how to improve your personal situation… before it’s too late.

Government Can Do Everything Bigger and Better, Right?

This post is a follow-on to a blog I wrote last week, New “Fiduciary Rules” Handed Down from Department of Labor Will Change Your Life, about new Department of Labor rulings spear-headed by Obama that strengthen fiduciary standards for those involved in giving advice about investment securities in an effort to protect the consumer.  How many different ways can I tell you this rule is like droppings from a bull, horse, or sheep?   In my humble opinion, the U.S. government is stupid thinking it can do better than private enterprise.

Here’s why I think this. The Financial Industry Regulatory Agency, or FINRA, is the regulating arm for investing in securities.  It has already established sound financial due-diligence practices that have been protecting the consumer for 50 years.  So why this new set of rulings?

Here is why I think the U.S. Department of Labor created tougher standards:  With stiffer regulations, if a financial adviser makes a mistake, or the market melts down again like it did in 2008, attorneys can sue and we know what happens when attorneys get greedy…

There was no evidence of abuse by FINRA or financial advisers who voluntarily work under its regulating arm when the Department of Labor announced these new rulings, so to me it is like a “solution” looking for a problem.  My counsel is to avoid all qualified retirement plans, like 401(k), 403(b), SEP, IRAs, and even Roth IRAs.  Learn how to create tax-free retirement income you cannot outlive and leave Wall Street and government regulations to the birds.  To learn how, contact me:, 801-292-1099.


The Government Pension Time Bomb is Ticking…

The state of Illinois is broke.  That is according to economist, James Dale Davidson, who just spoke yesterday on what is happening to employees that have worked for the state, stating that their retirement paychecks will not be sent out next month.  What’s the problem in Illinois that could be a factor in other states as well in the future?

Consider these facts:

  • The number of Illinois state university employees, teachers and administrators actively working is 80,845.  The retired employees are over 50,000.  The average pension paid annually is $37,261.  The unfunded liabilities exceed $20 billion.  
  • The retired teachers in Illinois exceed 10,000, with an average annual pension of $50,494.  The unfunded liabilities for teachers exceeds $57 billion.
  • The number of retired state employees is 53,478 who are receiving an average of $33,115 annually.  The unfunded liabilities for retirees with pensions is $24 billion.

How would you like it if you had worked your entire life and had been receiving a monthly income for the last five years, only to find out that all of it will end in just 30 days? What would you do?  What will Illinois state retirees do?  And what will those currently working for Illinois do today, knowing they may not receive anything at retirement?

What about California’s retirees, and any other of the 50 states?  If you shutterstock_128683532 (534x800)are a government worker who is expecting a pension, it might be wise to begin asking for accountability from your employer. With trouble brewing in places like Illinois, it is only a matter of time before more audits begin to be conducted in other states and the media jumps on top of this story about how bad things are becoming in Illinois and many other bankrupt cities, counties, state and federal agencies.

Working for the government has always been considered a “safe” place as it doesn’t terminate very many employees and the benefits are great, when compared to private employment. But as soon as Illinois stops paying their retirees, this will all change.

We can learn from this, I am sure.  While it may be too late for some, each of us needs to re-examine what we are doing for retirement and make hard choices.  Learning the Money Mastery Principles will be the key to making the right ones.  As the Money Mastery program teaches:

  • Know the rules (Principle 5)
  • The rules are always changing (Principle 6)
  • Always look at the big picture (Principle 7)

While planning your own retirement, you can save a lot of heartache by not assuming others should know the rules for you or that things will never change. Be prepared by looking at the overall big picture so you can anticipate problems before they arise.

Pensions Are Creating a Huge Financial Risk for Cities, Counties, and State Goverments

A few weeks ago I noted in my blog, The Real Reason for the U.S. Retirement Crisis, a lack of stable income as the reason most Americans will not be able to count on a decent retirement — it will be the next big financial shoe to drop in this country.  This lack of stable income has come partly because of the elimination of the good old American pension plan… and that seems to now  include government pension plans as well, retirement options for government employees that until recently were thought to be untouchable.

City, county, state, and federal government pension plans are now in trouble due, in part, to a bit of greed by government employees, but mostly due to mismanagement by government entities of the tax dollars they used to fund these pensions. What happened to bring about this crisis? Let’s look at an example of a city entity to help explain how things have gotten so bad for many government retirees.

Pensions were set up by the government employer so that employees, after 20 years of service, would get 60 percent of their highest three years of income while they were working. The employee would pay nothing out of their compensation — it was entirely the responsibility of the city, county, or state (which, by the way, is how the pension worked in private sector companies until these all but disappeared in recent years as well).  The process to establish a pension plan for a city employee worked like this: the city manger would  approach the city council to explain the amount of money needed to pay in order to recruit aRetirement Ahead certain quality of employee to work for the city.  The city council would negotiate for a lower salary and try to justify it by offering a fully funded pension plan paid entirely by the city.  The city justified this by using tax dollars to pay for the services the employee provided.  So far so good, except the employee came to work and learned that elected officials don’t last very long and that the turn-over is huge with every election.  The employee then started getting the feeling that he/she was not indispensable.  So employees started negotiating  a higher pension plan so that after 25 years of service they would get 70 percent of their highest three years of income.  The elected officials only had to agree to this in the moment, but did not have to fund this for 25 years into the future (since they wouldn’t be around to worry about it anyway).  This made it easy for the employee to get a commitment at the time. This worked for a while until many city employees got greedy and wanted to add a 401(k) plan, which is called a defined contribution plan, to their benefits package. Many U.S. cities have commonly dealt with these defined contribution plans by stating that they will match anything an employee contributes to his 401(k), or 403(b), or 457 retirement plan up to 4 percent. Some city managers, in order to keep employees from jumping ship, pointed out to the city counsel that other cities and counties were offering 401(k) plans and that they better offer one too!

It has now been over 30 years since this process has been in practice and governments have had thousands of employees work to get their pensions and 401(k) retirement funds.  The city of Stockton in California got to the point where over 70 percent of the city’s pay outs were to previous employees, leaving only 30 percent to pay for ambulance services and garbage collection.  The mayor decided to file bankruptcy so all the contracts for pensions and 401(k) were terminated. This meant that immediately 70 percent of the money going to retirees was available to take care of city services, and of course Stockton citizens were happy again, especially because they did not have their taxes go up for the first time in 25 years. Of course Stockton city employees were mad, and some became destitute and had to go back to work at a time in their lives where, for some,  their health prevented this.  This caused great alarm for other government workers in the surrounding counties and the state of California.

Another example of this pension fund mismanagement is Detroit, which had to file bankruptcy because it could not pay out all its pensions to government retirees. You can Google-search and find that 83 percent of all the debt Detroit had was pension and 401(k) plan payments to city retirees.  I am not arguing the rights and the wrongs done here, and please understand I do not have a dog in this fight, not yet anyway.  I am simply trying to show what will happen shortly all across the United States with cities and counties trying to stay abreast of all their retiree payouts.

I have a client who worked 27 years for Los Angeles County and his annual income was $125,000 a year.  He retired early receiving $12,000 a month for life from his county pension and $480,000 from a 401(k)  plan.  He tried to get his pay increased, but when he couldn’t, he was able to get a huge increase in his pension instead.  He just recently told me he has been notified that his pension will be negotiated way lower in the near future and perhaps be discontinued all together.  He is sick about this.

With all this financial mismanagement, government employees are beginning to see that things are changing and that they can no longer work for the government under the assumption that they will never be fired and that their retirement income is safe and secure.  Government employees should consider making changes to protect their income and retirement money. I have been keeping my eye out to see how many other cities and counties look like they may fail. As I mentioned before, Detroit has bombed and so have 12 cities in California, including Stockton and San Bernardino.  I have not tried to find out all government entities that have filed bankruptcy, but for sure there will be more.

shutterstock_243126268The image of an iceberg says it all — remember what happened to the Titanic — it was thought to be unsinkable but the dangerous ice lurking just beneath the water’s surface did the ultimate damage.  Don’t let unseen icebergs destroy your family’s retirement nest egg — if you have a government pension, investigate thoroughly NOW what is really happening financially with your city, country, or state government. Don’t assume that all is well until you know it really is. If you want to learn how to create a predictable, stable retirement please email me: