By Loyd Eskildson

Author Jane White chose a good topic, and an eye-catching title. Unfortunately, that's about all that's good about America, Welcome to the Poorhouse (FT Press/ 2009). She immediately (page 1) gets off on the wrong foot by asking "Are You Better Off Than You Were As a Kid?" It's a puzzling and meaningless question, at best. Then she tries to answer it using 1982 dollars to compare average weekly earnings from the early 1970s to 2005 - why the choice of 1982 dollars, or the year 2005 (instead of 2008) or a vague starting point (early 1970s)?

Finally, she lists The Four Biggest Sources of Financial Stress:

• Empty Nest Eggs
• Unaffordable Homes
• Overpriced Colleges
• Credit-Card Debt

Wrong - while these areas do reflect areas of considerable stress, they are not the 'root cause.'  The single biggest source (root cause) of financial stress in America is the offshoring of American jobs to benefit Wall Street.
 
Empty nest eggs are a problem, and White makes a good point reporting that defined-benefit plan coverage has dropped from covering 44% of the workforce to 17%. In their place, employees now either have no retirement plan or a largely-self-funded and inadequate 401(k) plan. Why 'inadequate' - 401(k) assets have fared poorly over the stock market's last decade, and are doing even worse in today's low-interest rate savings vehicles.

Moreover, many workers end up depleting their retirement funds when faced with financial problems - job losses, large medical expenses. However, we need to ask why are workers finding fewer defined-benefit retirement plans, losing jobs, incurring large uncovered medical expenses? Because so many American employers are competing with Asian firms where employees earn far less, lack retirement and health benefits!
 
Fortunately, unaffordable homes is a somewhat declining problem, 'thanks' to dramatically falling home prices resulting from the popped housing bubble. That, however, assumes you've been lucky enough to have retained your job over the past decade. Unfortunately, too many of those laid off are finding that new jobs, if obtainable, pay considerably less than their old jobs, again thanks to pressures created by off-shoring American jobs! Even those who made rational home-buying decisions based on historic rates of home inflation and expected earnings increases and were lucky enough to retain their jobs may be finding themselves in a financial bind. The good news is that government programs and state pressures for banks to adjust mortgages are having some impact, and it is expected that these will be expanded and extended.
 
Overpriced colleges are a problem only if parents are dumb enough to let it be one. True, college costs have increased scandalously, across the board. However, it's still possible for most to avoid $40,000+ annual tuition and room and board expenses by attending local state-supported community colleges, colleges, and universities while living at home!  Further, parents and students need to be more realistic about what they expect from a college education - researchers have found dropout rates near 50%, and that nearly 50% of graduates take jobs that don't require a college degree.

As for White's assertion that "with so many service and factory jobs being outsourced to India and China, we've got to aim for the majority of the next generation to get a college degree" - that's hogwash, at best. The key issue is, as economist Alan Blinder (Princeton) puts it -  "Does the job require being provided in person?" It is not "Does the job require a college education?" Even elective brain surgery can be outsourced. Unfortunately, professor Blinder predicts 30-40 million service jobs will be offshored in the coming years. (Don't cry for the unsubsidized high-cost private colleges. They only need to return to more sensible salaries for professors, professorial work-loads and support-staff levels of the 1970s, stop indulging professors' quest for sabbaticals and research that, for the most part, tells us more and more about less and less (and isn't even cited by their peers), and create ways for students to graduate in two or three years.)
 
Credit-card debt is the last of White's 'sources of financial stress.' Again, we need to ask "Why are credit-cards becoming a road to disaster for many Americans?" Answer - because of increasing wage and benefit pressures due to American corporations competing with Asian firms!
 
Treating the symptoms of off-shoring (eg. mandating much higher employer contributions to 401(k)s) is not the answer, as White implies and suggests.  The answer is to limit offshoring of American jobs! (This also includes the heretofore bottomless well of H1(B) etc. visas, and allowing illegal immigrants to find employment in the U.S.) Why have we done this? Part of the answer is that most economists confuse increasing GDP (benefits businesses - they buy low from Asia and sell higher to Americans) with improving life on Main Street.  It hasn't.  (Most economists are also too busy creating arcane mathematical equations that address 'new issues' that most of us couldn't care less about, instead of doing something useful.) Regardless, Wall Street is happy to endorse and repeat this economic malpractice first formulated 200+ years ago by Adam Smith and David Ricardo, PRIOR TO the Internet, fast, reliable, and cheap trans-Pacific transportation, and hundreds of millions of increasingly well-educated and very-low paid Asians looking to move into urban jobs.

We forget that America, Japan, Korea, China, and India all required trade protection to develop their economies! Thus, it's hardly rocket science level thinking to envision how trade protection can also protect a mature economy from decimation! 
 
Fareed Zakaria, editor of Newsweek International, recently pointed out that many Americans took terrorism as the defining issue of the new millennium - it wasn't. While we focused on terrorism, China (and to a lesser extent, India), took over America's future. That's what Jane White should have focused on in her book.

Jane White is founder and president of Retirement Solutions, LLC., which promotes 401(k) reform and provides investment education. In 2007, at the U.S. Department of Labor's invitation, White presented recommended 401(k) contribution rates to the ERISA Advisory Council. She is a regular contributor to Employee Benefit News, and maintains contact with over 300 print and broadcast journalists who use her as an expert on issues related to retirement planning.

Loyd Eskildson is retired from a life of computer programming, teaching economics and finance, education and health care administration, and cross-country truck driving.  He's now a reviewer for Basil & Spice.

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