Saturday, April 19, 2008
CNN Report: "Debt Free Forever"
Today Ali Velshi hosted “Debt Free Forever,” a one hour interview and documentary on CNN. (Link.) The opening portion interviewed Robert McBride of the Rochester Institute of Technology. Other guests included Ed Mierzwinski and Washington Post business columnist Michelle Singletary.
McBride talked about how “good debt” (that which is supported by tax policy) becomes bad when overdone. Home values went up because real estate is perceived as finite, while wages did not, partly because of overseas competition for wages and outsourcing or offshoring pressures. He also talked about the way the Tax Reform Act of 1986, considered a public policy blunder by the conservatives in the heart of the Reagan Administration, helped sow the seeds for today’s crisis.
There was discussion on how FICO scores are calculated. The wisdom now is not to use more than one third of one’s credit limit, and it is all right to have more credit cards to increase the limit as long as the credit remains unused. The other is, pay your bills on time, at least the minimum. And pay down the high interest balances (credit card balances) first.
There was mention that many students can get ahead of the game on student loans by taking AP courses in public high school, working hard, and doing well on the AP tests. This gives them college credit at public expense and may help them graduate sooner from college. Certain kinds of teachers (typically of a different temperament from those of inner city schools for which the need is always advertised) are particularly effective in helping students do this, especially in math and all the sciences, components of a pre-med curriculum.
Michelle Singletary (“Your Money and Your Man: How You and Your Prince Charming Can Spend Well and Live Rich”, Ballantine, 2007) talked about financial planning for couples, and insisted than if a couple is serious about marriage, it should accept joint finances. Marriage is not about being “roommates.” Singletary wrote about filial responsibility in the Washington Post Sunday April 13, 2008, link here to discussion. This program did not discuss eldercare or long term care.
Finally, the show previewed a documentary film coming this summer in August, “I.O.U.S.A.” from Patrick Creadon, about how future generations will pay our debts. The current level of national debt is barely acceptable, he says. The concept of the law seems to refer to how much each American would owe if his own wealth were garnished to pay for it.
Today John McCain called for expanding the dependent exemption from $3500 to $7000. He said "the tax code must treat both married and single fairly. But parents raising children bear special responsibility..."
He also proposed an alternate tax table, that any American could chose, with only two rates and a generous standard deduction, without itemizing. This is more like the Steve Forbes "flat tax."