Welcome to the November money and investing issue of NorthBay biz magazine. The North Bay is home to many of the state’s leading financial institutions, serving customers on the local, regional and national levels. This month, NorthBay biz taps this resource with thought-provoking stories that provide insight into issues that impact business every day in the North Bay.
There’s a variety of stories this month sure to capture your particular interests, including the cover story that looks at the increasing incidence of elder financial abuse and the tactics being employed by some financial institutions in order to protect
“Grandpa’s gold.” Plus, don’t miss all the other stories, features and columns that grace the pages of this issue of NorthBay biz—the North Bay’s only locally owned business publication.
Let’s face it: we’re getting older, not just you and me, but all of America. Not that it’s any consolation, but Europe is aging even faster. This aging of America is putting great pressure upon the government’s future ability to pay retirement benefits. As the baby boomers begin to retire, they’ll no longer be contributing to the system, but will instead begin collecting benefits, which over a short period could overwhelm the system. When you exclude non-working Americans age 1 to 19 and those 65 or older, you have a labor pool of people age 20 to 64. Right now, people aged 65 or older are equal to 22 percent of working age Americans. This is the dependency ratio. By the year 2050, that number grows from 22 to 37 percent. In Europe, the percentage of people over 65, as a factor of those between age 20 and 64, will grow from the current 26 percent to a staggering 52 percent. Think of the burden this will impose on the American and European economies. There are significant differences between the European and American versions of social support systems. Here, the consequences will be a severe challenge requiring some hard decisions. In Europe, unless there are drastic modifications, the programs are unsustainable—too many people, too little money.
For the past half century, America has been embroiled in a debate over whether it’s the proper role of government to enact and fund massive health, welfare and retirement programs. Where do the state’s obligations begin, and—the harder question—where do they end? At the heart of the debate is always the question of funding. How will we pay for these programs, not only in the short term, but also in the long term? The debate has raged predictably, primarily along political lines, with conservatives favoring a less economically intrusive government, lower taxes and more individual responsibility. Liberals favor a bigger economic role for government, supported by higher taxes, and a bigger safety net for those who can’t—or won’t—take responsibility for their own welfare.
We’re in the midst of a truly serious national debate focused on fixing Social Security. It’s a debate that should heat up leading up to the presidential election in 2008. Critics claim there’s no current crisis—and perhaps they’re right. Partial privatization of Social Security may or may not be part of the answer, but it’s put the issue squarely in front of the American public for debate. As far back as the 1970s, politicians were sounding alarm bells about the future of the program. Maybe it was scare tactics at the time, but not any longer. This country has prospered by encouraging entrepreneurial endeavors, developing emerging technologies that can be exported to the world in a low-tax, high-growth economic environment. This is a system that encourages productivity and gives us the flexibility to deal with an issue of this magnitude—a flexibility that Europe lacks. The already high cost of Europe’s existing social support system, coupled with its aging population, mandates further increases in public spending, which then have to be supported by raising already high tax rates. A tax increase suppresses growth and leads to more unemployment—sapping economic vitality and creating a nightmarish economic maze—leaving little hope of escape.
There’s still hope for the United States, but we’re faced with some difficult decisions that need to be made sooner, not later, if we hope to escape this ticking population bomb. Are our politicians capable of finding real solutions? Will they continue to act in a totally partisan fashion, worried more about which party will get the credit (or blame) than about doing what’s right for America? It’s not a simple problem to fix. It’s one that the best and brightest of both parties should collaborate to solve. Our economic future is on the line. Can we find the courage to make the tough decisions now to ensure our future strength or, by doing nothing and remaining divided, simply watch as we slowly, inexorably slide into the maw of a financial abyss?
Have you ever had a discussion with someone, let’s say about politics, and delivered your viewpoint with resounding clarity, backed by indisputable facts, presented in a totally logical progression only to have the other person respond as if you were speaking Chinese, unswayed and unmoved from their point of view? A recent study asked 30 males, with strong political party affiliations, to watch a political debate while having an MRI brain scan. The scans showed extremely high activity in the frontal cortex, anterior cingulate and posterior cingulate. These regions of the brain control emotions, conflict resolution and moral accountability. After the debate concluded, there was high activity in the ventral striatum, which is the reward/pleasure zone of the brain. Unmoved throughout the debate was the dorsolateral prefrontal cortex, which is most associated with reasoning!
According to Michael Shermer in Scientific American, “It appears as if partisans work to get the conclusion they want, then massively reinforce themselves for doing so.” Lead researcher Drew Westen summed up the study saying, “The implications for law, politics and business are of great concern. Even scientific research can be undercut by ardent theory-holders, in spite of double-blind studies, replication and peer review.”
It appears many of us suffer from “confirmation bias.” This occurs when we selectively choose evidence to support our already existing beliefs while ignoring or reinterpreting nonconforming facts to allow unconscious emotions to masquerade as inner debate. Thusly, we satisfy our concern for critical thinking and blithely go forward feeling our beliefs justified. Now you know why you can never win an argument with a zealot. They’ve convinced themselves they’re right, and no amount of reasoning can change their dorsolateral prefrontal cortex. It has no reason to work with anymore.
That’s it for now. Enjoy this month’s magazine.
