Immigration and the New American Reality


“I don’t want my child to grow up in the US.”

That’s a simple and direct statement from a financial professional who moved to Europe earlier this year. Her child will grow up learning between four and six languages and without the attitude/belligerence she sees in US schools. Plus college and healthcare are free.

Europeans pay high taxes. However, because so many expenses are included in those taxes, they have more money available to spend than most Americans do. That’s driving a faster economic recover in Europe than the US is seeing.

That prompted me to look at the data on migration. What are the trends? You might be surprised.

  1. Both legal and illegal immigration peaked prior to the recession in late 2008. The trends since are downward. The declines started during the Obama administration.
    • The illegal immigrant population peaked at 12.2 million in 2007.(2)
  2. Most illegal immigrants living in the US have been in the US for more than ten years. They are homeowners and taxpayers.
  3. Mexico no longer accounts for a majority of illegal immigrants. The majority now from from a combination of Central America and Asia.
  4. Mexico provides the largest number of LEGAL immigrants to the US. (1) Most Hispanic residents in the US are legal residents. (3)
  5. Recent immigrants from Mexico tend to work in the US for a few years and then return to Mexico. Pew reported in 2012 that net immigration from Mexico was zero, with the number of people leaving the US matching the number entering.
    • This “breakeven” has little to do with US immigration enforcement. People are leaving for a lower cost of living and better social services.

FT_17.04.17_unauthorized_update_2015-1The State Department estimates that 9 million US (non-military) citizens are now residents of other countries. That’s up from 4 million in 1999. However, the government has no formal mechanism for tracking citizens who move overseas. The actual number could be lower or much higher.

  • Seniors are part of the out-migration. Financial advisors recommend considering moves to places like Costa Rica in order to be able to maintain a reasonable standard of living on Medicare. (5)

The US is changing relative to other countries. There are a growing number of valid reasons for not wanting to live here, and that will have an impact on the economy and employment in the future — probably driving more jobs and business investment offshore. Don’t expect driving people and money out of the US to improve job prospects and the economy here. That’s naive in the extreme.


  1. Homeland Security, “Yearbook of Immigration Statistics 2015.”
  2. Jeffrey Passel and D’Vera Cohn, “As Mexican share declined, U.S. unauthorized immigrant population fell in 2015 below recession level,” Pew Research Center, 25 April 2017.
  3. Jie Zong and Jeanne Batalova, “Frequently Requested Statistics on Immigrants and Immigration in the United States,” Migration Policy Institute, 8 March 2017.
  4. US State Department, “CA by the Numbers,” updated June 2016.
  5. “Retire Overseas . . . and Live Better for Less . . . ” International Living, undated.

The Fiduciary Rule: What’s the Fuss?


Many people may say, “I don’t have any investments. This doesn’t affect me.” ben_franklin

Well, not exactly.

Most people aren’t financial experts. If you don’t have investments now, you hopefully will be saving money for retirement in the future. (If you plan to live on Social Security, well, the only way Social Security covers retirement living costs today is if you move out of the US to a lower cost country like Costa Rica. How’s your Spanish?)

Even if you’re counting on winning the lottery to cover you old age or breaking the house in Vegas, there will be times when you’ll need financial advice. It may be about where to put your money, or whether to buy or rent, or how to finance a home or car. Almost everyone has something on which they need financial advice. You’re probably no exception.

That’s why understanding the idea of “fiduciary” and who is and who isn’t is important.

How do you know you’re getting the best advice? How do you know you’re getting good advice? How do you know the person you are asking for advice has the knowledge to help you and isn’t lying to you for his own profit? Who’s responsible for keeping him (or her) honest?

It’s a problem. Remember Bernie Madoff and all the harm he did? A lot of money simply disappeared. And he wasn’t the first.

Most fraud doesn’t involve Ponzi schemes (what Madoff did). A more typical scenario is: “Investment X is better for this client than investment Y, but I get $100 for selling X and $200 for selling Y, so I’ll recommend Y to him.” The advisor gets a little more money; the client gets an inferior product. Will it make a huge difference for the client? Maybe, maybe not. Is it the right way to do business? No.

In fact, the Feds think that people are giving $17 billion in “excess fees” to retirement advisors now.

Giving sales people incentives to sell specific products is common throughout retail, not just something that happens with investments. How about the person who sold you a home theater set-up? Or your computer system?

“Spiffs” are bonuses paid to retail salespeople for selling a specific product. The term isn’t usually applied to financial products, although the underlying idea is relevant. Companies run competitions with potentially significant awards based on sales volume.

The Department of Labor (DOL) Fiduciary Rule is simple: it requires retirement advisors to act as fiduciaries.  That is, they must place client interests ahead of their own profit motives. To me, that’s the way advisors should behave, all the time. It shouldn’t require a regulation to make it so.

Fiduciary (legal term): An individual in whom another has placed the utmost trust and confidence to manage and protect property or money. The relationship wherein one person has an obligation to act for another’s benefit.

The problem with the DOL rule is the general problem with government regulation. The government enforces rules through

  1. Licensing requirements for sales people
  2. Regulation of investment companies, and
  3. Surprise inspections and tedious paperwork.

The extra bookkeeping and storage involved in the latter adds to overhead cost for the advisor.

In the Medicare insurance sector, salespeople have to keep records of every sales call for ten years and be able to produce those records for inspection when asked. Think about what that means.

My problems with the DOL rule are:

  1. Can’t we find a better a more efficient and effective approach to enforcement?
  2. We should impose the rule on all forms of financial advisor, not just investment and retirement advisors. That means including bankers, insurance agents, credit union managers, tax advisors, etc. Anyone who can affect your finances should be covered by the rule.

What you need to know:

  • The fiduciary rule as now written doesn’t apply to everyone from whom you may see advice on financial decisions. Buyer beware.
  • One guide to consider: Is the advisor open about what they earn from the different products they sell? Are they willing to recommend products they don’t sell? Are they willing to explain the reasons for their recommendations to you in plain English?


  1. Eversheds Sutherland.
  2. Investopedia, “DOL Fiduciary Rule Explained as of May 23, 2017.”
  3. Li Skinner, “Figuring Out Fiduciary,” Investment News, 9 May 2017.
  4. Federal Register, 8 April 2016, v. 81, no. 68, Part V. Department of Labor, Employee Benefits Security Administration, “Definition of the Term ‘Fiduciary’; Conflict of Interest Rule — Retirement Investment Advice.”
  5. Heidi Shierholz and Ben Zipperer, “Here is what’s at stake with the conflict of interest (‘fiduciary’) rule,” Economic Policy Institute, 30 May 2017.

The Latest Bearing Sign for the US Economy


The Federal Highway Administration reports that highway travel has declined from theben_franklin last quarter of 2016. That fits with weak consumer spending data from the first quarter of this year — but is a surprise to many economists.

Retail sales at gasoline stations are down 4.8% from this time a year ago. Those sales include gasoline, snacks and other items stations sell.

In reporting this, the Wall Street Journal speculates on a number of possible causes, including immigration enforcement.

The Journal doesn’t cite two obvious causes:

  • The decline in tourist visits to the US — down 16% from a year ago, and
  • Uncertainty about healthcare costs that may be causing consumers to cut spending.

The drop-off in tourism affects all industries that serve tourists:

  • Hotels and recreational facilities
  • Transportation, including air, rental cars and gasoline
  • Restaurants

The decline in this industry is a big deal and affects a lot of jobs as well as city and state tax  revenue.

It doesn’t look like consumer spending is going to drive economic growth.  If it doesn’t, is there anything else that can? Historically, the answer largely is no.

Further, Trump has alienated trading partners who might be interested in seeing our economy recover — Mexico, Canada, China, Germany. The downside of “America First” might be “America Alone”.


  1. “Americans Tap Breaks on Driving,” The Wall Street Journal, 27-28 May 2017, p. B12.
  2. Kate Taylor, “Tourism in the US has drastically declined since Trump was elected,” Business Insider, 17 May 2017.

The AHCA: Warren Buffett’s view


If you haven’t seen this, Bloomberg quotes Buffett as saying:

The AHCA bill is a “huge tax cut for guys like me. And when there’s a tax cut, either the deficit goes up or they get taxes from somebody else.”

Mr. Buffett said healthcare’s high costs put the United States at a disadvantage relative to other countries.


The US Economy: Lessons from NASCAR


Apparently the government isn’t the only group subject to “alternative facts.”

Some web sites selling tickets hype the popularity of NASCAR. However, do you see the irony in this excerpt from the Ticket City website?

In the world of auto racing, NASCAR ranks as one of the sport’s most popular form. The $3.1 billion organization has been filling speedways to capacity for decades and the NASCAR following is only getting stronger. With an average NASCAR ticket price ringing in at $107 for the 2017 season, the sport has made attending races a reasonable feat in comparison to its racing counter parts like Formula 1, and the 2017 season is one of the most affordable in recent years..

The most iconic of all the NASCAR races, the Daytona 500, or the Super Bowl of NASCAR as it has become known, carries NASCAR’s highest priced ticket, but it may not be as pricey as you would think. In 2017, the Daytona 500 average ticket price settled in at $137 a pop. While the Daytona International Speedway currently holds nearly 101,000, following renovations to the track which reduced the number of available seats. (1)

Yep, the sport is so popular that we’re reducing the number of seats available.

USA Today has a different take:

Think NASCAR’s falling attendance and last season’s low TV ratings have lessened the cost of race tickets this season? Think again. (2)

Even with the reduced seating at Daytona, the track failed to sell all the seats this year. Bristol had sold out 55 consecutive races until 2016. Further, there are third party websites that are advertising 75% discounts on ticket prices. (4)

The bottom line is disposable income. Some US households have money left after spending on necessities; many don’t. Ultimately, the government owns the issues that are draining consumer wallets: health insurance and care costs, education cost and the burden of student loans, home financing. Until consumers are provided some relief, these issues will continue to strangle economic growth.



Your Health: The Right to Life?


The US was founded on the promise of “the Right to Life, Liberty and the Pursuit of ben_franklinHappiness” in Jefferson’s Declaration of Independence.

From the start, the relationship between the country and this promise has been at best inconsistent and sometimes ironic. After all, the principal writer of the Declaration, Jefferson, was a slave-owner.  So for whom was this promise made? Everyone? Or the wealthy, the planters, the slave-owners and the merchants? (Remember, there were no factories — that was before the industrial revolution.)

The inconsistency continues to this day.

We have groups concerned with whether babies or born, but not with what happens to them after they are born. How long do they live? What’s their quality of life? As Ed Cara notes, in some areas of the US, children will now have shorter lives than their parents. (2)

A new study in the Journal of the American Medical Association talks about discrepancies in life expectancy. I’ve blogged about this before, but it’s nice to see authoritative sources recognizing the issue.

The new statistical analysis shows that there is a difference in life expectancy of up to 20 years based on the county in which you live. In this analysis, the issues affecting life expectancy are

  • Income and poverty
    • The wealthy live longer
  • Race/ethnicity
    • Both Native Americans and African Americans have a shorter life expectancy
  • Regular exercise
    • Those who do live longer
  • Obesity, Diabetes and Hypertension
    • Shorten life expectancy
  • Education
    • Each level completed adds to life expectancy
  • Quality of health care
    • Higher quality is associated with living longer
  • Having health insurance
    • Having health insurance promotes longer life
  • Access to physicians
    • Having more physicians in an area helps

These factors translate into differences in life expectancy in the US based on where one lives:

  • Residents of central Colorado, coastal California and the New York Metro area live longer
  • Residents of eastern Kentucky and much of the Old South, especially along the lower Mississippi River, have a shorter life expectancy
    • The Old South in this case includes Alabama, Arkansas, Georgia (outside of Atlanta), Louisiana, Mississippi, Oklahoma and Tennessee (outside of Nashville)
    • The two metro areas, Nashville and Atlanta, offer much better life expectancy than the rest of their states

The states with the lowest life expectancy are those with the lowest spending on public health and health education.

One limitation of this study is that the analysis is at a county level, and there is only selected data available at that level regarding health. In particular, suicide is now one of the top 10 causes of death in the US. Suicide isn’t reported accurately or consistently, and there is limited data available on the causes of suicide.

A second limitation is the inter-relationships between some of the factors measured. For example, wealth is associated with having health insurance, with less use of cigarettes, and with living in an area with better access to medical professionals. By breaking the analysis into this much detail, does the report understate the role of wealth in life expectancy?

By the way, I use the image of Ben Franklin on some of these posts for the following reasons:

  • His brilliance
  • His common sense
  • His skill at negotiation
  • And among the Founding Fathers of the US, he became a profound opponent to slavery


  1. Laura Dywer-Lindgren, et. al., “Inequalities in Life Expectancy Among US Counties,1980 to 2014,” JAMA Intern Med. Published online May 8, 2017. doi:10.1001/jamainternmed.2017.0918.
  2. Ed Cara, “Kids Will Die Younger than Their Parents in Some Parts of the US,” Vocativ. 9 May 2017.



The Definition of Idiocy


Been there. Done that. Tried it. It failed. So let’s do it again!

To paraphrase Einstein’s famous quote, stupidity is doing the same thing over and over again and expecting a different result.

In surfacing the concept of “high risk pools”, Congress is reusing an idea that has failed repeatedly in the past when used with either auto insurance or healthcare.

The idea of the high risk pool is to group people who are very ill and provide a special pool of funding for their insurance. With government subsidy, the pool would in principle provide “affordable” rates for these people.

The ACA in fact used a high risk pool for people with pre-existing conditions (PCIP) during the transition period between 2010 and 2014. It produced the result that high risk pools have always produced:

  • Excessive costs to consumers
  • Cost overruns requiring bailouts
  • Fewer people being insured.

As Kaiser comments:

PCIP was operational in all 50 states by the fall of 2010.  By late 2012, just over 100,000 individuals were enrolled and program expenses had consumed nearly half of the $5 billion appropriation.  For the final 12-month period for which PCIP expense data were reported, net losses for the program were over $2 billion. (1)

State health insurance pools restricted access to only a small fraction of those needing coverage, and even then require huge bailouts from taxpayers.

New Jersey tried a high risk pool for auto insurance. It failed to prevent rates from soaring, and went bankrupt.

My interpretation: Basically, what Congress is doing in the AHCA bill is “passing the buck” either to future Congresses or to taxpayers.



  1. Karen Politz, “High-Risk Pools For Uninsurable Individuals.” Updated 22 February 2017.