Happy new year!

For the past few years, I've logged into my TreasuryDirect account on the 1st of the year to buy some Series I savings bonds. Last year I bought $2,009 worth of bonds to commemorate the year 2009, and the year before that, $2,008.

However, I was startled to see that for last year, the national debt increased by over $1.5 trillion, the largest single year increase ever! This equates to an increase of over $5,000 for every man, woman, and child in America. Imagine having to write the IRS a check for $5,000 for each person in your household (in addition to all of the taxes you already pay!) just to cover government spending for 2009.

The national debt is clearly out of control, and we as a people should not allow ourselves to be financially compromised like this. I don't run a credit card balance in my own personal finances, and I certainly don't want the government running a tab on my behalf. So I authorized a purchase of $5,000 worth of Series I savings bonds to cover my share, which will post to my account on Monday. I'm not thrilled about it (in fact I'm quite angry!), but until we the people can influence some responsibility in our government, it is what it is.

Thinking about Memorial Day also got me thinking about the important role that everyday people like you and I can have by buying government bonds, especially during times of national struggle. That said, I logged into my TreasuryDirect account and noticed that as of May 1, 2009, all Series I savings bonds are earning zero interest.

It doesn't matter when the bond was purchased--if you own a Series I savings bond (I'm currently holding $8,041.54 worth of them myself), it is not earning any interest right now. This is because the negative semiannual inflation rate (currently -2.78%) wipes out the fixed rate completely.

By the way, while I haven't been updating the blog as frequently as I used to, I have been posting videos on my YouTube channel, in case anyone is interested in watching and/or subscribing. In today's video, I mention that taxes would need to be raised by 80% (a scary thought!) to cover the magnitude of deficit spending for fiscal year 2009, and discuss how a nonchalant attitude towards the future financeability of our national debt compromises our financial freedom.

Sources:

U.S. Office of Management and Budget - Fiscal Year 2010 Federal Budget (PDF)
(Page 119, FY09: $2.186 trillion total receipts versus $1.752 trillion deficit)

I was working late tonight, and wound up leaving the office around 2:30 AM. When I got home, I decided to quickly check the news on CNN.com.

Earlier tonight, President Barack Obama appeared on television to plead the case for his economic stimulus plan, which would cost an unprecedented $838 billion, citing that this is not a "run-of-the-mill" recession.

However, the lead story on CNN.com was about Starbucks offering a coffee-breakfast combo to attract more customers in these trying economic times.

I can't help feel like the government, and the media, is increasingly out of touch with reality. While some might lead us to believe that current economic times are the worst since the Great Depression, the comparison seems hardly justified. Back then, devastating poverty, hunger, and homelessness affected millions of people.

It just seems like there's a big difference between being able to afford basic necessities versus not having enough extra money in the budget for premium coffee.

I'm not trying to make light of the situation, nor am I being cynical, but something just doesn't seem right here.

In celebration of Google's 10th anniversary, the company has created Project 10^100, a call for ideas to change the world by helping as many people as possible.

According to the website, Google's name expresses the goal of achieving great results through smart technology that starts small and scales dramatically over time to have a tremendous long-term impact. Project 10^100 is a similar attempt to produce those kinds of scalable results by harnessing the insights and creativity individuals in the global community who are interested in helping others.

Google is committing $10 million to fund up to five ideas filtered by a rigorous selection process and ultimately chosen by an advisory board. The submission deadline was October 20, 2008, and apparently Google received over 100,000 entries.

I too submitted an idea, which is based on several of the concepts I've been researching these past four years.

Watch Video: Google's Project 10^100 :: World Changing Ideas | YouTube Version

As part of the submission process, each entrant was asked to answer several essay questions:

10. What one sentence best describes your idea?

This idea would promote economic opportunity by refinancing the national debt to provide citizens with a safe and effective savings plan.

11. Describe your idea in more depth.

This idea was originally designed to either supplement or replace the traditional employer based pension plan. It will allow workers greater flexibility to change jobs while still keeping the same savings plan. It will also help eliminate the economic uncertainty in investing for the future while providing protection from a loss of pension due to corporate layoffs, scandals, or bankruptcies.

The theory behind this savings plan is to refinance our national debt. When a person refinances a typical loan, the goal is usually to attain a lower interest rate. However, the goal of this idea is to attain a different distribution of ownership. Taxpayers currently forfeit hundreds of billions of dollars each year to pay the interest on the national debt, and this money provides no benefit and is essentially lost to us. This plan will begin to slowly refinance those parts of the national debt that are issued at the highest interest rates, transferring ownership from wealthy bond holders and foreign central banks to average citizens. Freedom isn't free, but we the people should be the ones earning the interest.

12. What problem or issue does your idea address?

For fiscal year 2008, the national debt increased by more than $1 trillion, and American taxpayers paid over $451 billion in interest expense on the over $10 trillion in total debt outstanding. The government currently finances most of these deficits through the sale of bonds at auction, borrowing money from investors who might otherwise lend this capital to businesses and individuals to promote productive economic activity. Meanwhile, our country currently has a very low personal savings rate, and the average American is saving less than 3% of personal income. This savings problem is worsened by the fact that bank accounts are paying very low interest rates, and the stock market has been extremely volatile. The government needs to find stable long-term financing for the national debt that does not drain money from the credit markets, and the American people need an effective savings plan.

13. If your idea were to become a reality, who would benefit the most and how?

Everyone would benefit if we were able to refinance the national debt with individual savings accounts. The government would find stable long-term financing for our national debt, without the need to drain money from the credit markets. Businesses and individuals seeking credit would benefit, because when the government stops competing for this available capital, it may help lower interest rates for business loans. Also, the government would no longer need to borrow from foreign central banks, which means that instead of buying our bonds, these foreign countries could use their dollar assets to buy our goods and services, thus strengthening our economy. American citizens would benefit the most, because we would have the ability to save for our future while watching our savings grow. We would also have an investment in the country and a greater sense of responsibility and ownership in our democracy.

14. What are the initial steps required to get this idea off the ground?

The first step in implementing this idea will be the creation of a comprehensive draft outlining the function and structure of the savings plan. A detailed analysis of the logistics necessary for refinancing the national debt will also need to be conducted. This idea is extensive in scale, but much of the infrastructure needed for implementation already exists. For example, this idea could reinvent and revitalize some of the components from the traditional savings bond program, which has experienced dwindling participation in recent years as evidenced by bond sales. This idea could also leverage the electronic network used by the government's TreasuryDirect system, after making several ease-of-use adjustments to improve the user experience. Eventually, Congress will be needed to give the idea legislative approval, which may require a sponsorship by either the House Ways and Means Committee or the Senate Finance Committee.

15. Describe the optimal outcome should your idea be selected and successfully implemented. How would you measure it?

The optimal outcome for this idea will be achieved when participation grows to include all citizens and the money that taxpayers currently spend on interest payments for the national debt flows into our individual savings plans. Optimally, participation will be a transformative experience that encourages and enables people to be financially successful. The first large-scale measurement of success for this idea would start in 2017, when the government will need to start refinancing over $4.2 trillion in Social Security trust fund assets as projected by the 2008 OASDI Trustees Report. The Social Security trust fund is currently being used as a source to fund our national debt, and refinancing this debt will be a significant achievement in helping to ensure our seniors receive full retirement benefits. Another measurement of success will be when other countries become interested in our program and start adopting similar savings plans for their citizens.

The stock market hasn't been doing too well lately.

I'm definitely not the biggest fan of investing in the stock market, but I bought some stock today. It seems like people are starting to panic, and stocks have been going straight down for a couple of weeks now.

This morning at work, I saw that the market opened way down (again) after Congress passed the $700 billion bailout last week. So I bought all I could while prices were in a near free fall.

I am an American. For richer or poorer, better or worse, this is my country--and Lady Liberty is my girl. I will do my part. If that means buying some stock and keeping my cool while others panic, then I'll buy some stock.

And that's exactly what I did.

This is not a corporation--it's a country! This is not of the corporation, by the corporation, for the corporation--it's of the people, by the people, for the people!

Earlier tonight, Congress came one step closer to passing a $700 billion bailout package for the financial industry. While I am not one to rush to judgment before knowing and understanding the details, my initial reaction is one of anger!

In fact, I am reminded of a drawing I made a few years ago, with the American flag depicted as a combination of corporate bar codes...

Regardless of whether the situation warrants a bailout or not, I firmly believe that the current credit crisis has been caused in part by the federal government. In addition to the constant manipulation of interest rates, continual federal budget deficits have vacuumed increasingly large amounts of capital from the credit markets, sucking up money that might otherwise be used for legitimate lending and productive business activity.

Tonight after work, I went to see the new documentary I.O.U.S.A.

The film focuses on what it identifies as the four major deficits in America: the federal deficit, the savings deficit, the trade deficit, and the leadership deficit. And while the subject of economics does not usually make for edge-of-your-seat excitement, I thought the presentation was very educational and engaging. I liked it!

I was doing some additional research this weekend, and discovered that investors purchased $1.799 billion worth of Series I U.S. Savings Bonds for calendar year 2007. Assuming this dwindling rate of new investment were to remain constant in future years, the government would save only $21.6 million in incremental annual interest expense by cutting the fixed rate for these bonds to 0.0% (from an already low 1.20%).

It’s absolutely inconceivable to me that the government would thoroughly discourage savers like myself from investing in our country to save a mere $21.6 million.

Furthermore, at around the same time the fixed rate on Series I bonds was slashed to 0.0%, the government started sending out Economic Stimulus Act of 2008 rebate checks to eligible taxpayers. So it amazes me that the government could afford $152 billion to promote spending, but could not afford $21.6 million to promote saving!

In my humble opinion, financial strength is built not upon the shifting sand of reckless spending, but rather upon the solid rock foundation of saving and investment.

Sources:

TreasuryDirect - Historical Savings Bond Sales

After working out at the gym tonight, I ran into Barack in the locker room. We talked for a couple of minutes, and he actually remembered me, which was pretty cool.

TreasuryDirect has a page where program participants (and the general public) may submit questions concerning U.S. Savings Bonds, so on July 12, 2008, I sent a question that asked (in part):

Why was the fixed rate for Series I Savings Bonds set at 0.0% (zero) on May 1, 2008?

And this morning I received the following reply:

Adam,

The Secretary of the Treasury or the Secretary's designee determines the fixed rate of interest. Our Department has no control or input of the earnings rate of savings bonds.

Series I bonds will never decrease in value. The earnings rate will reflect deflation as well as inflation. Even if deflation is enough to offset the fixed rate completely, the earnings rate will not go below zero. Series I bonds will maintain their values until the earnings rate will again produce and increase in value.

Thank you for your participation in the Savings Bond Program.

*******
Customer Service Specialist

I was glad to receive a response to my question, but unfortunately, contrary to the reply that I received, Series I bonds will not maintain value at a 0.0% (zero) fixed rate.

Earned interest is tax deferred for U.S. Savings Bonds, meaning that interest will compound tax-free while the bond is owned. However, once the bond is cashed, the total earned interest is then treated as taxable income. So a 0.0% (zero) fixed rate may preserve the value of the underlying principal while the bond is owned, but the value will actually dip below what is necessary to keep pace with inflation once the bond is cashed and the earned interest is taxed.

In terms of economics, the negative impact of this taxation means that investing in Series I savings bonds paying a fixed 0.0% (zero) interest rate will always be a losing proposition.

For several months now, I've faithfully invested a part of each paycheck in Series I savings bonds. However, as I was preparing to purchase more bonds this month, I noticed that effective May 1, 2008, the government slashed the fixed interest rate on these bonds to 0.0% (that's right--zero percent).

Unfortunately, without realizing it, I've already purchased $700 of Series I savings bonds at the new rate, which is locked at 0.0% (zero) for the entire 30-year interest-bearing lifespan of these bonds. Furthermore, regulations prohibit me from cashing these bonds until at least one year after the purchase date, which means I'm stuck with them for now.

This whole scenario has me somewhat upset. In fact, this weekend, I wrote a letter to every single United States Senator to express my disappointment. I then went to the post office in Chicago's federal district, and mailed these letters earlier today.

The effective interest rate for a Series I savings bond is composed of a fixed rate plus an inflation rate, so that the bond will always return a fixed rate over inflation. However, if the fixed rate is 0.0% (zero), then the bond will have a real rate of return equal to 0.0% (zero) regardless of the inflation rate. This means that even though the bond continues to earn the annual inflation adjustment component (currently 4.84%), the money in the bond will never actually increase in purchasing power.

So by slashing the fixed rate to 0.0% (zero), the government is essentially telling us that we might as well spend all our money now, because it will never be worth any more than it is today.

I knew going in that government bonds were not the highest paying investment I could put my money into. After all, U.S. savings bonds are not exactly the investment of choice for the rich and famous. However, it was very important for me to start financing my share of the national debt, because I do not believe in having foreign governments own such a large percentage of our bonds.

But in my opinion, there's a big difference between investing in a bond with a low interest rate and investing in a bond with no interest rate. Perhaps I'm wrong to think like this, but it's starting to seem like the government always finds a way to discourage people from trying to help the country, and often penalizes those who put in more than they take out. I believe the American people deserve better.

Read the letter that was sent to all 100 U.S. Senators

While going through some papers at my desk tonight, I came across a clipping from the June 10, 2008 edition of The Wall Street Journal.

It would have been fairly easy to overlook the heading “Treasury Securities Sales Set,� as the U.S. Treasury is continually selling more bonds to finance our growing national debt, and the details of these transactions rarely make for interesting reading material.

However, the text of this particular notice was actually quite shocking.

The Treasury plans to sell $22 billion of five-day cash management bills Tuesday. The bills will be dated June 11, 2008, and will mature June 16, 2008.

Securities such as 26-week bills, 10-year notes, and 30-year bonds are all fairly common government debt instruments. But this was the first I had ever heard of five-day cash management bills.

June 15th is the deadline for payment of second-quarter estimated taxes, which makes it an important payday for the government. Corporations and individuals not subject to federal tax withholding must make quarterly payments based on their estimated tax liabilities, and these payments are due on the 15th day of April, June, September, and January.

In other words, the U.S. Treasury was selling these five-day cash management bills because the government was running low on cash and needed a short-term loan to keep going until payday.

It’s fair to say that people who seek payday loans are not usually in the best of financial circumstances. In fact, that’s pretty much an understatement, and in most cases, people who start taking these loans often end up making a bad situation worse.

So it’s a scary thought that the government continues to spend at such an alarming rate that payday loans would be necessary to keep things going, especially when these loans are in the magnitude of $22 billion.

I never imagined that a set of clothes could put a smile on my face, but that was before I tried on my new suit.

Last Tuesday after work, I walked down to the Brook Brothers store located on LaSalle and Adams near the Chicago Board of Trade.

Almost every wall had wooden shelf cases with shirts stacked practically to the ceiling. And upstairs, it seemed like there were enough suits to clothe an entire town. After first trying on a dark navy jacket, I chose a two-buttoned grey, and a trim, white-haired man made small chalk markings on the fabric while he took measurements.

This expert tailor finished my suit today, and I picked it up this evening.

And as I was walking back, I realized that most of what I was wearing happened to be made right here in America. The suit I was carrying. The shirt I was wearing. My belt. And even my underwear. All had a “Made in the USA� label.

At that moment, in the light of the setting sun, I took satisfaction in completing a long day of hard work. Because I had given thought to my purchases, other Americans could also share in the pride of a job well done. And I smiled.

This morning (Saturday) I went down to the bank and purchased $200 worth of paper Series I bonds. Even though I've been doing a good job of saving lately, the amount of this investment is less than I would have liked. That's because I'm anticipating higher expenses for the month, as yesterday the company I work for tasked me with buying a business suit for an important upcoming meeting.

Believe it or not, I've never actually owned, or even worn, a suit before. Though I wear dress shirts on an almost daily basis, I typically roll up the sleeves within minutes of buttoning my shirt, and it's been so long since I've worn a tie that I've forgotten how to tie one.

And so, this week I'll set out to buy my first suit. I'm planning to look at one of the men's clothing stores in downtown Chicago, in search of a suit that fits both my frame and my budget.

Only three years ago, I could scarcely afford the cost of a new pair of jeans, and would stay up late stitching patches to repair the burns received from hot sparks of steel that sprayed upon me as I welded. Now I'm a position to enlist the help of a professional tailor.

Aside from this, I'm still a man working hard to accomplish his goals—that part hasn't changed. And while it's been said that clothes make the man, I believe that men are made by actions, not appearances. The strength of a warrior is found not in the breadth of his arm, but in the depth of his heart.

"Whenever the people are well informed, they can be trusted with their own government; that whenever things get so far wrong as to attract their notice, they may be relied on to set them to rights." - Thomas Jefferson

A troubling thought has been keeping me awake at night, and the more I think about it, the more it bothers me. It all started a few days ago while I was searching through the U.S. Social Security Administration's 2008 OASDI Trustees Report. The following, with emphasis added, is an excerpt from the introduction of this report:

"The Board of Trustees was established under the Social Security Act to over­see the financial operations of the OASI and DI Trust Funds. The Board is composed of six members. Four members serve by virtue of their positions in the Federal Government: the Secretary of the Treasury, who is the Manag­ing Trustee; the Secretary of Labor; the Secretary of Health and Human Ser­vices; and the Commissioner of Social Security. The other two positions, which are currently vacant, are for members of the public, to be appointed by the President, subject to confirmation by the Senate."

As hard as I try, I cannot seem to understand how these two positions could be left completely vacant at such a critically important time, when now more than ever we need visionary leaders to guide us through difficult circumstances and an uncertain future. Who do we expect to look after our best interests if we ourselves will not? And how can we possibly hold politicians accountable for taking trillions of dollars from the Social Security trust fund when we the American people are denied our rightful advocates?

Sources:

U.S. Social Security Administration - 2008 OASDI Trustees Report
(Section I, Introduction)

The previous post mentioned that Congress has already spent the entire Social Security trust fund, which as of last year, totaled $2.238 trillion. It also mentioned that current intermediate projections made by the U.S. Social Security Administration indicate that this trust fund should continue to increase in value to a total of $4.486 trillion by the year 2017, and that we the people of this great nation would be in dereliction of our duties as citizens and taxpayers if we were to let politicians spend the second half of this trust like they have spent the first.

For calendar year 2007, Social Security brought in a total income of $784.9 billion, which included $656.1 billion in cash from payroll taxes, $18.6 billion in cash from the taxation of benefits, and $110.2 billion in interest earned from the bonds in the Social Security trust fund. The program also had expenses totaling $594.5 billion, of which $584.9 billion was paid out in cash for benefit payments.

After subtracting total outgo from total income, Social Security generated a net surplus of $190.4 billion last year, but it is important to note that this surplus was not a huge pile of cold, hard cash locked away in some cavernous vault. In fact, only $80.2 billion was in the form of cash from our tax dollars, and the remaining $110.2 billion was interest earned on the special-issue bonds in the Social Security trust fund.

Each year when Congress raids the surplus, Social Security receives special-issue bonds equal in value to the money that is taken from the cash reserves in its trust fund. Like all government bonds, these special-issue bonds are backed by the full faith and credit of the United States government, and are completely legitimate treasury securities.

Similarly, when I purchase a $100 Series I savings bond at the local bank, I hand over $100 in cold, hard cash, and in return, the government issues me an interest-bearing savings bond by mail. What happens next is that the government spends my $100 in cash, and the national debt increases by another $100. A record of this debt eventually gets included in the monthly statement of the public debt, where totals for United States savings bond transactions are tallied alongside other nonmarketable treasury securities such as the special-issue bonds in the Social Security trust fund.

Like all $36.9 billion in outstanding Series I bonds collectively owned by investors, my bond will continue to earn interest each month for up to 30 years after its purchase, and during this time, the government will not actually send out checks for the accrued interest. Rather, this interest is added back to the value of my bond, and continues to compound monthly.

By comparison, when the Social Security trust fund earned $110.2 billion in interest last year, this interest did not represent a payment of cold, hard cash. Instead, this interest went to purchase more special-issue bonds for the trust fund, and the transaction was merely a mathematical calculation and an accounting entry on the part of the government, with no real money involved.

The danger is that the U.S. Social Security Administration is banking on the fact that real money will be available from the trust fund to help make benefit payments starting in 2017. All the economists, actuaries, and academics take for granted that this money will be readily available when the time comes. But where will the government actually get the cash?

For example, if I finally decide to go to the bank and cash in my $100 Series I bond, I will receive cold, hard cash in the amount of the $100 originally paid for the bond, plus the amount of interest earned over the interest-bearing period. This means that the government will actually need to come up with real money to pay me back, and my bond will no longer be financing a portion of the national debt.

However, more than likely, someone else will go to the bank and buy a savings bond that same day, and this new purchase will help offset the sale of my bond. In other words, new bonds are constantly being purchased by investors to make up for the ones that mature or are retired, and the government does not need to worry too much about replacing the lost source of financing when existing bonds are cashed.

Unfortunately, because the Social Security trust fund has been compounding for so long without its special-issue bonds ever having been refinanced or rolled over on the cash markets, and because the numbers are so very large, there is a substantial risk that existing financing sources such as the bond markets will be unable to secure replacement financing for these bonds. In other words, who will offset the disbursements when Social Security needs to start converting its $4.486 trillion in trust fund bonds to cold, hard cash?

Sources:

U.S. Social Security Administration - 2008 OASDI Trustees Report
(Section II.A, Highlights; Short-Range Results, Long-Range Results)

U.S. Social Security Administration - Office of the Chief Actuary
(Time Series: Both Funds; Income Components; Calendar Year; All Years)

U.S. Social Security Administration - 2008 OASDI Trustees Report
(Section IV.A, Short-Range Estimates; Table IV.A3, Intermediate Projections)

U.S. Treasury - Monthly Statement of the Public Debt, April 30, 2008
(Page 7, Total Outstanding United States Series I Savings Bonds: $36,948 Million)

"Fool me once; shame on you. Fool me twice; shame on me." - Ancient Proverb

I recently started reading the U.S. Social Security Administration's 2008 OASDI Trustees Report. It pretty much goes without saying that this is not the most interesting reading material in the world, as the report is neither a suspenseful page-turner nor a runaway bestseller. Released to no apparent fanfare on March 28th, so far the report has done a better job of gathering dust than garnering attention.

Short-Range Results

"The OASI Trust Fund and the combined OASI and DI Trust Funds are ade­quately financed over the next 10 years under the intermediate assumptions. The DI Trust Fund is expected to remain solvent over the next 10 years, but does not satisfy the short-range test of financial adequacy because assets are estimated to fall below 100 percent of annual expenditures before the end of 2017. The combined assets of the OASI and DI Trust Funds are projected to increase from $2,238 billion at the beginning of 2008, or 359 percent of annual expenditures, to $4,273 billion at the beginning of 2017, or 385 percent of annual expenditures in that year..."

Long-Range Results

"...Annual cost will exceed tax income starting in 2017, at which time the annual gap will be covered with cash from redemptions of special obliga­tions of the Treasury that make up the trust fund assets until these assets are exhausted in 2041."

To most of us, OASDI (which stands for Old-Age, Survivors, and Disability Insurance) is better known as Social Security. Unfortunately, because the mere mention of Social Security has the ability to illicit spontaneous yawning, we as Americans have been sleeping rather than standing guard. Consequently, our eyes have been closed to a deceit that is robbing us of our future financial security.

With total incoming revenue expected to top $800 billion for the year, Social Security is the largest program in the history of our government. And for the past twenty years, OASDI has been cash flow positive, with surpluses totaling over $190 billion last year alone.

However, over the years, Congress has been continually borrowing these annual surpluses, and has now spent more than $2 trillion of Social Security’s trust fund assets. While referring to this practice as "borrowing" is far too kind, these monies have been taken legally due to the accounting principles (or lack thereof) that now govern the distribution of funds within our federal budget. Under a unified budget, surpluses from one program, such as Social Security, automatically flow into general revenue calculations, where they may then be used to mask deficit spending for any number of other programs or initiatives.

The whole point of starting a trust fund was to set aside money for the future. Because projected program costs were expected to exceed revenue in coming years, tax rates were increased prior to need, and these tax increases were scheduled as prescribed by the 1983 amendments. In other words, if the government were to wait to increase taxes until 2017 when the money will actually be needed to fund retirement benefits for the baby boom generation, it would already be too late. At that point, the program would begin to need cash at a rate far in excess of the ability to raise it through fair and balanced taxation.

This certainly does not have to mean that the Social Security program is destined for insolvency, and the passing of the baby boom generation should be seen as an extended hurdle rather than an insurmountable barrier. Referring to these looming demographic issues as an “extended hurdle� may be a slight understatement given the current lack of foresight and financial discipline exhibited by our government, but with proper planning, we can assuredly meet these challenges with confidence--and success. That said, Social Security will need to draw upon its cash reserves during the effectual time period, and we must ensure that these resources will be ready and available as needed.

As it pertains to the current state of the OASDI trust funds, the money has already been spent and the damage is done. However, Social Security is projected to generate continued operational surpluses between now and 2017, and the total value of the OASDI trust funds is scheduled to grow from last year's assets of $2.238 trillion to a total of $4.486 trillion in assets by the end of 2017.

This means that the Social Security trust fund is projected to double in value over the next 10 years. We as citizens have little hope of recovering the $2 trillion in trust monies that have already been spent, and politicians are largely to blame for this gross negligence. However, if we as citizens allow politicians to continue to spend these incoming surpluses and "borrow" an additional $2 trillion from our trust fund, we will have only ourselves to blame. We must act now to protect and preserve the future of our financial security--for our parents, for ourselves, and for our children.

Looking ahead, the OASDI surplus is expected to total $192 billion for 2008. To put this number in perspective, the Economic Stimulus Act of 2008 has an estimated price tag of $152 billion, with the majority going towards sending stimulus checks to eligible taxpayers. It pretty much goes without saying that a significant percentage of this money will ultimately leave our economy through the purchase of foreign oil and other consumer goods manufactured outside these United States. So if Congress can find a way to spend $152 billion to facilitate consumer spending, then surely it can also find a way to start saving comparable amounts, such as the ongoing Social Security trust fund surpluses.

An important first step will be to stop including Social Security revenue in the unified budget. That way, politicians will no longer be able to devise new ways to spend this money as part of general revenue, and we can start using OASDI surpluses for their intended purpose--saving for the future.

Furthermore, to best protect this money and the people who actually earned it, the government should start allocating trust resources to individual accounts for each taxpayer instead of lumping it together in a collective lockbox. Creating a sense of individual ownership will allow taxpayers to act as their own trustees, as individuals with a stake in the future success of the program. And managing such a responsibility will help reinforce the fact that we have a truly vested interest in financial sustainability of Social Security, so that we will never again allow its trust fund resources to be squandered away as carelessly as they have been in the past. We the people created this great nation, and we the people are its rightful trustees--for this generation and the next.

Sources:

U.S. Social Security Administration - 2008 OASDI Trustees Report
(Section II.A, Highlights; Short-Range Results, Long-Range Results)

U.S. Social Security Administration - Office of the Chief Actuary
(Time Series: Both Funds; Income, Outgo, and Assets; Calendar Year; All Years)

U.S. Social Security Administration - 2008 OASDI Trustees Report
(Section IV.A, Short-Range Estimates; Table IV.A3, Intermediate Projections)

White House - Press Release, February 13, 2008
(Fact Sheet: Economic Stimulus Act of 2008)

Several weeks ago, I received a notice in the mail regarding the Economic Stimulus Act of 2008--I want to say it arrived in late March.

It's hard to complain about the fact that the government is going to be giving us back some of our hard-earned tax dollars. However, it seems like no small coincidence that these payments are being made during an election year, at a time when politicians desperately want to make themselves look good for voters.

That said, I've noticed that ever since I received the notice about this payment, my spending habits have been more conservative. With all the talk we now hear about difficult economic conditions and recessionary pressures, it doesn't exactly make a person want to go out and spend a lot of money.

View Larger Pictures: 1, 2

For example, last month I was looking at purchasing some new dress shirts, and I normally wouldn't think twice about such an expenditure. But after telling myself that it didn't make much sense to buy long sleeve shirts with the weather getting warmer, I didn't end up buying any.

By month end, I wound up saving quite a bit more money than usual. So tonight I logged into my TreasuryDirect account and placed an order for another $500 worth of electronic savings bonds (Series I).

I guess what I'm trying to say is that in some regards, I think the Economic Stimulus Act of 2008 is counterproductive. Maybe not everyone feels this way, but rather than make me want to go spend money, this payment makes me want to be more cautious with my finances.

I think we would all be better served if instead of throwing money at the problem in the form of stimulus checks, our elected leaders actually put more thought and effort into fixing some of the underlying issues with the economy. After all, a check for several hundred dollars is not going to do much for you if you're about to lose your home or business, or if you've already lost your job, or if you're struggling with rising prices for basic necessities.

The PACT America logo is now a registered trademark with the United States Patent and Trademark Office. The application for trademark was first submitted last July, and it's an awesome feeling to have finally completed the registration process. I felt that obtaining a trademark was an important step in strengthening the seriousness of this cause, and I will continue to pursue this endeavor with a sincere devotion to help the American people.

Catch-22 - A no-win situation, often bound by constraints of circular logic, in which each course of action yields a self-contradictory effect and creates an impasse to favorable outcome.

When I was kid, I played a lot of basketball, and was always trying to get my Dad to take me to a Chicago Bulls game. At the time, Michael Jordan was leading the Bulls to championship after championship, and as thrilling as it was to see him play on TV, I knew it would be even better to watch a game from the inside the stadium.

Some nights after climbing into bed, I would even put on a pair of headphones and stay awake listening to the game on the radio. It seemed that no matter the circumstance, whether the clock was running out or there were three guys guarding him, Jordan always found a way to win.

But it wasn't until just this year that I finally made it to a Bulls game--long after Michael Jordan had retired (for good).

When I was younger, I wouldn't have thought of missing even one second of the action had I been offered the opportunity to go to a game. But more than a decade later, I arrived at the United Center as the second quarter was well under way. And even though I was having an awesome time at the game, I wound up leaving before it was even over.

That's the ironic part about my life so far--it's almost like a Catch-22. When I had the time, I didn't have the money. When I finally had the money, I didn't have the time.

But then I figured--why go once when you can go twice? So on February 22, I rolled up to the United Center in a cab, and again missed the opening tip-off. But I had an absolutely great time watching the Bulls beat the Nuggets 135-121. In fact, it was the highest scoring game for the Bulls since 1991--the season Michael Jordan and the Bulls won their first NBA championship. And in a way, the experience helped make up for some lost time in my life.

Looking back, it almost seems like life starts out as one continuous Catch-22. For example, many young people know that no matter how hard you try, it's nearly impossible these days to find a good job and a decent salary without a college degree. And yet, it's even harder to afford college without first having a good job to pay for it.

Sometimes life tosses us these inescapably difficult situations and says, "Here, catch!"

But we shouldn't just catch whatever the world throws us. Like Michael Jordan wearing the number 23 jersey, we should find the strength to leap high above all obstacles--and dunk!

So even when it seems like all is lost and there's no way to win, it's not a Catch-22 when you can Dunk-23.

Not too long ago, times were tough, and I did the best I could. These days, thanks to long hours of hard work, I'm finally starting to see a slow but steady improvement in my circumstances.

Download Video: A Wildfire Carried on the Winds (WMV - 8.4 MB) | YouTube Version

Last week, I purchased $240 worth of electronic U.S. savings bonds (Series I), and had enough left in my budget to purchase another $310 worth this week--which means I'm now financing 10.002% (double digits!) of 'My Share' of the national debt. Dunk-23...

Earlier in the week, U.S. Treasury Secretary Henry Paulson gave a statement in conjunction with the release of the 2008 Social Security and Medicare Trust Fund Reports, and the following is an excerpt of his remarks:

"For decades, Social Security and Medicare have provided vital support for millions of Americans. As the baby boom generation moves into retirement, these programs face progressively larger financial challenges. If we do not take action soon to reform Social Security and Medicare, the coming demographic bulge will jeopardize the ability of these programs to support people who depend on them. Without change, rising costs will drive government spending to unprecedented levels, consume nearly all projected federal revenues, and threaten America's future prosperity. Our Nation needs a bipartisan effort to strengthen both programs for future retirees."

In reading the full statement, it seems imperative for us as a nation to now address the economic issues we face in the future, so that we may discuss honestly and act prudently--before it's too late.

Sources:

U.S. Department of the Treasury - Press Release, March 25, 2008
(Statement by Secretary Henry M. Paulson, Jr. on the 2008 Social Security and Medicare Trust Fund Reports)

"A penny saved is a penny earned." - Benjamin Franklin

Passing through the columned portico of the Chicago Civic Opera House on my journey homeward Thursday night, I noticed a lone quarter lying on the sidewalk of the building's stately colonnade.

When I was a little kid, I got a real kick out of finding pennies on the ground, and to this day, I will still stop to pick one up. Some people think that a face down penny is bad luck, but whether heads up or down, I almost always reach down and pocket these coins. After all, my philosophy is that finding free money is a lucky proposition in and of itself.

And while quite a few people had probably passed by during the evening without giving second glance to this particular quarter, I paused to pick it up. Although the surface of the coin had a luminous shine, the edges of its engravings were gray and dark--the telltale tarnish of a silver quarter.

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Minted over fifty years ago at a time when quarters were made primarily from silver, this quarter is now worth more than just its face value of twenty-five cents. Well worn from circulation, the coin likely has negligible numismatic value to collectors, but it still has intrinsic value due to its silver content.

Between 1932 and 1964, United States quarters were forged from an alloy of 90 percent silver and 10 percent copper. Since each coin weighs 6.25 grams, and there are 31.1034768 grams in each troy ounce, the ASW (Actual Silver Weight) of this quarter is .180848 troy ounces (6.25 grams multiplied by 90% silver and divided by 31.1034768 grams per troy ounce equals .180848 troy ounces silver).

The price of silver is currently $16.885 per troy ounce based on Thursday's closing price at the CBOT (Chicago Board of Trade). Therefore, the melt value of this quarter is $3.05--significantly higher than its face value of only $0.25.

If there's a lesson to this story, I suppose it's that most people walk right by seemingly insignificant opportunities every day, even though there is often great value in the discernment of small details.

I believe that a man must practice responsibility with small matters before he is put in charge of large ones, and such a discipline reminds me of Benjamin Franklin's adaptation of an ancient proverb:

"For want of a nail the shoe was lost.
For want of a shoe the horse was lost.
For want of a horse the rider was lost.
For want of a rider the battle was lost.
For want of a battle the kingdom was lost.
And all for the want of a horseshoe nail."

In current times, corporate executives are paid millions of dollars, even while neglecting such trivial details as actually making a profit for the company. Politicians borrow and spend hundreds of billions of dollars without ever giving thought to the seemingly unimportant details involved in balancing a budget.

So although the ideals of men like Benjamin Franklin are now largely forgotten and ignored, perhaps we would each take greater benefit from the practice of good stewardship of both personal and national finances. In such matters of money management, the government has certainly not been a good example for its citizens, and so, maybe it is now time for the citizenry to lead a better example for its government.

Earlier today, the Federal Reserve cut the fed funds rate by three-quarters of a percentage point, and the Fed has also recently been pumping large amounts of liquidity into the financial markets.

A keen observer will note that only a few years ago, the economy faced similar recessionary pressures, and the Fed started aggressively cutting interest rates at that time, which in turn helped fuel hyperactivity in the mortgage markets. Now the financial markets are dealing with the fallout from those previous actions, and the Fed is again slashing interest rates and dumping liquidity on the markets.

Unfortunately, I feel that until we as a nation start to address some of the underlying issues and disparities facing our economy, the actions of the Federal Reserve are akin to a ship captain who pours the crew's water supply overboard in an attempt to float a beached vessel.

Furthermore, I feel the role of the government in matters like this should not be that of a drunken ship captain, but that of a lighthouse, a shining beacon illuminating risks with a guiding light that beams boldly into the darkness of uncharted territories.

Recession - A period during which economic activity, as measured by gross domestic product, declines for at least two quarters in a row.

When the winds of trade are strong and conditions are fair for seafaring, a captain should track true to underlying currents while the winds work their ways upon the sea.

But even under the sunniest of skies, a captain must take in sails when wild winds tear at threads and the mast pains under stress and strain.

And when the sky does darken and stormy seas threaten life and liberty, a captain must guide with clear vision and steady hand, lest cargo be swallowed by sinking swells or dearest ship be dashed against rocky rogues.

In calmer seas, when winds do sometimes slow, a captain must not forget the deeper currents, yes slower, yet stronger than winds do blow.

Caution calls that even among seemingly safe harbors, a ship may stick on sands when tides recede. Though foolish captains pour every barrel of precious water onto sand below, it raises not the ocean flow.

A wise and patient captain, however, remembers that waves wither not, for whence they came, they shall reclaim.

The Benchmade Knife Company is located in Oregon City, Oregon, and its knives (except for the "Red Class" products, which are currently manufactured at an offshore facility) are proudly made in America.

Whether it's simply opening mail or slicing through a nice, thick steak, my Benchmade knife always gets the job done. I've had it for years, and use it daily.

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One time when I was looking for some scrap wood for the fireplace, I used my Benchmade to cut a 2x4 in half. While there are obviously better and faster ways to cut lumber, it's nice to know that you can.

Also, believe it or not, I've actually shaved with this knife a couple of times, and didn't even need shaving cream. Now that's tough!