Shall not be infringed

THE OFFICIAL NEWSLETTER FOR GENERATION AMERICA MEMBERSSEPTEMBER 2012

ALSO INSIDE

PAUL RYANINVESTING FOR THE

LONG TERMFREDRICKSBURG,

TEXAS

Throughout history, Americans have always fought for the personal freedoms our founding fathers secured for all of us.

October 7, 1777 marks the defeat of the

British in the second battle of Saratoga

and is widely recognized as the turning

point in the American Revolution and

our fight for freedom.

On June 6, 1944 General Eisenhower

committedAllied troops to the largest

invasion in history that led to preserva-

tion of the free world.

November 6, 2012: Our Election D-Day

This November 6, 2012, can be viewed

as a similar turning point in the battle to

restore the freedoms, the opportunities

and the economic stability that have

been systematically destroyed.

In fact, this November 6th could just be

the most important day in all of our

lives. On this Election D-Day, a battle

will be waged and we must mobilize to

prevail. This election can’t be lost or

there will be four more years of bank-

rupting this country, destruction of our

individual savings and security, and loss

of our personal freedoms.

Generation America is committed to

protecting the economic safety, security

and well being of seniors and all

Americans. This was our mission when

we started and it is the motivation that

gets us out of bed every morning.

The first step to victory is to stop the

implementation of The Patient

Protection and Affordable Care Act

(ObamaCare), which will destroy the

America that seniors have protected

and nurtured.

The good news is that this Battle

(election) can be won! Look back at the mid-term elections of 2010 when supporters of ObamaCare suffered the largest defeat in the history of the Progressive movement. Those defeats were in almost every race from the Senate to Gubernatorial seats and local elections.

THE WINNING CAMPAIGN

With a coalition of the Tea Party, Republicans, Libertarians, Independents and Democrats who are abandoning the Obama agenda, we can defeat President Obama and his supporters in the Senate while retaining the majority in the House of Representatives.

If Americans are educated about what is really happening in Washington, they will be motivated to stop this destruc-tive movement. For America to prevail on November 6th, we must inform everyone we know. With our standard of living and freedoms on the line, everything must be done to educate, gain support, and get people to vote. It is simple. The most votes win. An educational grass roots mobilization is a critical component for victory. We are asking you to help with this effort. With each member “acting individually and in concert,” this battle will be won. With your commitment, we can elect citizens who oppose The Patient Protection and Affordable Care Act and take back America: Generation America will produce weekly, informative emails for everyone who joins this effort. They will be accompanied by either a short survey or petition, which will be used to impact current elected officials or those who hope to be elected in November. Everyone who knows the TRUTH can’t help but be energized to pass along the emails to their family and friends and get them involved.

YOUR PARTICIPATION IS ESSENTIAL FOR SUCCESS

What we are asking you to do is to

forward these emails to your friends

and ask them to forward them to their

friends. If each member forwards these

to only 20 people and they continue the

forwarding of this information, the truth

will reach millions of voters.

NOT A SOLICITATION

Let me make one thing perfectly clear,

this effort is not a fundraiser or a

membership drive for Generation

America. This initiative is simply

focused on November 6, 2012, and this

crucial effort to stop the destruction of

our Country.

As members, just to remind you, the

policy issues we are developing include:

taxes, national security, deregulation of

healthcare, fiscal responsibility, social

security protection, term limits and

shoring up Medicare (not reducing its

growth by $500B over the next 10 years

and forcing many seniors to buy

additional coverage). It all begins with

getting a new President as well as

Senators and Representatives that take

a stance this election season on

repealing The Patient Protection and

Affordable Care Act.

Our fight is simple. Forward the emails

to 20 family members, friends, and

acquaintances. The truth will get out

and America will win.

As Thomas Jefferson said, “Educate

and inform the whole mass of the

people... they are the only sure reliance

for the preservation of our liberty.”

Sincerely,

Michael Young

Founder, Generation America

The Campaign

OPENING REMARKS

In this issue:

SEPTEMBER 2012

4

1032

20

FREDRICKSBURG, TX

WHAT TO DO WHEN THE STOCK MARKET DEFIES LOGIC

14

31

29

Food & Your Health

ReduceYour Risk of Falling

On the cover:

Minuteman Statue, Battle Green Square,

Lexington, Massachusetts,

by H.H. Kitson, dedicated on April 19, 1900.

PHOTO: Ian BrITTOn

The Success of Chile’s Privatized Social Security

What’s Really in the Ryan BudgetDefinining Ryan 15

SECTIONS

Special Feature: Your Second Amendment Rights and Freedom 4

News & Opinion 10

Your Finances 20

Health & Wellness 29

Travel 32

Plus: What They Didn’t Tell You about Mass Shootings 9

Shall Not Be Infringed

3GENERATIONAMERICA.ORG

Shall not be infringed

“A well regulated militia, being necessary to the security of a free state, the right of the people to keep and bear arms, shall not be infringed.”

What do those words mean to you? What do

they mean to us, as Americans, as seniors? How

can a single line, a single law, make the difference

between a society of free citizens and one that is

socialist?

To answer these questions, we must look into the

fundamental principle from which the Constitu-

tion derives its true power. That principle is that

the rights spoken of in the Constitution are not

granted to us by the government; they are

endowed upon us by our Creator and are

unalienable. The Constitution’s power is that it

forbids the government from acting in a way that

violates those rights. In other words, it insures

that those rights shall not be infringed.

This is the heart of what defines this nation as

more than just another constitutional republic; it

defines us as a nation of free men. It was that

philosophy that brought the world, by America’s

example, out of tyrannical darkness at the end of

the 18th century, and into the modern age. It has

guided man from a world where every significant

nation on earth was ruled by an absolute

monarchy, to one where only a few, such as in

Brunei, Qatar, and Swaziland, remain. Do we

really feel that our current leaders are more

qualified to guide us than the men who crafted

the document that brought this about?

The liberal media and left wing politicians want

us to think that government-imposed regulation

and the outright banning of arms are not an

infringements upon our right. The nonsensical

message repeated by them is that “sensible” gun

laws pose no threat to liberty or law-abiding

citizens, and we, the people, shouldn’t resist

them.

However, in order to allow the restriction of our

God-given right to defend ourselves and our

loved ones from violence, theft, and oppression,

we must relinquish that right to the government.

Therefore, any law infringing upon our right to

bear arms is, by definition, a threat to our liberty

because it establishes that the rights enumerated

in the Constitution can be considered nothing

more than privilege. Once the government has

authority over what was once our rights, it can

measure out freedom, as it sees fit.

The burden of voting to preserve America’s civil

liberties, such as freedom of religion and

freedom of speech, has often fallen to the older

generation, and this civil liberty is no different. In

total, about half of Americans report owning a

gun, and Americans who are 55 and older, as a

group, have the highest percentage of gun

ownership. This statistic is also reflected in the

membership of the National Rifle Association,

which is predominantly over 55. In other words,

seniors in this country are more likely to own a

firearm than any other age group, and they are

also more likely to vote. As a group, that means

we are in a position to have our opinion and our

vote taken very seriously by those who would

seek to dissolve our rights.

If half of Americans own guns, and seniors have

the highest percentage of ownership, and we

vote more than anyone else, how is it that our

right to own guns is being legislated away? The

answer is that those who seek to disarm the

citizenry know that it must first be divided. They

need to break apart gun owners into manage-

able groups. In this way they are able to avoid

their combined voting power as they remove

liberty from one group without invoking the

outrage of the other.

The myth the media, activists, and many politi-

cians want us to believe is that all they are after

are military style guns, handguns, concealable

weapons, and those weapons that are very

powerful, and that if we let them just outlaw

these guns, they will leave us alone. Politicians

need to convince the older Americans that they

are not after our dove gun, or our deer rifle. They

claim that those guns have a purpose, and are

If the Constitution of the United States is the most important document of man’s historical quest for liberty and self-governance, the Second Amendment to that document is the single most liberating phrase man has ever written.

See also:

What They Didn’t Tell You About Mass Shootings

PAGE 9

BY SETH DISARRO, GENERATION AMERICA

5GENERATIONAMERICA.ORG

not used in crime, and, therefore, will never be a

target of their restrictions. However, there is no

reason to believe that the actual goal is anything

short of the removal of all firearms and all

ammunition from the populace.

England is one of many examples of this “divide

and conquer” tactic being used to eliminate the

individual right to bear arms. Starting with the

1920 and 1937 firearms acts, ownership of

firearms in England was restricted. Just as in the

United States, the early approach was to ban or

restrict the possession of those weapons

considered dangerous to the public or the

government. Ownership of a firearm now had to

be justified. Once the government established

that possession of a firearm required a specific

“need,” they had only to limit what “needs” they

considered justifiable. At first, some hunting and

sporting use was considered an acceptable

justification, but, defense of one’s person or

home was not. If self-defense is not considered

important enough to justify owning a gun, is it

really that far of a stretch to imagine that there

would be no “need” to allow people to hunt or to

target shoot? It didn’t take long for the British to

realize that. By 1968, England was outright

banning hunting arms and ammunition. By 1997,

the ownership of all handguns and almost all

hunting arms was outlawed. So complete was

England’s ban on firearms of all types, that

British athletes training for shooting sports of the

2012 London games were forced to train off of

British soil.

The same is happening here at home. If the right

to keep and bear arms is allowed to be within the

control of the government to limit, how far will it

go? What else will the government see that you

have no reason to own? Will it be all ultra-high

power “sniper rifles,” capable of assassinating a

person at 500 yards, such as a scoped Browning

bolt action with a walnut stock chambered for

30-06?

We are expected to believe that these kinds of

restrictions on our way of life are justifiable

because they will eventually reduce crime, when,

in fact, the opposite is true. Reducing the legal

access to guns does not reduce violent crime, it

causes it to increase. As the population becomes

less able to defend themselves, the criminals,

being opportunistic in nature, commit more

crime. With less risk inherent in committing

violent crime, there is naturally more violent

crime committed.

The effect has been consistent in cities and states

in the U.S. where ownership has been restricted,

and on a national scale in other countries where

it has been almost entirely forbidden. Again, we

can look to England as an example. In the first

five years after England implemented the 1997

firearms act, banning most weapons, gun-related

crime sky rocketed from 13,874 to 24,070

incidences, and has remained about the same

ever since. As a result, England now has a higher

overall crime rate than the United States. Of

course, the elderly were the hardest hit by this

rise in crime, as they no longer had any means to

protect themselves or their property.

The myth that gun control will somehow limit

criminal access to a gun is demonstrably false.

Illegal guns, like any other black market com-

modity, operate on fundamental economic

principals: So long as there is a demand, there

will be a supply. The only people who will have

their access to guns limited are those not willing

to commit a crime by owning them. Banned

firearms are easily illegally imported from other

countries and transported across state lines like

any other illegal item in demand. An extreme

case of this level of circumventing gun laws can

be found in the horrific case of Behring Breivik,

the terrorist who perpetrated the 2011 mass

killings in Norway. Some of the most restrictive

gun control laws in the western world did not

prevent him from obtaining weapons and

explosives and using them to murder 77 innocent

people.

England, Australia, Canada, and the U.S., have

had the same experience: As gun ownership

decreased, gun-related crime dramatically

increased. If the goal of disarming law-abiding

people is truly to decrease crime, why do

governments continue to systematically elimi-

nate the ability of their people to own firearms

when the crime rates rise, rather than fall? The

political message most often repeated during

these failed efforts is that if the restrictions were

more severe and more universal they would

eventually cause crime be reduced. The more

The notion of freedom has become little more than a placating campaign slogan.

SPECIAL FEATURE: YOUR RIGHTS

7GENERATIONAMERICA.ORG

logical motivation for perpetuating such a failure

is to increase the balance of power in favor of the

government, and to decrease the perception and

expectation of individual liberty among the

governed citizenry. It other words, the purpose is

to make people into subjects; to make them

more dependent upon their government and

more likely to accept or demand the expansion

of its size and power. Is this not the goal of the

liberal government? Is this not the unspoken goal

of such things as socialized healthcare and Social

Security? If we allow ourselves to believe that we

can trade liberty for security, we are destined to

have neither.

The Second Amendment is the most extraordi-

nary and extreme symbol of a truly free popula-

tion. The guarantee that the people will not be

disarmed insures that the power of governance

will remain with the people, for unjust laws

cannot be enforced because the whole of the

people are armed. What could possibly show

more clearly that this country is ruled by the

people than to show that the government is

powerless to disarm them? Ronald Reagan may

have put it best…

“The gun has been called the great equalizer,

meaning that a small person with a gun is equal

to a large person, but it is a great equalizer in

another way, too. It insures that the people are

the equal of their government whenever that

government forgets that it is servant and not

master of the governed. When the British forgot

that they got a revolution. And, as a result, we

Americans got a Constitution; a Constitution that,

as those who wrote it were determined, would

keep men free. If we give up part of that Consti-

tution we give up part of our freedom and

increase the chance that we will lose it all.”

—Ronald Reagan, 40th President of the

United States

Today, understanding the importance of preserv-

ing our civil liberties seems to be lost on many of

our politicians. Many treat it as an extreme or

outdated philosophy, one to be cheered in

political speeches, but not cherished in policy.

The notion of freedom has become little more

than a placating campaign slogan.

Are we, as Americans a free people, or have our

freedoms been so infringed upon over the

decades that we have come to redefine the

concept of liberty in order to allow it to fit within

the limits imposed upon us by ourselves and our

government? How much of our liberty have we

voted away over the past couple hundred years?

Is it so much that we no longer know what it

means to be free? Have we been misled so far

from the noble path blazed for us that we are

willing to give up the very tools that forged this

nation? It was the individual ownership of

military grade weaponry that allowed us to rend

this land from the British, and build the nation

that inspired a world to seek freedom. Now, safe

and prosperous, we debate the merits of

allowing or preventing the people from owning

this or that kind of weapon, while the very bones

upon which our laws are built forbid the limiting

of such ownership, in any way.

If we don’t see individual ownership of arms for

what the Constitution intended it to be—an

unalienable God-given right—we will watch it

eroded away until we are no freer than an

Englishman. Wasn’t that how all this got started

in the first place? G

SPECIAL FEATURE: YOUR RIGHTS

If we allow ourselves to believe that we can trade liberty for security, we are destined to have neither.

PHO

TO: A

ITCH

EYE.

COM

It seems like there is another mass shooting in the news every few days.

Some of these shootings, such as the recent one that took place in aurora, Colorado, involve what is commonly, and incorrectly, referred to as “assault rifles.” The rhetoric is always the same; if people didn’t have access to these types of weapons there would be less shoot-ings, and the shootings that did happen would result in less victims. What they didn’t tell you is that the availability or the use of military style weapons has little statistical effect on either the frequency of shootings or the number of fatalities caused by the shooters.

Over the past 40 years the number of mass shootings in the United States has remained, more or less, consistent at an average of around 20 per year. The

highest number of mass shootings and the victims of those shootings in the US reached a 40 year high at the end of the decade long assault weapons ban and the height of the Clinton “Crime Bill.”

There are a variety of factors that contribute to the number of victims caused by a mass shooting: the intent of the shooter, the proximity of the shooter to the victims, the ability of the victims to exit the area, and the duration of the attack. What has proven to not be a consistent cause of a high number of victims is the type of weapon used. The data shows that common handguns are just as likely to cause a high number of fatalities as a semi-automatic ar-15 carbine with a 100 round C-Mag, such as the one used in Colorado.

What does appear to be the most significant and consistent factor in determining the number of victims is if the shooter was stopped by a citizen or by law enforcement. In the cases where the shooter was stopped by a citizen (armed or unarmed), the number of victims are consistently low. In the events where the shooter was stopped by law enforcement the number of victims are consistently high.

The facts that the media will not bother to report are that there are no more mass shootings occurring today than normal, the type of weapon used is not the problem, and the best way to end a mass shooting, with the least number of victims, is through the bravery of those being attacked. —SETH DISARRO

GRAPHIC: TIME. Sources: James alan Fox, northeastern University; Bureau of Justice Statistics; Gallup.

What They Didn’t Tell You About Mass Shootings

9GENERATIONAMERICA.ORG

The Success of Chile’s Privatized Social Security

It’s an honor for me to share with you some of

the experiences we have had in Chile with our

new private pension system. I would like to

comment on how the new system works, how

we were able to make the transition from the old

system to the new one, and what have been the

main economic, social, and political consequenc-

es of the new system. I will not explain the

shortcomings of the old pay-as-you-go system

in Chile. Those shortcomings are very well

known because that is the system that is failing

all over the world.

In Chile we accomplished a revolutionary reform.

We knew that cosmetic changes—increasing the

retirement age, increasing taxes—would not be

enough. We understood that the pay-as-you-go

system had a fundamental flaw, one rooted in a

false conception of how human beings behave.

That flaw was lack of a link between what

people put into their pension program and what

they take out. In a government system, contribu-

tions and benefits are unrelated because they

are defined politically, by the power of pressure

groups.

So we decided to go in the other direction, to

link benefits to contributions. The money that a

worker pays into the system goes into an

account that is owned by the worker. We called

the idea a “capitalization scheme.”

We decided that the minimum contribution

should be 10 percent of wages. But workers may

contribute up to 20 percent. The money

contributed is deducted from the worker’s

taxable income. The money is invested by a

private institution, and the returns are untaxed.

By the time a worker reaches retirement

age—65 for men, 60 for women—a sizable sum

of capital has accumulated in the account. At

retirement the worker transforms that lump sum

into an annuity with an insurance company. He

can shop among different insurance companies

to find the plan that best suits his personal and

family situation. (He pays taxes when the money

is withdrawn but usually at a lower rate than he

would have paid when he was working.)

As I said, a worker can contribute more than 10

percent if he wants a higher pension or if he wants

to retire early. Individuals have different prefer-

ences: some want to work until they are 85; others

want to go fishing at 55, or 50, or 45, if they can.

The uniform pay-as-you-go social security system

does not recognize differences in individual

preferences. In my country, those differences had

led to pressure on the congress to legislate

different retirement ages for different groups. As a

result, we had a discriminatory retirement-age

system. Blue-collar workers could retire at 65;

white-collar workers could retire more or less at

55; bank employees could retire after 25 years of

work; and the most powerful group of all, those

who make the laws, the congressmen, were able

to retire after 15 years of work.

Under our new system, you don’t have to

pressure anyone. If you want to retire at 55, you

go to one of the pension-fund companies and sit

in front of a user-friendly computer. It asks you

at what age you want to retire. You answer 55.

The computer then does some calculations and

says that you must contribute 12.1 percent of

your income to carry out your plan. You then go

back to your employer and instruct him to

deduct the appropriate amount. Workers thus

translate their personal preferences into tailored

pension plans. If a worker’s pension savings are

BY JOSé PIñERA

José Piñera, who as Chile’s

minister of labor privatized

the state pension system, is

president of the International

Center for Pension Reform

and co-chairman of the Cato

Institute’s Project on Social

Security Privatization.

NEWS OPINION

not enough at the legal retirement age, the

government makes up the difference from

general tax revenue.

The system is managed by competitive private

companies called AFPs (from the Spanish for

pension fund administrators). Each AFP oper-

ates the equivalent of a mutual fund that invests

in stocks, bonds, and government debt. The AFP

is separate from the mutual fund; so if the AFP

goes bankrupt, the assets of the mutual fund—

that is, workers’ investments—are not affected.

The regulatory board takes over the fund and

asks the workers to change to another AFP. Not

a dime of the workers’ money is touched in the

process. Workers are free to change from one

AFP to another. That creates competition

among the companies to provide a higher return

on investment and better customer service, or to

charge lower commissions.

The AFP market opened on May 1, 1981, which is

Labor Day in Chile and most of the world. It was

supposed to open May 4, but I made a last-min-

ute change to May 1. When my colleagues asked

why, I explained that May 1 had always been

celebrated all over the world as a day of class

confrontation, when workers fight employers as if

their interests were completely divergent. But in a

free-market economy, their interests are conver-

gent. “Let’s begin this system on May 1,” I said, “so

that in the future, Labor Day can be celebrated as

a day when workers freed themselves from the

state and moved to a privately managed capital-

ization system.” That’s what we did.

Today we have 20 AFPs. In 14 years no AFP has

gone bankrupt. Workers have not lost a dime. Of

course, we created a regulatory body that, along

with the central bank, set some investment

diversification rules. Funds cannot invest more

than x percent in government bonds, y percent

in private companies’ debentures, or z percent in

common stocks. Nor can more than a specified

amount be in the stock of any given company,

and all companies in which funds are invested

must have credit ratings above a given level.

We set up such transitional rules with a bias

for safety because our plan was to be

radical (even revolutionary) in approach but

conservative and prudent in execution. We trust

the private sector, but we are not naïve. We knew

that there were companies that might invest in

derivatives and lose a lot of money. We didn’t

want the pension funds investing workers’ money

in derivatives in Singapore. If the system had

failed in the first years, we would never have been

able to try it again. So we set strict rules 14 years

ago, but we are relaxing those rules. For example,

only three years ago we began to allow the funds

to invest abroad, which they weren’t allowed to

do initially, because Chilean institutions had no

experience in investing abroad. The day will come

when the rules will be much more flexible.

Let me say something about the transition to the

new system. We began by assuring every retired

worker that the state would guarantee his

pension; he had absolutely nothing to fear from

the change. Pension reform should not damage

those who have contributed all their lives. If that

takes a constitutional amendment, so be it.

Second, the workers already in the workforce,

who had contributed to the state system, were

given the option of staying in the system even

though we thought its future was problematic.

Those who moved to the new system received

what we call a “recognition bond,” which

acknowledges their contributions to the old

system. When those workers retire, the govern-

ment will cash the bonds.

New workers have to go into the new private

system because the old system is bankrupt. Thus,

the old system will inevitably die on the day that

the last person who entered that system passes

away. On that day the government will have no

pension system whatsoever. The private system is

not a complementary system; it is a replacement

that we believe is more efficient.

The real transition cost of the system is the

money the government ceases to obtain from the

workers who moved to the new system, because

the government is committed to pay the pen-

sions of the people already retired and of those

Workers have not lost a dime. Of course, we created a regulatory body that, along with the central bank, set some investment diversification rules.

11GENERATIONAMERICA.ORG

who will retire in the future. That transition cost

can be calculated. In Chile it was around 3

percent of gross national product. How we

financed it is another story. It will be done

differently in each country. Suffice it to say that

even though governments have enormous

pension liabilities, they also have enormous assets.

In Chile we had state-owned enterprises. In

America I understand that the federal government

owns a third of the land. I don’t know why the

government owns land, and I don’t know the

value. Nor am I saying that you should sell the land

tomorrow. What I am saying is that when you

consider privatizing Social Security, you must look

at assets as well as liabilities. I am sure that the

U.S. government has gigantic assets. Are they

more or less than the liabilities of the Social

Security system? I don’t know, but the Cato

project on privatizing Social Security will study

that. In Chile we calculated the real balance sheet

and, knowing there were enough assets, financed

the transition without raising tax rates, generating

inflation, or pressuring interest rates upward. In

the last several years we have had a fiscal surplus

of 1 to 2 percent of GNP.

The main goal and consequence of the pension

reform is to improve the lot of workers during

their old age. As I will explain, the reform has a

lot of side effects: savings, growth, capital

markets. But we should never forget that the

reform was enacted to assure workers decent

pensions so that they can enjoy their old age in

tranquility. That goal has been met already. After

14 years and because of compound interest, the

system is paying old-age pensions that are 40 to

50 percent higher than those paid under the old

system. (In the case of disability and survivor

pensions, another privatized insurance, pensions

are 70 to 100 percent higher than under the old

system.) We are extremely happy.

But there have been other enormous effects. A

second—and, to me, extremely important—one is

that the new system reduces what can be called

the payroll tax on labor. The social security

contribution was seen by workers and employers

as basically a tax on the use of labor; and a tax

on the use of labor reduces employment. But a

contribution to an individual’s pension account is

not seen as a tax on the use of labor. Unemploy-

ment in Chile is less than 5 percent. And that is

without disguised unemployment in the federal

government. We are approaching what could be

called full employment in Chile. That’s very

different from a country like Spain, with a

socialist government for the last 12 years, that

has an unemployment rate of 24 percent and a

youth unemployment rate of 40 percent.

Chile’s private pension system has been the main

factor in increasing the savings rate to the level

of an Asian tiger. Our rate is 26 percent of GNP,

compared to about 15 percent in Latin America.

The Asian tigers are at 30 percent. The dramatic

increase in the savings rate is the main reason

that Chile is not suffering from the so-called

tequila effect that plagues Mexico. We do not

depend on short-run capital flows because we

have an enormous pool of internal savings to

finance our investment strategies. Chile will grow

by about 6 percent of GNP this year, the year of

the “tequila effect.” The stock exchange has gone

down by only 1 or 2 percent and will be higher at

the end of the year. Chile has been isolated from

short-run capital movement because its develop-

ment is basically rooted in a high savings rate.

Pension reform has contributed strongly to an

increase in the rate of economic growth. Before

the 1970s Chile had a real growth rate of 3.5

percent. For the last 10 years we have been

growing at the rate of 7 percent, double our

historic rate. That is the most powerful means of

eliminating poverty because growth increases

employment and wages. Several experts have

attributed the doubling of the growth rate to the

private pension system.

Finally, the private pension system has had a very

important political and cultural consequence.

Ninety percent of Chile’s workers chose to move

into the new system. They moved faster than

NEWS & OPINION

Chile’s private pension system has been the main factor in increasing the savings rate... 26 % of GNP, compared to about 15% in Latin America.

Germans going from East to West after the fall of the Berlin Wall. Those workers freely decided to abandon the state system, even though some of the trade-union leaders and the old political class advised against it. But workers are able to make wise decisions on matters close to their lives, such as pensions, education, and health. That’s why I believe so much in their freedom to choose.

Every Chilean worker knows that he is the owner of an individual pension account. We have calculated that the typical Chilean worker’s main asset is not his small house or his used car but the capital in his pension account. The Chilean worker is an owner, a capitalist. There is no more power-ful way to stabilize a free-market economy and to get the support of the workers than to link them directly to the benefits of the market economy. When Chile grows at 7 percent or when the stock market doubles—as it has done in the last three years—Chilean workers benefit directly, not only through higher wages, not only through more employment, but through additional capital in their individual pension accounts.

Private pensions are undoubtedly creating cultural change. When workers feel that they

own a fraction of a country, not through the party bosses, not through a politburo (like the Russians thought), but through ownership of part of the financial assets of the country, they are much more attached to the free market, a free society, and democracy.

By taking politicians out of the social security business we have done them a great favor because they can now focus on what they should do: stop crime, run a good justice system, manage foreign affairs—the real duties of a government. By removing the government from social security, we have accomplished the biggest privatization in Chilean history—someone even called it, paraphrasing Saddam Hussein, the mother of all privatizations, because it has allowed us to go on to privatize the energy and telecommunications companies.

That has been our experience. Of course, there have been some mistakes. There are some things that should be improved. There is no perfect reform. With time and experience, I know I would do some things differently. But on the whole, I can tell you that it has been a success beyond all

our dreams.GSOURCE: CATO.ORG

In this section we will be bringing you some illustrations of the condition of our nation. This month we point the spotlight on our nation’s out of control debt.

US: Crushing Burden of DebtDebt held by public as a share of economy

Europe: Trouble AheadGovernment debt as a share of economy (2011)

SOUrCE: OMB/CBO

SOUrCE: IMF

ECONOMIC SNAPSHOTS:PUBLIC DEBT

1940

100%WWII

CURRENT PATH

19601950 1970 1990 20101980 2000 2020

64%

91%

114% 120%

152%

100%

SPAIN PORTUGAL IRELAND ITALY GREECE

100%

UNITED STATES

13GENERATIONAMERICA.ORG

NEWS & OPINION | ELECTIOn 2012

BY DANIEL J. MITCHELL

Thanks to several years of fiscal

restraint during the 1990s, the

burden of federal spending dropped

to 18.2% of gross domestic product

by the time Bill Clinton left office. The federal

budget today consumes more than 24% of

economic output, a one-third increase since 2001

in the share of the U.S. economy allocated by

politics rather than market forces. That makes

the Republican House budget, which would

reverse this trend, extremely important for the

economic health of the country.

Both political parties deserve blame for the

spending spree that’s put America in a fiscal ditch.

President George W. Bush was a big spender and

President Obama has compounded the damage

with his stimulus spending and other programs.

But the era of bipartisan big government may

have come to an end. Largely thanks to Rep.

Paul Ryan and the fiscal blueprint he prepared

as chairman of the House Budget Committee

earlier this year, the GOP has begun climbing

back on the wagon of fiscal sobriety and has

shown at least some willingness to restrain the

growth of government.

Policy makers should focus on reducing the

burden of government spending as a share of

GDP—leaving more resources in the private

economy.

The Ryan budget has generated considerable

controversy in Washington, and it will become

even more of an issue now that Mr. Ryan is Mitt

Romney’s running mate. So it’s an appropriate

time to analyze the plan and consider what it

would mean for America.

The most important headline about the Ryan

budget is that it limits the growth rate of federal

spending, with outlays increasing by an average

of 3.1% annually over the next 10 years. If spend-

What’s Really in the Ryan Budget

The Ryan budget has generated considerable controversy in Washington... it’s an appropriate time to analyze the plan and consider what it would mean for America.

BY MICHAEL D. TANNER

With more than a third of American voters tell-ing pollsters that they don’t yet know enough about Republican vice-presidential candidate Paul Ryan to have an opinion of him, the race to

define the Republican congressman is fully joined.

Democrats clearly want to paint Ryan as an unbending

ideologue who refuses to compromise and is unwilling to

work with his opponents. Already Obama campaign adviser

David Axelrod has taken to calling Ryan a “right-wing ideologue”

and “quite extreme.” President Obama himself refers to Ryan as

“the ideological leader of Republicans in Congress.”

It’s impossible to deny that there has been an ideological

component to Ryan’s career in Washington. He has been an

articulate spokesman for the idea of smaller, less costly govern-

ment, and he is perhaps Congress’s best-known advocate of

entitlement reform. There is no doubt that in his heart he prefers

markets to government control.

But any effort to paint him as an inflexible ideologue runs up

against his demonstrable tendency toward pragmatism.

Throughout his time in Washington, Ryan has been the classic

“half a loaf” type of conservative. Time and again, he has shown

that he is willing to compromise and take far less than he had

originally sought, as long as he is moving incrementally in the

direction he wants to go. You won’t find Ryan on the short end

of any 434-to-1 votes.

Take, for example, the infamous “Ryan budget.” Yes, it cuts

spending and reforms Medicare—though not Social Security—

but it was far from the most fiscally conservative budget offered

by Republicans this year. Just compare Ryan’s budget with the

one proposed by Senator Rand Paul (R., Ky). Ryan’s budget

takes 30 years to reach balance. Paul’s would have balanced the

budget in five years. Ryan would cut government spending by

$4.1 trillion over ten years. Paul would have cut spending an

additional $4 trillion over that period. Ryan’s budget didn’t

touch Social Security. Paul’s would have raised Social Security’s

retirement age and means-tested the program. Now, that is a

fiscally conservative budget.

In fact, Senators Jim DeMint (R., S.C.) and Pat Toomey (R., Pa.)

also offered budget proposals that cut spending more than

Ryan’s budget did. Ryan was willing to push the envelope on

spending cuts, but only as far as he could while still getting

ing is left on autopilot, by contrast, it would grow

by 4.3% (or nearly 39% faster). If President

Obama is re-elected, the burden of spending

presumably will climb more rapidly.

This comes as a surprise to many people since the

press is filled with stories about the Ryan budget

imposing trillions of dollars of “savage” and

“draconian” spending cuts. All of these stories,

however, are based on Washington’s misleading

budget process that automatically assumes an

ever-expanding government. The 4.3% “base line”

increase is the benchmark for measuring “cuts”—

even though spending is rising rather than falling,

and it’s only the rate of spending growth that is

being slowed.

Even limiting spending so it grows by 3.1% per

year, as Mr. Ryan proposes, quickly leads to less

red ink. This is because federal tax revenues are

projected by the House Budget Committee to

increase 6.6% annually over the next 10 years if

the House budget is approved (and this assumes

the Bush tax cuts are made permanent). Since

revenues would climb more than twice as fast as

spending, the deficit would drop to about 1% of

gross domestic product by the end of the 10-year

budget window.

To balance the budget within 10 years would

require that outlays grow by about 2% each year.

Spending in the Ryan budget means the federal

budget reaches balance in 2040. There are many

who would prefer that the deficit come down

more quickly, but from a jobs and growth

perspective, it isn’t the deficit that matters.

Rather, what matters for prosperity and living

standards is the degree to which labor and capital

are used productively. This is why policy makers

should focus on reducing the burden of govern-

ment spending as a share of GDP—leaving more

resources in the private economy.

The simple way of making this happen is to follow what I’ve been calling the golden rule of good

Defining Ryan

To balance the budget within 10 years would require that outlays grow by about 2% each year.

SEE ‘RYAN BUDGET’ PG 18

15GENERATIONAMERICA.ORG

NEWS & OPINION | POLITICS

the votes of moderate as well as conservative

Republicans. Yes, his budget is conservative,

but it is hardly radical.

According to the National Journal, Ryan

works with Democrats about as often as any

Republican does. Most famously, he collaborated

with liberal senator Ron Wyden (D., Ore.) to

develop the latest iteration of his Medicare

reform plan. In fact, the evolution of Ryan’s

Medicare plan shows both the promise and the

perils of his pragmatism.

Ryan’s first Medicare reform plan was fairly

accurately described as a voucher program:

Seniors would each receive a support payment

roughly based on the current per-capita amount

of Medicare spending. Wealthy seniors would

receive somewhat less, poor and sicker seniors

somewhat more. The Ryan-Wyden plan, on the

other hand, abandons the voucher concept in

favor of a pure premium-support model.

Ryan also gradually agreed to loosen his pro-

posal’s cap on overall Medicare spending. In his

original plan, Medicare spending would not be

allowed to grow any faster than the overall

economy. In Ryan-Wyden, the cap is GDP growth

plus a full percentage point. At the same time,

the burden for exceeding growth caps has

shifted from seniors themselves, who would have

been required to pay more out of pocket under

the original Roadmap for America’s Future, to

providers, who will have their reimbursements

reduced under Ryan-Wyden.

The budget passed by the House this year was

in some ways closer to Ryan’s original Medicare

proposal than to the Ryan-Wyden plan. But

Ryan has clearly shown that he is willing to

water down his ideas if doing so garners

Democratic support.

The downside of Ryan’s pragmatism is that each

change has weakened his proposal. His original

proposal would have reduced Medicare spending

by far more than Ryan-Wyden. Given that even

the most optimistic scenarios show Medicare

running $38 trillion in the red, Ryan’s retreat is not

a step in the right direction.

Still, it might have been justified if Ryan’s willing-

ness to compromise had attracted substantial

Democratic support. But, in the end, it was the

Democrats who refused to budge. Senator

Wyden was the only Democrat to join with Ryan,

and even he later backed away from his support

under pressure from his caucus.

Ryan’s pragmatic streak has also led him to cast

many votes that seem to contradict his reputation

as a budget hawk. Ryan would no doubt say that

he won important concessions in exchange for

those votes—for instance, getting health savings

accounts included in the Medicare prescription-

drug bill—or that the alternatives were worse. But

any way you look at it, those votes hardly make

Ryan an inflexible budget cutter.

All of this means that Ryan is not really the

government-slashing savior envisioned by some

conservatives. It also means that he is not the

ideological hard-liner portrayed by some

liberals. He is, in fact, likely to disappoint his

conservative backers on occasion. But he may

also be able to work across party lines to really

change the disastrous course we are now on.G

Michael Tanner is a senior fellow at the Cato Institute and

author of Bad Medicine: A Guide to the Real Costs and

Consequences of the New Health Care Law.

SOURCE: CATO.ORG. THIS ARTICLE APPEARED ON NaTIoNal RevIew

(ONLINE) ON AUGUST 22, 2012.

Ryan was willing to push the envelope on spending cuts, but only as far as he could while still getting the votes of moderate as well as conservative Republicans. Yes, his budget is conservative, but it is hardly radical.

Interest rates are at historic lows and have been for some time. Banks are flush with funds, as are large corporations. Monetary conditions are not restraining economic growth. We need to look elsewhere for the source of the problem.

BY WILLIAM POOLE

Fed Chairman Ben Bernanke recently

kicked off the annual Economic

Symposium of the Federal Reserve

Bank of Kansas City, which draws

central bankers, academics, market participants

and policymakers from around the world. I have

taken the liberty of drafting his ideal speech:

Again this year, as for the past three years, we

seek to understand the prospects for the U.S.

and world economies following the most severe

recession since the Great Depression.

We thought that by now economic growth would

be picking up, but the expected sustained

recovery has not occurred. In the U.S., employ-

ment is growing but far too slowly.

Why?

Bottom line: The absence of a long-run fiscal

plan is weighing heavily on planning by the

business sector.

I’ll focus this morning on the role of nonresiden-

tial fixed investment and the effects of fiscal

policy on this important component of GDP. In

the second quarter of 2012, real business fixed

investment was still 6% below its level at the

business cycle peak in the fourth quarter of 2007.

As I reflect on these issues, I keep coming back to

the marvelous biography of Steve Jobs by Walter

Isaacson. Are there lessons in his life as an

entrepreneur and head of Apple Computer—now

just Apple—for public policy today?

Apple made huge investments in developing the

Macintosh computer and subsequent i-this and

i-that. The vision was remarkable and the length

of time to develop new products not trivial.

Apple’s Macintosh computer project began in

1979 and continued through turbulent years in

the early 1980s of very high interest rates

followed by deep recession; the machine did not

come to market until early 1984.

Later products also took years to develop. Even

the Apple store took almost two years from Jobs’

conception to opening.

Business investment is especially vulnerable to

uncertainties about the future because the lead

times are often long. Projects expected to come

to market in three to five years are much more

dependent on the long-term environment than

on the immediate business situation.

WASHINGTON’S FISCAL PARALYSISLagging business fixed investment cannot be

attributed to monetary policy. Interest rates are

Like Steve Jobs, Ben Bernanke Should Think Long-Term

SEE ‘LONG TERM’ PG 19

17GENERATIONAMERICA.ORG

NEWS & OPINION

fiscal policy: The private sector should grow faster than the government. This is what happens with the Ryan budget. The Congressional Budget Office expects nominal economic output (before inflation) to grow about 5% each year over the next decade. So if federal spending grows 3.1% annually, the burden of federal spending slowly shrinks as a share of GDP.

According to the House Budget Committee, the federal budget would consume slightly less than 20% of economic output if the Ryan budget remained in place for 10 years. This would be remarkable progress considering that the federal government is now consuming 24% of GDP vs. Mr. Clinton’s 18.2% in 2001. If Paul Ryan’s policies are social Darwinism, as Mr. Obama and his allies allege, one can only speculate where Bill Clinton ranks in their estimation.

Spending restraint also creates more leeway for good tax policy. Regardless of what you think about deficits, the political reality is that it is difficult to lower tax rates if government borrowing remains at high or rising levels. If deficit spending contin-ues at current levels, then higher tax rates are almost sure to follow. And higher tax rates can’t create an environment condu-cive to more investment and jobs.

The Ryan budget avoids this unpleasant outcome by addressing the problem of excessive government spending. This makes it possible to extend the 2001 and 2003 tax-rate reductions. It also clears the way for other pro-growth reforms, such as Gov. Romney’s proposed across-the-board 20% income tax cut, a more competitive 25% corporate tax rate, and less double-taxation of dividends and capital gains.

One of the best features of the Ryan budget is that he reforms the two big health entitlements instead of simply trying to save money. Medicaid gets block-granted to the states, building on the success of welfare reform in the 1990s. And

Medicare is modernized by creating a premium-support option for people retiring in 2022 and beyond.

This is much better than the traditional Beltway approach of trying to save money with price controls on health-care provid-ers and means testing on health-care consumers. Price controls are notoriously ineffective—because health-care providers adapt by ordering more tests and proce-dures—and politically unsustainable due to lobbying pressure. Means testing imposes an indirect penalty on people who save and invest during their working years. That should be a nonstarter for a political party that seeks to encourage productive behavior and discourage dependency.

But good entitlement policy also is a godsend for taxpayers, particularly in the long run. Without reform, the burden of federal spending will jump to 35% of GDP by 2040, compared to 18.75% of output under the Ryan budget.

Assuming the GOP ticket prevails in November, Mitt Romney will make the big decisions on fiscal policy. But there is no escaping the fiscal math. If Mr. Romney intends to keep his no-tax-hike promise, he has to restrain the growth of spending.

This doesn’t mean he has to go with every

detail of the Ryan budget—but it’s

certainly a good place to start.G

Daniel J. Mitchell is a senior fellow at the Cato

Institute. SOURCE: CATO.ORG

RYAN BUDGETCONTINUED FROM PG 15

EVERYTHING OLD IS NEW AGAIN CHICAGO TRIBUNE 1934

at historic lows and have been for some

time. Banks are flush with funds, as are

large corporations. Monetary conditions

are not restraining economic growth. We

need to look elsewhere for the source of

the problem.

Everyone is well aware of the standoff—

indeed, paralysis—in Washington over

fiscal policy. Monetary policy cannot fix or

even offset the damage being done by

fiscal inaction.

In round numbers, to stabilize its finances

the federal government needs to cut its

annual deficit by $500 billion, or about

3% of GDP.

Doing so will require cuts in outlays,

revenue increases, or some combination

of the two. Doing more would be wise,

but 3% of GDP is the minimum. The

problem for the economy is this: No one

knows where the spending cuts or

revenue increases will fall.

Consider expenditure cuts first, because

their impact is easy to explain. In nominal

dollars, in 2011 total government con-

sumption expenditures and gross

investment—“government purchases” for

short—was 20% of GDP. This figure

includes both federal and state and local

purchases, which are partly financed by

the federal government. Obviously, a

resolution of the budget issue will not

eliminate the entire 20%.

If you were a government contractor,

however, from a defense supplier to a

road-paving company, absent a budget

deal, you couldn’t know what your share of the cutbacks would be. Even if ultimately government purchases are reduced by 3% of GDP, 20% of the economy is negatively affected today because no one knows who will fall in the 3% group.

Thus, although on crude Keynesian terms

current fiscal policy is stimulative, because of the deficit, in fact policy is very restrictive.

The same argument applies to revenue increases, whether by increases in tax rates or by reduction of tax preferences.

Until disputes about corporate taxation are resolved, corporations are left wondering what the effects will be on their particular businesses from some combination of tax rate and tax prefer-ence changes.

TAX UNCERTAINTY

What about the individual income tax?

Reducing certain tax preferences will affect the businesses of those benefiting from those preferences. For example, scaling back the deductibility of home mortgage interest—a proposal discussed by many—leaves prospective homeown-ers and homebuilders in doubt.

Similarly, increasing upper income tax rates, which may or may not occur, will affect the return to entrepreneurial activity.

Steve Jobs was not himself much moti-vated by money, but his investors and employees were. The possibility of a tax

increase and uncertainty over its size weighs negatively on today’s entrepreneurs.

The Apple story makes clear the impor-tance of accumulation of human capital. Steve Jobs attracted skilled and experi-enced software engineers and managers from other companies.

They gave up secure jobs to join a young firm with a charismatic leader and the promise of great riches if the company were successful.

They knew, however, that they would

have to make a commitment of several years to see the Mac and, later, various i-products come to market.

In no case was the outcome clear at the outset.

Every serious observer agrees that there is a pressing need for tax reform, and that the shape of reform is to lower rates and broaden the tax base. It may or may not be desirable to raise more tax revenue in the process of reforming the system. That is a political judgment properly left to elected officials.

My counsel, however, is to get on with it.

In the late 1990s, Steve Jobs launched the “Think Different” ad campaign. For the federal government, the mantra needs to be “Think Long-Term.”

We are fortunate that the U.S. economy is terribly resilient. Current fiscal uncertain-ties have depressed growth but seem unlikely to cause a recession in the near-term.

Vigorous growth is in our future once people understand what government spending is going to be cut and what taxes are going to be increased to control the deficit.

I emphasize again that monetary policy cannot fix the fiscal problem. If the Fed finds something more that might be done through monetary policy, we will do it.

But I must be clear: Monetary policy has gone about as far as it can in offsetting the negative effects of current fiscal policy paralysis.G

william Poole is a senior fellow at the Cato

Institute and Distinguished Scholar in Residence

at the University of Delaware. He retired as

president and Ceo of the Federal Reserve Bank

of St. louis in March 2008. SOURCE: CATO.ORG

LONG TERMCONTINUED FROM PG 17

The possibility of a tax increase and uncertainty over its size weighs negatively on today’s entrepreneurs.

19GENERATIONAMERICA.ORG

BY TERRY SAvAGE

What do you do when the

financial markets are upside

down? What’s the strategy

when bad news seems to be

good news, and vice versa?

It’s a question stock market investors

must be asking these days, when

economic growth is stalling, fiscal policy

is undecided, Europe is talking and not

acting, and even the Fed can’t seem to

find a policy to help.

Yet the Dow Jones industrial average

closed out last week at 13,096—within 8

percent of its all-time high of 14,164.53 set

on Oct. 9, 2007. That was before the

world generally recognized the global

financial crisis that has engulfed us in

waves over the past five years.

The subsequent financial fear pushed the

Dow nearly straight downward for the

next 18 months, to a closing low of

6,547.05 on March 9, 2009, as investors

dumped stocks in a classic selling panic.

At current levels, the DJIA has now

doubled from that closing low point!

If you were dumping stocks along with

the crowd in early 2009, you may feel

humiliated—and far less wealthy. If you

were buying stocks that week, you can

brag to your friends and neighbors. If you

were paralyzed with fear and did nothing,

you can now breathe a sigh of relief. If

you were this columnist, you can point

back to a column you wrote on that day

urging people to stay positive and

continue investing and believing in the

future of America.

But what no one can do is take credit for

consistently calling the turns in the

market over these past five years.

That’s just something to think about as

you keep making that monthly invest-

ment into your 40l(k) or IRA. You have no

guarantees that the market will be higher

when you are withdrawing during your

retirement years. But historic odds say

you’ll do better investing regularly in a

diversified portfolio of stocks than leaving

your money in the bank.

Following that discipline is easier when

you have some money safely set aside in

a money fund to “hedge” your bets.

That’s why you don’t put all your eggs in

any one basket. And why you step back,

gain perspective, then make a plan—and

stick to it.

Long-term thinking is what generates

prosperity over the long run.

A golden opportunity?

So if you buy into the idea that trading

YOUR FINANCES

WHEN THE STOCK MARKET DEFIES LOGIC, THINK LONG-TERM

OU HAVE NO GUARANTEES THAT THE MARKET WILL BE

HIGHER WHEN YOU ARE WITHDRAWING DURING YOUR

RETIREMENT YEARS. BUT HISTORIC ODDS SAY YOU’LL DO BETTER

INVESTING REGULARLY IN A DIVERSIFIED PORTFOLIO OF STOCKS

THAN LEAVING YOUR MONEY IN THE BANK.

Y

SEE ‘STOCK MARKET’ PG 22

Dear Reader: Retirement

planning can sometimes

seem like a lot of work, but

the more you get organized

now, the more you can relax later on.

You’re wise to be looking at your choices

ahead of time because when it comes to

what to do with a 401(k) after retirement,

there are some pros and cons to consider.

And what you choose will have an impact

not only on the potential continued

growth of your retirement savings but

also on your income taxes.

REVIEW YOUR BASIC CHOICESGenerally, there are four things you can

do with a 401(k) when you leave your job.

One in particular—rolling over to a new

employer—doesn’t really apply to your

situation, but the other three merit

consideration. Basically, when you retire

you can:

n TAkE THE CASH: At your age, there’s no

penalty, but there are tax consequences.

Withdrawals from a 401(k) are taxed as

ordinary income, so this could be a big

initial hit. The Internal Revenue Service

withholds 20 percent right off the top

(this is mandatory) and any remaining

taxes will be factored in when you prepare

your return for the year in which you take

the distribution. On the plus side, you’ll

have immediate access to your money. On

the minus side, your savings will no longer

grow tax-deferred. There is a 60-day

window in which you can still choose to

move your money into a tax-deferred IRA,

but after that time, your only choice is to

put it in a taxable account.

n kEEP YOUR 401(k) WITH YOUR fORMER

EMPLOYER: This is probably the easiest

and does have some benefits. You avoid

income taxes and the mandatory 20

percent withholding; your money

continues to grow tax-deferred; and you

maintain the option of rolling it over,

should you ever decide to go back to

work. The main potential drawback is that

your investment choices are limited to

what’s available in the plan. If you have 15

or so funds to choose from, that could be

just fine. But if you’re limited to three or

four investment selections, you might be

better off moving your money elsewhere.

There also may be limitations on with-

drawals and when and how you invest.

Make sure you get the details.

n ROLL IT OvER TO AN IRA: Like a 401(k),

an IRA keeps your money growing

tax-deferred. It also gives you the

flexibility to choose the types of invest-

ments that you deem best. Plus, you can

invest and access your money whenever

you want, without going through a plan

provider. Those are significant advan-

tages. One possible drawback is that a

401(k) may have more legal protection

from creditors than an IRA.

n DECIDE WHAT TO DO WITH COMPANY

STOCk: If you have appreciated company

stock in your 401(k), there’s another

course of action that could save money

on taxes. No matter what you do with

the rest of your 401(k) assets, you can

transfer your company stock to a taxable

BY CARRIE SCHWAB-POMERANTz

Dear Carrie: I’m 64 and about to retire. I’m starting to get my finances organized, and I’m wondering, should I leave my money in my 401(k) or transfer it to a different account? —a Reader

Ready to Retire: What Should You Do With Your 401(k)?

4 BASIC CHOICESFOR ROLLING OVER YOUR 401K

1. Take the cash

2. Keep your 401(k) with your former employer

3. Roll it over to an IRA

4. Decide what to do with company stock

21GENERATIONAMERICA.ORG

YOUR FINANCES

account and take advantage of what’s

called net unrealized appreciation.

With this strategy, when the shares are

transferred, you pay ordinary income

taxes only on the cost basis of the

stock (the average cost at the time you

received it from your employer), which

could be significantly lower than the

current value. If you sell immediately,

you pay taxes on the appreciation

beyond the cost basis at the long-term

capital gains rate. If you decide not to

sell immediately, you will pay taxes on

any additional appreciation at either

the long- or short-term capital gains

rate, depending on your holding period.

If you were to simply roll this stock over

into an IRA, you’d end up paying

ordinary income taxes on the current

value when you withdraw it, which

could be much higher than long-term

capital gains taxes.

FACTOR IN SOCIAL SECURITYWhether you take your entire 401(k) in

cash at once or withdraw from it over

time, the distributions will be added to

your ordinary income. This, in turn, can

impact how your Social Security

benefits are taxed. Currently, single

filers could pay income taxes on up to

85 percent of benefits if their modified

adjusted gross income (MAGI) is over

$34,000. For married couples filing

jointly, the MAGI threshold is $44,000.

As you can see, there’s a lot to consider.

You’ll also want to look at your 401(k)

in conjunction with your other sources

of retirement income. This might be a

good time to sit down with your tax or

financial advisor to review your entire

financial picture. All the best for a long

and rewarding retirement.G

Carrie Schwab-Pomerantz, Certified Financial

Planner™, is president of Charles Schwab

Foundation and author of “It Pays to Talk.” You

can e-mail Carrie at askcarrie@schwab.com. This

column is no substitute for an individualized

recommendation, tax, legal or personalized

investment advice. © 2012 CHARLES SCHWAB & CO., INC.

MEMBER SIPC. DISTRIBUTED BY CREATORS.COM

short-term market moves is better left to

people who find roller coasters thrilling,

then you might start looking around for

additional historic long-term trends on

which to base your investing philosophy.

I’m talking about the kinds of very

long-term cycles that are hidden in the

shorter (one- and two-year) immediacy

of the financial markets.

So what do we know about what histori-

cally happens to paper currencies? Very

simply, we know that when an empire or

a country runs up debt, the rulers

eventually resort to “printing” more

currency to pay down that debt—as

opposed to trying to balance their

budgets through policies that will

generate economic growth. Rulers won’t

cut spending and raise taxes if they are

trying to “buy” support or compliance

from the populace.

Once debt gets out of hand, they will

“print.”

The problem in Europe now is that the

individual countries cannot “create” the

Euro currency. They are all bound to its

standards. Only Germany has enough

power to acquiesce in “printing” to

rescue the banking system. And Germans

have horrific memories of the currency

printing spree in the late 1920s, which

helped bring Hitler to power. While the

United States remembers the Great

Depression, Germany remembers the

Great Inflation—and stands resolutely

against a European bailout.

America, on the other hand, has a

generational insecurity about recessions

and depressions. We’ve seen what can

happen when the government demands

austerity as a solution to debt problems.

And we’re hoping to avoid that at all

costs. Eventually, that cost may be

inflation—money printing—especially if

our government cannot organize around

policies that promote economic growth.

Remember, these are not short-term

political issues but longer-term economic

trends that will defy politicians of both

parties. And if you step back and take the

larger perspective, you’ll want some

protection against that possibility.

Historically, that protection has been

gold—currently trading around $1600 an

ounce. The idea of buying gold now may

seem as outrageous as buying stocks in

March 2009 at Dow 6547. But stocks

doubled from that point, when no one

was looking and few were buying. If our

country doesn’t get its financial act

together, you could see a similar percent-

age move in gold—the historic “hedge”

against inflation.

Let me make my point clear. Gold could

double from the current $1,600 an ounce

if Congress doesn’t get its act together.

I have no time frame on that possibility,

no deadline—and despite taking my own

advice, I devoutly hope it won’t happen.

Soaring gold prices would mean that

something important has broken down in

the American political and financial

system, and that our paper currency—the

U.S. dollar—would no longer be the safe

haven the entire world seeks today.

It’s tough to think about but not impos-

sible. And that’s The Savage Truth.G

Terry Savage is a registered investment adviser

and is on the board of the Chicago Mercantile

exchange. She appears weekly on wMaQ-Channel

5’s 4:30 p.m. newscast, and can be reached at

terrysavage.com. © 2012 TERRY SAVAGE PRODUCTIONS.

DISTRIBUTED BY CREATORS.COM

STOCK MARKETCONTINUED FROM PG 20

ERY SIMPLY, WE

KNOW THAT WHEN

AN EMPIRE OR A COUNTRY

RUNS UP DEBT, THE

RULERS EVENTUALLY

RESORT TO “PRINTING”

MORE CURRENCY TO PAY

DOWN THAT DEBT...

V

23GENERATIONAMERICA.ORG

FALL 2012

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Maintain Your Health: reduce Your risk of Falling

HEALTH WELLNESS

BY DR. DAvID LIPSCHITz

After age 65, about 30 percent of people

fall at least once annually. If a hip

fracture occurs, 25 percent will die in a year

and 50 percent will become dependent—

frequently requiring nursing-home care.

Fortunately, much can be done to reduce the

risk of a fall, the need for lengthy hospital

stays or the loss of independence.

The risk of falling frequently is due to declines

in balance, mobility and gait, as well as a high

risk of fainting caused by a blood pressure

drop when attempting to stand up. Visual

difficulties, dizziness, inappropriate shoe choic-

es and drug side effects often contribute to

falls. Tripping due to environmental hazards in

the home or elsewhere remains the major

cause of falls at any age.

For a person at risk of falling, an evaluation by

a physician is essential. Medical conditions that

contribute to falls must be identified and

treated, and problems with gait and balance

should be evaluated. Medications that increase

the risk of falling should be avoided. Wherever

possible, keep medications to a minimum and

avoid sleeping pills, tranquilizers and alcohol.

Patients must be made aware that medications

to treat hypertension can lead to dangerous

drops in blood pressure, with changes in

posture. Never stand up suddenly and always

have something to hold on to.

29GENERATIONAMERICA.ORG

HEALTH & WELLNESS

No matter your health, aging is associated with a

relentless loss of muscle mass, an increased

proportion of weight as fat, and progressive

weakness that slows gait speed, affects balance

and increases the risk of falls. It follows that the

more we do to maintain strength the better.

Physical therapy can help reduce falls. Treatment

includes balance exercises and working with

weights that build muscle, bones and most

importantly, strength. The older the patient, the

longer the time taken to see tangible improve-

ments, but they will occur and in the long term,

the results are well worth the effort. When

physical therapy ends, keep moving and consider

joining a health club to maintain and improve

strength and balance.

If needed, do not be embarrassed to use a cane,

walker or wheelchair. But walk as much as

possible. The more time spent being immobile or

sitting in a wheelchair, the greater the loss of

muscle and the increased chance of a fall.

Most serious falls occur in the bathroom.

Carefully review the bathroom and make

sure slippery surfaces can be avoided, that water

does not leak from the shower or tub, and if

possible, install handrails from the bed all the way

into the bathroom. Often a raised toilet seat with

armrests can prove helpful. A sturdy plastic seat

should be placed in the tub or shower and use a

hand-held shower to bathe. If a wheelchair is

needed or gait and balance is significantly

impaired, a uniquely designed bathtub or shower

may be necessary.

Fall-proof the home by clearing walking areas of

boxes and electrical and phone cords. Remove low

coffee tables and move magazine and plant

stands out of the way. Loose rugs should be

removed or taped to the floor; uneven wooden

floorboards or carpeting must be repaired; and

skidproof materials should be used for cleaning.

Many falls are caused by standing on a chair or

attempting to remove something from an

out-of-reach cupboard. For this reason, clothing,

cleaning materials, dishes, utensils and food must

be accessible and stored within easy reach.

Adequate lighting decreases the risk of a fall.

Assure that each room has ambient light from

outside during the day, is well lighted at night and

use nightlights liberally. Always switch on a light

before climbing the stairs and install glow-in-the-

dark or illuminating light switches.

If the risk of a fall is too great, consider whether

living alone in a large house with stairs is appropri-

ate. It may be time to move to a one-level home or

assisted-living facility, where help is available and

people surround you. And as you grow older, no

matter your health, live as close as possible to

immediate family.

Accidents due to falls are a major cause of

physical disability, the need for nursing-home care

and poor quality of life. The earlier precautions are

taken to reduce the risk of a fall, the better.G

Dr. David lipschitz is the author of the book Breaking

the Rules of Aging; more information is available at:

drdavidhealth.com. To find out more about Dr. David

lipschitz and read features by other Creators Syndicate

writers, visit creators.com. © 2012 CREATORS.COM

...walk as much as possible. The more time spent being immobile or sitting in a wheelchair, the greater the loss of muscle and the increased chance of a fall.

The food and Drug Administration recently denied a petition by the Corn Refiners Associa-tion to rename high fructose corn syrup “corn sugar.” Soon after that, the mayor of New York

City proposed prohibiting the sale of large sodas

and other sugary drinks (“large” defined as more

than 16 fluid ounces).

These two events could be viewed as big

government regulating what should be personal

choice. However, to me, they demonstrate our

conflicted feelings about the sweet stuff.

Whether sweetness is in the form of table sugar

(sucrose) or high fructose corn syrup (HFCS),

both contain fairly equal amounts of fructose.

As a sweetener, HFCS has been controversial.

Food scientists are exploring how the body

handles it and if there are differences from table

sugar. It’s great that we can distinguish HFCS

from sugar on food labels. Especially because

there are people with fructose intolerance who

absolutely must avoid HCFS.

Soft drink makers are even switching from HFCS

back to sugar. After all, sugar seems more natural

and even healthier—right?

Nope.

Sugar-containing drinks, such as fruit drinks, sodas,

energy drinks, sports drinks and sweetened bottled

waters, are the major source of added sugar in the

American diet. About half of the U.S. population—

adults and children 2 years old and over—have

sugary drinks on any given day.

This habitual sipping of sugary drinks has been

linked to poor diet, weight gain, obesity and type

2 diabetes.

So don’t be fooled. The recent decision to not

allow HFCS to be called sugar is fine by me. But

the trend away from HFCS to sugar in soft drinks

is no improvement.G

As the temperature rises so does our excite-ment over picnics and grilling. Unfortunately,

the number of foodborne illnesses rise too.

Most people know to keep potato salad cold. But

beyond that, are you thinking about food safety?

Consider the following food for thought as you

plan your summer outings.

Check the forecast. You know to refrigerate

perishable food within two hours. But did you

know that drops to one hour when the tempera-

ture is above 90 F (32 C)? Serve, eat and get

food back in the cooler.

Come clean. If your picnic spot doesn’t have

clean running water, bring some with you. Bring

wipes or sanitizing gel for surfaces and hands.

Wash hands before food prep and after handling

raw meats.

Keep your cool. Use an insulated cooler with ice,

ice packs or partially frozen items to keep food at

40 F (4 C) or cooler.

Pack smart. Keep separate coolers for food and

beverages. Chances are people will be in and

out of the beverage cooler, which lets cold air

escape. To keep food as cold as possible, keep

that cooler closed until you’re ready to cook.

Pack meat in plastic and put it on the bottom of

the cooler to prevent it from leaking on other

foods. Pack two platters—one for raw meat and

one for cooked meat.

Use a thermometer. Don’t rely on the color of

meat to judge when it’s cooked enough. Use a

food thermometer to check the temperature.

Safe minimum temperatures are:

165°F (74°C) for any type of poultry

160°F (71°C) for ground meat other than poultry

145°F (63°C) for solid cuts, such as steaks, of

meat or fish

What are you packing in your picnic cooler?

What are you grilling? And how are you doing it

safely?

To your health,

Katherine G

SUGAR IS SUGAR—DON’T BE FOOLED

WARM WEATHER FOOD SAFETY TIPS

JENNIFER NELSON, M.S., R.D. AND KATHERINE ZERATSKY, R.D., FOR THE MAYO CLINIC

31GENERATIONAMERICA.ORG

TRAVEL

BY kATHRYN LEMMON

Just before setting out for Fredericksburg, Texas, I happened to see a news item

on the Texas tradition of taking photos of youngsters among bluebonnets.

When I arrived, I got my first glimpse of these beautiful blue flowers. What a

lucky connection—and what a great start to my visit.

Fredericksburg is a manageable city with a thriving main street in an area

known as Texas Hill Country. Regardless of its size, however, it packs in a number

of diverse attractions. From German and World War II history to wine, fine art

and presidents, it’s all here.

The region was first settled by Germans, and it proudly retains the heritage. A

popular landmark in town is the Vereins Kirche (Society’s Church) Museum.

Regional names such as New Braunfels and Luckenbach, made famous by the

Waylon Jennings and Willie Nelson song, also indicate the German connection.

In those early days residents obtained land both outside of town and a small

FredricksburgTexas

Home to German Heritage, Pacific War Museum

WHEN YOU GO:

When it’s time for a break,

replenish at:

fredericksburg Brewing Co. yourbrewery.com

farm Haus Bistro fredericksburgherbfarm.com

Der Lindenbaum Authentic German cuisine

derlindenbaum.com

Fredericksburg is a 75-minute

drive from the San Antonio

airport. For more information,

visitvisitfredericksburgtx.com

Above: Quaint Main Street

in Fredricksburg

Far left: Blue Bonnet is the

Texas state flower and is a

popular subject of photos.

Left: The Texas White

House, Lyndon B. Johnson

National Historical Park

33GENERATIONAMERICA.ORG

plot in town. An interesting holdover from that

time period are homes known as Sunday Houses.

Whether for church, shopping or trading, the

Sunday House provided practical shelter for a

short stay. Before making the time-consuming

wagon journey back to the farm, this gave the

rural folks a place to rest.

Today visitors can still see a well-preserved

Sunday House at the Pioneer Museum Complex.

This complex is a collection of authentic struc-

tures preserved from the 19th century that

includes the Weber Sunday House. The Weber

family had a seven-mile trek to town, no small

distance with a horse-drawn wagon and children

in tow. The Sunday House typically had just one

room with a lean-to kitchen downstairs plus a

half-story above, usually only reachable by an

outside stairway. The children most often were

assigned to the upper portion.

Sunday Houses aren’t the only structures special

to “Fred.” Tank Houses are another type that still

stands from times past,

and local residents are

naturally protective of

them. Prior to the time of

public utilities, home-

owners had to supply

and store their own

water. Generally the

tanks were made up of

two sections, the lower

support portion and the upper tank portion. Today

the remaining tanks have been creatively con-

verted into garden sheds or offices, and one is

large enough to act as a bedroom at a bed-and-

breakfast inn.

The National Museum of the Pacific War is also

located in Fredericksburg. Like so many aspects

of Texas, it is larger than life. It’s so extensive that

tickets are issued for 48 hours to allow time to

cover the entire place. The spread of buildings

and exhibits covers six acres and has more than

50,000 square feet of indoor space.

Since both my father-in-law and my father spent

time in the Pacific during the war, I was especially

eager to explore the exhibits. Individual sections

cover the well-known areas of activity, such as

Pearl Harbor and the Coral Sea, along with

lesser-known areas such as Leyte and Peleliu. The

museum follows a timeline of the events leading

up to, during and after the war in the Pacific.

One of the displays is a two-man Japanese

submarine that was one of only five similar

vessels that took part in the Pearl Harbor attack.

Special lighting and sound techniques provide a

dramatic exhibit.

The unusual location—a long haul from the

ocean—for a comprehensive museum about the

war in the Pacific is due to Adm. Chester Nimitz,

who spent the first six years of his life in a hotel

operated by his grandfather on Main Street.

Eventually he left Texas for the U.S. Naval

Academy. Later he became the commander-in-

chief of the Pacific during World War II. The

restored Nimitz Hotel today houses the Admiral

Nimitz Museum, showcasing the life and career of

Nimitz as well as early life in Fredericksburg.

Based on the population of the town, Fred has a

surprisingly large number of art galleries. The

InSight Gallery features

fine art with a Western

focus in a beautifully

restored downtown

building that dates from

1907. The Artisans at

Rocky Hill Gallery was

easily my favorite. The

gallery displays the

works of specialized

artisans who work their magic in reclaimed

metals, fabric, ceramics, copper and carved

wood, to name just a few. One of them has

created a one-of-a-kind horse sculpture from

metal gun parts.

A Texas-style welcome awaits at the Lyndon B.

Johnson National Historical Park east of Freder-

icksburg. This park has two distinct visitor areas

separated by 14 miles and split between Johnson

City and the LBJ Ranch. At the Johnson City

Visitors Center, park rangers can help plan a visit.

It is possible to tour the Texas White House where

the 36th president conducted much of his business.

The house was first opened for tours in 2008, and

additional rooms were opened in 2011. Lady Bird’s

necklaces still hang on the bathroom wall, and her

clothing is still in the closet. G© 2012 CREATORS.COM.

NATIONAL MUSEUM OF THE PACIFIC WAR

G PLEASANTLY ALL-AMERICAN g SurpriSingly Varied

BY STEvE BERGSMAN

My visit began with a nature hike at Whitefish Dunes State Park on a cool spring day in bright sun and with few

other visitors. I was in Door County, Wis., a

forested peninsula that separates Lake Michigan

from Green Bay. Similar to the way the eastern tip

of Massachusetts geologically breaks away from

the mainland to form a haphazard and extended

peninsula called Cape Cod, near to the football-

crazed city of Green Bay, Wisconsin’s Lake

Michigan coastline uncharacteristically and

haphazardly breaks its solid shores with a long jut

of land, forming a less-heralded but equally

beautiful vacation land. In fact, Door County is

often called Wisconsin’s Cape Cod.

If the dramatic shoreline, beaches and traditional

New England locale attract summer vacationers

and weekend travelers to Cape Cod from the East

Coast, Door County does the same for Midwest-erners. The difference is that Door County’s isolation on the Great Lakes makes it virtually unknown outside of the Midwest.

Once you drive past Sturgeon Bay and head north on the peninsula there are no chain restaurants or hotels. It’s like the America of the late 1800s and early 1900s. You’ll pass small harbor towns of interesting names—Egg Harbor, Fish Creek, Ephraim, Baileys Harbor and Whitefish Bay—all stranded in an architectural time warp of a more innocent era. Inns, lodges and bed-and-breakfasts proliferate, each one fantastically idiosyncratic. The restaurants and eateries are family-owned and finely tuned to the local ambience. Take for example Wilson’s Restaurant and Ice Cream Parlor, which has the familiar 1950s look new restaurants often try to re-create. The difference is that Wilson’s has been around since 1906, so the 1950s ambience is a real part of its history.

You’ll pass small harbor towns of interesting names—Egg Harbor, fish Creek, Ephraim, Baileys Harbor and Whitefish Bay—all stranded in an architectural time warp of a more innocent era.

oaaaaaaaaaaaaapW I S CO N S I NCOUNTYDOOR

35GENERATIONAMERICA.ORG

There are no Starbucks shops in northern Door County, so one morning I traveled to Door Country Coffee and Tea, where I had heard I could get a baked-egg breakfast and taste the some of the best coffee in the state. This place commercially brews its own brand onsite besides making a host of flavored coffees. While I’m not usually a fan of flavored coffee, the cookie-dough- and pumpkin-flavored coffees were definitely worth trying.

What also makes Door County the epitome of All-Americanism is its focus on cherries. As with

Washington, D.C., in the spring, many Midwesterners come here just for the cherry blossoms. At one time Door County was the largest cherry producer in the country, with about 95 percent of the market. Alas, today it only produces about 5 percent as other states, such as neighboring Michigan, have begun to dominate. Still, in the spring everything comes up cherries in Door County.

First of all, you couldn’t call yourself a restaurant here if you didn’t offer cherry pie for dessert. At breakfast, my hotel offered cherries and yogurt or for dessert a cherry petite. My first stop when I arrived was Country Ovens, which produces Cherry DeLite products and offers the

dried cherries and bottled cherry juice that I picked up for a snack. I also had a cherry ice cream sundae, cherry wine and at a place called Julie’s Park Cafe, ribs cooked in cherry barbecue sauce.

Door County also produces apples, grapes and other fruit, and now there is a growing wine business. That being the case, the area offers a number of places to do wine tastings. One of the more interesting is the Orchard Country Winery and Market, which was built on the acreage of an old family farm where the huge original barn still dominates the landscape. The cherry orchard is accessible, and visitors can try their hand—or their

puckered lips—in the cherry-pit-spitting competition area.

Door County counts 298 miles of shoreline. At its widest point, the land mass stretches about 11 miles. It’s not mountainous, but the land is ruggedly uneven, with rises and bluffs, beaches and coves, farmland and village. Before traveling about, I would strongly suggest taking the Door County Trolley tour, which lasts about an hour and half and provides an overview and a history of the area.

The landscape is heavily wooded now, but between the 1850s and 1890s, the peninsula was laid bare of vegeta-tion, with almost every tree cut for the lumber market and shipped to the fast-growing cities of Chicago and Milwaukee. But when I took my 2.8-mile Red Trail hike around Whitefish Dunes State Park I was able to experi-ence a thick forest of white pine, white cedar, sugar maple and hemlock while strolling past the dune thistle and rare flowers like the dwarf lake iris. The naturalist leading my walk listed porcupine, red fox, deer, coyote, otter and the occasional bear as wildlife she sees in the park.

Sand dunes aren’t common in Wisconsin, and those in the park are some of the highest in state. The Red

Trail hike includes a walk up Old Baldy, the tallest dune in the park at 93 feet. Indeed, surrounded by forest, I thought I was walking through hill country, but no, everything beneath my feet was sand.

Afterward, I was telling a Wisconsin down-stater that I was from Arizona, where the hard sand desert land can’t support tall vegetation such as trees and what a nice surprise my hike had been.

“Door County is like Sedona, Ariz.,” he told me. “There’s

something in the atmosphere that makes you feel better.”

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TRAVEL

GETTING THERE:

The Appleton and Green Bay airports are close

to Door County and serviced by several of

the major carriers. I flew from Phoenix, through

Minneapolis and on to Green Bay.

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Midwesterners come here just for the cherry blossoms. At one time Door County was the largest cherry producer in the country, with about 95 percent of the market.