Extreme Economics in the Classroom

Extreme Economics in the Classroom

“You’ve got to stand for something, or you will fall for anything.”

-John Mellencamp

Many of my columns are about people who make bad financial decisions. People who take out payday loans and run up debts on high-interest credit cards. People who play the lottery and gamble too much at casinos. People who just don’t know how to handle their money.

I’m often asked where people can go to avoid these mistakes. Dr. Keen Babbage has some answers in his new book, Extreme Economics (Rowman & Littlefield Education, Lanham, Md.).

Dr. Babbage says that personal finance should be a part of the school curriculum.

I’ve known Dr. Babbage for nearly 30 years, and he knows something about finance. He is frugal and has a good eye for investments. His brother Bob, my former college instructor and longtime friend, was instrumental in my getting into the financial planning business. Keen and I both served as treasurer for Bob’s campaigns during his successful terms as a state auditor and secretary of state.

I know the Babbage boys are good at saving a buck. I suspect they learned it at home. Keen mentions that he learned from his Keen Johnson, his grandfather, former Kentucky Governor (and Richmond Register publisher). Governor Johnson was a “saving, thrifty, frugal” governor who instead of buying new office stationery, used the stationery of the previous governor, Happy Chandler.

Johnson drew a line through Governor Chandler’s name and wrote in his own.

In an era when the current Kentucky governor spent over $5,000 on a secret door to his office, I am afraid that Governor Johnson’s example has been lost.

If you look at the saving rate of Americans, it becomes obvious that the frugal ethic of Governor Johnson’s era has not been handed down to the current generation.

We have a society where the haves are getting more and the have-nots are getting less.

There are whole segments of the business world set up so that the more intelligent and cunning can prey on the less savvy. If you go back to Darwin, there is an argument that the world has always been that way.

Education, however, is the way for the have-nots to protect themselves.

Education is the equalizer in any society. It allows the poor to be on equal footing with the rich. If people are able to make informed decisions, they are less likely to make mistakes.

That is where the concept of “Extreme Economics” kicks in.

Babbage’s book is aimed at teachers and educators, but any parent or student would also benefit from reading it. As Babbage notes in his introduction, the United States is facing a financial disaster “that could become absolute melt down.”

Smart money management sounds simple: spend less than you make, and save the rest. I don’t think Americans, especially young Americans, get it. Babbage has some ways to help them understand.

My grandmother was a savings fanatic as she grew up during the depression. She never had a credit card, or any kind of credit, and was able to save money from her meager paycheck from a potato chip factory.

Today’s young people haven’t had to learn hard lessons from a depression, and neither have their parents. Both have the societal pressure to spend on consumer goods.

It wasn’t life and death for grandma to have the coolest cell phone or IPOD. She didn’t have either and seemed to do fine.

A family member has been teaching their 6-year-old about money by paying him to do household chores. No work, no Scooby Doo. My parents taught me in a similar fashion, but schools, along with parents, need to join the battle.

When sound fundamentals are taught at a young age, they become habits. I’ve read many studies that show that people’s financial profiles are decided by the time they are 27. If they run through money at age 27, they will at age 50.

If you don’t know the basics, you will blow your money. It doesn’t make a difference how much money you have. Just ask lottery winners like Jack Whitaker. Like roughly 90% of lottery winners, he went through all of his money in less than five years.

The spend-for-today mentality has to stop. Schools and society have to address the problem, and Dr. Babbage has concrete ideas, exercises and plans.

All of America needs to stand up and take notice. Too many Americans are falling for anything.

Don McNay is Chairman of the Board for McNay Settlement Group in Richmond,Ky. You can write to him at don@donmcnay.com or read other things he has written at http://www.donmcnay.com/. His award-winning column is syndicated throughout over 200 newspapers.

Notes From Don

NOTES FROM DON

Representative Harry Moberly

I want to pass along my condolences to Mr.Moberly, whose mother died last Friday.

He allowed me a lengthy interview and said that he and Senator Ed Worley are solidly supporting Steve Beshear for Governor.

Moberly said that he will run for re-election. He also plans to continue serving as Chairman of the House Appropriations and Revenue Committee and will support Jody Richards to be re-elected as house speaker in 2009.

Harry does not read political blogs but I had him specifically deny that he had made a deal to be Budget Chair for Fletcher as one blogger speculated or that he had made a deal to be Budget Chair for Beshear as another speculated.

He also denied a blog post that he was trying to be President of Eastern Kentucky University and a new rumor that has him being named to the Public Service Commission.

It does not appear that Harry is going anywhere but a lot of people seem to think he is.

Comment on Kentucky

The following is a brief summary of some of the topics addressed on Comment on Kentucky on June 1, 2007 in which Don McNay was a guest.

Postsecondary Education

There are two important happenings in Post Secondary Education.

First is the search for new President for the Council on Post Secondary Education to replace the retiring Tom Layzell.

Peggy Bertelsman of Ft. Thomas, who was my high school English teacher 30 years ago, heads up the search committee and told me that the committee hoped to announce a finalist this week but he withdrew over the weekend.

Bertelsman said they are still receiving applications and the committee won't reveal any names until they present one or more candidates to the full council.

On another subject,

Dr. Jim Applegate and Sue Patrick at the Council on Post Secondary Education told me that beginning in 2009, incoming college students will need a score of 19 in math and 21 in reading on the ACT exam to be placed in a credit bearing college course. The current score needed is 18.

State Representative Joni Jenkins, who is employed by Jefferson Community College, is concerned about the increase and said that studies show that the ACT is not always a good predictor of college performance.

State Representative Harry Moberly, who is a director at Eastern Kentucky University strongly favors the increase in ACT scores and said that the move is part of an overall push to bring Kentucky up to national standards on admitting college students.

Congressman Hal Rogers and OxyContin

I've written two recent columns about Purdue Pharma, the makers of OxyContin, agreeing to a $635 million settlement with the federal government.

Purdue's lawyer, former New York City Mayor, Rudolph Giuliani, negotiated a plea that kept top executives at Purdue from going to jail.

Kentucky Congressmen Hal Rogers asked the FDA to insist OxyContin only be prescribed for severe pain.

Rogers said that would reduce the number of drugs being diverted to the black market.

Purdue Pharma is fighting Rogers’ request.

OxyContin addiction has been a huge problem in Roger's district, and he has been vigilant in his effort to get it more heavily regulated.

The OxyContin Letters

The OxyContin Letters


When things go wrong, don’t walk away.
That will only make it harder.

-Robin Lane and the Chartbusters

I recently wrote about how the makers of OxyContin agreed to a wimpy $600 million settlement with the federal government. Purdue Pharma, the makers of OxyContin, were selling an addictive drug. The top executives knew it was addictive, and the company sold almost $10 billion of the stuff.

Their lawyer, presidential candidate Rudolph Giuliani, negotiated a plea that kept people at Purdue from going to jail.
Giuliani cut a deal that street pushers would drool over. The fine is a small percentage of their sales, and the drug is still on the market.

In the language of the street pusher, the people at Purdue coped a plea, paid a fine and went back on the street.

In the wake of the OxyContin executives’ admission to committing a CRIME, Congressmen Hal Rogers of Kentucky and Frank Wolff of Virginia made a reasonable request.

They want OxyContin to be prescribed only for severe pain, not moderate pain as it is now.

Rogers said that one of the advantages of the change would be that it would cut the number of drugs being diverted to the black market.

Rogers and Wolff asked the Food and Drug Administration (FDA) to look into the matter.

Amazingly, Purdue Pharma, the makers of OxyContin, the same company that just let Giuliani cop a plea on their behalf, are fighting Rogers and Wolff.

Instead of thanking God for Rudy’s great connections and the laptop tendencies of the prosecution, the people at Purdue want the FDA to ignore the congressmen.

Here is something I can’t ignore. After I wrote my column, I started hearing from people all over the world.

A reader in Texas wrote the following:

My sister was very much addicted to Oxycontin that she was obtaining legally from her doctor. She was living with my 72-year-old mother as she was unable to hold a job. Her boyfriend was also addicted to various drugs. One night she refused to give him more of her Oxycontin, and he left to later return and cut the throats of my mother and sister.

The OxyContin problem is not confined to the United States. A reader in Canada wrote:

My son was addicted to Oxycontin for about 3 years. He is 22 months clean now but only because he is on the methadone maintenance program. We live in a small town and have to travel 2 hours each way weekly for him to be urine tested and to see the doctor. He was hooked so hard core, it is amazing he is still alive. He is clean right now, but he is a totally different person, often filled with anger. In our town of 6,500 people the drug of choice among our kids is Oxycontin!

Not everyone liked my column. A financial consultant in New York City called me a jerk but didn’t specify why. Either he likes OxyContin or likes Giuliani. Maybe both.

An Arizona reader told me his doctor had prescribed OxyContin for his back pain but that he was careful to explain that the drug could be addictive. Thus, the man used OxyContin without incident.

After reading horror story after horror story, I can’t imagine a scenario where I would willingly take OxyContin. I can understand doing so if you and your doctor weigh the risks and the benefits.

For moderate pain there has to be a better solution than OxyContin. Even if the government just limited the supply, it would be a big step forward.

It takes a lot of gall to keep fighting after your company and its top executives have agreed to a $634.5 million fine—not to mention the fact that everyone who was charged was well-connected enough to avoid serving jail time.

Purdue apparently has that kind of gall.

The people at Purdue admitted to willfully doing something that harmed people. They ought to do more than pay a fine; they ought to show leadership and clean up some of the mess they started.

Instead, they want the FDA’s blessing to keep on selling OxyContin to people with moderate pain.

The people at Purdue need to realize that when things go wrong, you don’t walk away.

That will only make it harder.

Don McNay is the Chairman of the Board for McNay Settlement Group in Richmond, Ky. You can write to him at don@donmcnay.com or read other things he has written at www.donmcnay.com. His newspaper column is syndicated in over 200 newspapers.