For Social Security, cash crunch in the wings
I read with interest your recent article on Medicare and Social Security. I have heard over the years that the federal government has cannibalized the Social Security fund on several occasions. Is this true, and if so, how many times and how much has actually been diverted to other programs? — B.D., Akron, Ohio
A: It’s not true in the sense you mean it. When Social Security employment tax revenues have exceeded benefit payments, the excess revenue was exchanged for special U.S. Treasury obligations. All of that is held in the Social Security Trust Fund. So in one sense, the federal government hasn’t “cannibalized” the trust fund. It has accounted for every dime of surplus revenue and accumulated interest with Treasury IOUs.
So, yes, the surplus was taken and spent on other things. And there are debt obligations to account for all of it. Those debts are backed by the “full faith and credit” of our government and its ability to levy taxes.
If our government had operated with a balanced budget, then total government debt would be modest and the trust fund holdings could easily be exchanged for Treasury cash. But the budget was not balanced. And other Treasury debt has become very large. So when Social Security will be looking for more cash to pay benefits, our government may not be able to redeem the accumulated debt. It’s a cash problem, and it is growing.
I have asked several people about my situation and have gotten conflicting answers. Here are the major facts, and then I will pose the question. First, I am retired from the U.S. Air Force with a $1,300 monthly pension. Second, I am a widower with a $126,000 insurance payment in the bank drawing 4 percent interest. Third, I have a mortgage with $95,000 left to pay over 11 years at 4 percent.
Should I pay off the mortgage? I have been given three answers from several financial people.
First answer is: Yes, pay it off from insurance and let the account rebuild from money left over and live off the pension check. Second answer is: No, keep the mortgage open and use the tax deduction. Third answer is: It doesn’t matter — the interest is a wash and the tax saving is not that big over the years. — R.P., Wadsworth, Ohio
The first answer has the most merit: Pay off the mortgage and slowly rebuild the account from the change in your monthly cash flow without the mortgage payment.
The second answer is wrong because your itemized deductions from mortgage interest and taxes probably aren’t much over the standard deduction for a single filer, $6,300.
The third answer doesn’t work because it’s not just a question of interest; it’s a question of interest and principal. The monthly payment for paying off a $95,000 loan in 11 years at 4 percent is $891, about $10,700 a year. That’s a lot more than 4 percent interest on $95,000 (about $3,800) because principal repayment is a big part of a relatively shortterm loan.
You’re now paying about $3,800 in interest and $6,889 in principal, with the amount of principal rising each year. So the interest cost can be a wash with interest earnings, but you’re still short the principal payment.
A U.S. court has the authority to hear a trademark lawsuit by grocery chain Trader Joe’s against a man who purchased the company’s products and resold them in Canada at “Pirate Joe’s,” a store designed to mimic a real Trader Joe’s, a federal appeals court ruled Friday.
The 9th U.S. Circuit Court of Appeals overturned a district court’s decision to dismiss California-based Trader Joe’s federal trademark claims.
The district court in Washington state said it lacked authority to hear those claims because the defendant’s alleged trademark violations occurred in Canada and Trader Joe’s had failed to clearly explain how they affected U.S. commerce.
The 9th Circuit said defendant Michael Hallatt’s conduct could harm Trader Joe’s reputation, decreasing the value of its American-held trademarks.
Has Colonel Sanders’ nephew inadvertently revealed to the world the secret blend of 11 herbs and spices behind KFC’s fried chicken empire?
The company says the recipe published in the Chicago Tribune is not authentic. But that hasn’t stopped rampant online speculation that one of the most legendary and closely guarded secrets in the history of fast food has been exposed.
It all started when a reporter visited with Joe Ledington, a nephew of Kentucky Fried Chicken founder Colonel Harland David Sanders.
The reporter was working on a story for the Tribune’s travel section about Corbin, Ky., where the colonel served his first fried chicken. At one point, Ledington pulled out a family scrapbook
Circuit Judge Morgan Christen also pointed out that Hallatt bought the Trader Joe’s goods he resold in Washington state.
A call to Hallatt’s attorney, Nathan Alexander, was not immediately returned.
Trader Joe’s does not have stores in Canada. The company sued Hallatt in 2013, alleging containing the last will and testament of Sanders’ second wife, Claudia Ledington. he drove across the border to a Trader Joe’s store in Washington state, bought the company’s products and resold them at higher prices at his Vancouver store. A Trader Joe’s store refused to sell to Hallatt, but he put on disguises to avoid detection, shopped at other stores as far away as California and hired others to shop
On the back of the document is a handwritten list for a blend of 11 herbs and spices to be mixed for him, the company said in its lawsuit. It estimated Hallatt had spent more than $350,000 on its products.
Hallatt said his business was lawful. He provided a service to Canadians who wanted Trader Joe’s products but didn’t want to go through the trouble of traveling to the U.S. to get them. In court documents responding to the lawsuit, Hallatt said he never represented himself as an authorized reseller of Trader Joe’s products or as an affiliate of Trader Joe’s.
The 9th Circuit sent the case back to the district court for further proceedings. with two cups of white flour. While Joe Ledington initially told the reporter that it was the original recipe, he later said that he didn’t know for sure.
KFC — which is a subsidiary of Yum Brands Inc. — calls its recipe “one of the biggest trade secrets in the world.” It says that the recipe the reporter saw is not the real thing.
“Many people have made these claims over the years and no one has been accurate — this one isn’t either,” KFC said in a statement.
The Louisville, Ky.-based company says that the original recipe from 1940 handwritten by Sanders is locked up in a digital safe that’s encased in two feet of concrete and monitored 24 hours a day by a video and motion detection surveillance system.
Joe Ledington could not immediately be reached for comment.