In the polarized environment of the current financial status of the U.S. government and the current elections, I have been surprised by the alarmist nature of news stories on both sides of the political spectrum regarding budgeting issues. The two news stories below are representative:

Our county is in the beginning phases of negotiating next year’s budget, which may include cuts to the local school system. A recent news story had the headline: “Expenses cause ruckus in Spotsylvania: School Board Upset by Mileage reimbursement Policy After Seeing Former Chairman’s Bill“. While certainly no one wants fraud, waste or abuse, the article goes on to detail that the largest charge being complained about was $319.59 and all the charges in question totaled $932.37. These charges were in full compliance with the School Board’s expense policies and seem absolutely trivial to me (in the context of normal business expenses).  The story, however, was representative of the fear of many in the school system that someone is out to take advantage of them at every turn.

On the other side, I received an email recently with this headline, “Government Will Seize Gold.” The article went on to detail one investor’s view that policies enacted by the federal government in 1933 when the U.S. dollar was still based on the gold standard will be revived. While, I suppose in theory, the government could do this, it seems so far from likely that I can’t imagine being concerned about it. Wouldn’t you expect that before the U.S. government went around seizing gold from people they would just raise taxes? Still, it is representative of the fear among wealthy individuals that all their hard-earned money will be taken away at a moment’s notice.

These stories remind me of another investing mindset strategy:

Maintain a healthy skepticism about all things.

 
All lawyers are taught to be skeptical of everything all the time. Lawyers always rain on the parade and point out the loopholes and downsides in any plan. It’s part of their job. Businesspeople tend to go to the extremes. When things are good, businesspeople tend to want to overemphasize the positive. When things are bad, the skepticism increases and tends to lean more toward paranoia. Donald Trump, in particular has written before about his ever-watchfulness in this area.

I would point to the article below as an example of healthy skepticism:

• “Jim Rogers: Government ‘Always’ Lies, Tweaks Inflation and Jobless Data,” Newsmax, December 6, 2011.

It is probably true that there are many ways to present government data on inflation and joblessness. While the word “lies” may be an exaggeration, “shenanigans” might come to mind. To be a good investor, you need to think about the motivation of whomever prepared the data and whether there is a legal, but biased way that it could be presented. Understanding this will help you make better decisions for yourself.

When it comes to healthy skepticism, however, it probably does not help matters that we have seen so much fraud and abuse in so many areas of government and in business as well. These stories from The Washington Post saddened me because they highlighted how easy it is to manipulate public trust and how difficult it is to get caught:

• $8 million in Prince William County IT contracts over 4 years were awarded to a company associated with the head of the IT department who was steering the business to the company and helping submit fake counter-bids.
• $20 million was overcharged on IT contracts for the Army Corps of Engineers with the complicity of the government officers overseeing the contracts. The Washington Post described it, “an audacious four-year swindle that prosecutors have called ‘one of the most brazen’ in federal contracting history.”

On the bright side, it seems the government is taking seriously the mission to restore public trust.

• “Pentagon builds auditing army as budget shrinks,” The Washington Post, February 26, 2012

but it’s not always easy ferretting out fraud and it’s expensive too:

• “Slow start for Medicare’s new fraud-busting computer disappoints lawmakers,” The Washington Post, February 23, 2012.

So, in the meantime, we can tell ourselves that it is probably true that someone somewhere is taking advantage of the system (and our respective interests) but hopefully far more people are playing by the rules, paying their fair share and have the interests of the greater good at heart. When it comes to our individual actions, we have to do our best to ignore what someone else may have done to cheat the system, since justice has a way of coming around to those folks eventually, and focus on what is the just action for ourselves and for others at that moment. At the very least, we will be able to sleep well at night.

What news stories have caught your eye recently as examples of paranoia, fraud or abuse? How do you balance this information with your own thoughts? Please share in the comments.