Building wealth: Best moves if you're 35 to 44

Updated: Jul 31, 2014 7:33 PM UTC | Originally published: Apr 15, 2013

Money magazine's 101 Ways to Build Wealth package offers blueprints for the different stages of your life on how to achieve real financial security. In tips #28 through #52, we offer advice for 35- to 44-year-olds.

Former Virginia Governor Charged With Accepting Illegal Gifts

Updated: Jan. 21, 2014, 7:09 p.m. E.T.

Former Virginia governor Bob McDonnell and his wife were charged on Tuesday with illegally accepting gifts — including luxury vacations, private jets and large loans — from a wealthy businessman seeking special treatment from the government.

Federal prosecutors say McDonnell, a Republican, and his wife Maureen repeatedly received gifts and loans totaling more than $160,000 from dietary-supplement executive Jonnie R. Williams Sr. In exchange, the McDonnells allegedly bolstered Williams' struggling company with the prestige of the governor's office. The indictment on Tuesday charges them with 14 counts, including wire fraud and conspiracy.

In a statement on Tuesday, McDonnell, who has previously apologized for the gifts scandal but said he did nothing illegal, maintained his innocence.

"I deeply regret accepting legal gifts and loans from Mr. Williams, all of which have been repaid with interest, and I have apologized for my poor judgment for which I take full responsibility," McDonnell said. "However, I repeat emphatically that I did nothing illegal for Mr. Williams in exchange for what I believed was his personal generosity and friendship. I never promised — and Mr. Williams and his company never received — any government benefit of any kind from me or my administration. We did not violate the law, and I will use every available resource and advocate I have for as long as it takes to fight these false allegations, and to prevail against this unjust overreach of the federal government."

"I come before you this evening as someone who's been falsely and wrongly accused,""I come before you this evening as someone who's been falsely and wrongly accused," he said later in a press conference on Tuesday night. "All of these (gifts) have now been returned or repaid with interest ... I repeat again emphatically that I did nothing illegal for Mr. Williams for what I believed was his personal friendship and generosity."

McDonnell left office earlier this year after the single term in office Virginia governors are allowed. His election in 2009 heralded the first Republican backlash to President Barack Obama, and McDonnell was frequently considered a possible vice-presidential candidate, and perhaps even a future White House hopeful himself.

Newly elected governor Terry McAuliffe, a Democrat, said in a statement that he was "troubled" by the charges.

“As this case progresses, it is my sincerest hope that justice will be served and that Virginians get the answers to which they are entitled," he said. "As governor, I will remain focused on leading this commonwealth in a way that restores Virginians’ trust in government and honors their expectation of transparency and accountability."

This post has been updated to include Bob McDonnell's comments in a Tuesday-night press conference.

America's Economic Moment

Is the U.S. economically exceptional? It's a question that's suddenly worth asking, since 2014 looks to be the year the U.S. will regain its traditional position as the world's economic engine--a role that seemed lost forever in the dark years following the 2008 financial crisis. Assuming the current projections of 3%-or-more GDP growth for this year hold, the American economy will, for the first time in more than five years, expand as fast as or faster than the global economy as a whole. It will top many of the once hot emerging markets as well. The resurgence has myriad implications for the U.S., of course. But given the implications for the global economy, it's attracting attention everywhere (including among the leaders gathered at the World Economic Forum in Davos from Jan. 22 to Jan. 25).

Here's the short story: The U.S. has exited from financial crisis; Asia and Europe have not. China, the second largest economy in the world, is pretty much where the U.S. was five years ago--deeply in debt. Back then it took China just over a dollar of debt to create every dollar of economic growth, according to Ruchir Sharma, Morgan Stanley's head of emerging markets. Today four dollars of debt are needed to create one dollar of growth in the Middle Kingdom. (Sharma considers the debt-to-growth ratio the most reliable predictor of financial crisis over the past 100 years.) Growth in China is already down sharply from its double-digit peak years before 2008, to 7.7%, and it could fall even more sharply in the face of a banking crisis.

Japan, where government debt is over 200% of GDP, continues to struggle too. Short of some serious austerity, Japan will probably have to live with another lost decade or two of negligible growth. As for Europe, while central bankers have saved the euro (at least for now), deflation is making the region's already bad debt troubles worse. A new round of banking crises could reignite the whole euro-zone-breakup risk again.

In the midst of all this, the U.S. looks pretty good. Americans have a lot going for them: cheap energy, relatively skilled and low-cost workers, a newly robust manufacturing sector and, most important, private balance sheets that are back in the black. American consumers have gotten their finances in order, and businesses are sitting on more cash than ever before--as much as $2 trillion at home and the same amount in bank accounts abroad.

Whether Americans are indeed exceptional will come down to what they decide to do with these assets. A recent Accenture survey tallied the optimism among CEOs and other top executives in 20 countries and found that 64% of them were bullish on the U.S. and planning to locate more labor and operations there in 2014. Companies may finally stop sitting on so much cash and use it to invest in workers and equipment. That would spark a virtuous cycle that should ultimately lead to real, sustainable growth of 3% to 4%, which is what the U.S. needs for unemployment numbers to continue ticking down. Incoming Federal Reserve Chair Janet Yellen recently told me she's hopeful that businesses will start spending this year.

If they do, pay attention to what types of jobs get created. That's where the argument for exceptionalism gets trickier. Over half of all U.S. jobs created in 2013 were in low-wage sectors, like retail or health care, where paychecks are actually shrinking relative to inflation. Part-time workers still make up more of the workforce than is healthy. And the participation rate, meaning the number of people with jobs relative to the overall working-age population, is the lowest it's been since 1978, before women started coming into the labor force en masse. (The unemployment rate, by contrast, takes into account only workers who are seeking jobs.) While some economists argue that this reflects the retirement of baby boomers, Westwood Capital managing director Daniel Alpert points out that it's not nearly enough to account for the many millions of workers who've dropped out of the labor market. "There is much more going on here than the retirement of some lucky baby boomers," he says.

So 2014 will be a telling year. Hopefully we will learn that the U.S. is in the early stages of a traditional recovery, the kind that will eventually trickle down to the masses and create the sort of middle-class jobs we need to spur growth (albeit a lot later in the cycle than in recessions and recoveries past). It could, however, turn out instead to be something new: a two-tier recovery that will create growth and jobs but only at the top and bottom of the pyramid. We're about to find out whether the American economy is exceptional or whether Americans are just in an exceptional kind of recovery.

The Case for Snooping

It's not always true that if you're under attack from both sides of the political spectrum, you're probably doing the right thing. The smart or moral course is sometimes resolutely partisan. But watching President Obama take flak from the left and the right for his speech on intelligence reform, I believe he's striking a difficult balance on a crucial topic.

In his speech, Obama defended the essential structure of U.S. surveillance activities. He argued that the National Security Agency is not a rogue outfit, that it plays by the rules and is staffed by patriotic men and women. But in an important admission, he also made clear that after 9/11, the NSA and American intelligence efforts in general went too far. Taking advantage of its unique technological capabilities, the U.S. government did whatever it could, rarely asking whether it should. The President proposed some new checks on decisions to collect data and new constraints on how it is stored and when it can be accessed.

The speech annoyed liberals and conservatives suspicious of government overreach, but reaction from the left has been more anguished. Many voices have begun arguing that Edward Snowden's revelations show that U.S. intelligence operations have run amok and are illegal and unconstitutional and that Snowden deserves to be pardoned and treated like a hero. The factual basis for every one of these claims is weak. A large number of Snowden's revelations involve not domestic surveillance but foreign intelligence operations, a standard role for U.S. spy agencies. They show, for example, that the U.S. government is spying on the Taliban and Pakistan. They show that the NSA is spying on foreign leaders like Germany's Angela Merkel and top aides to Brazil's Dilma Rousseff. Now, you might regard some of these choices as wise and others as mistaken, but there is nothing unprecedented about countries spying on foreign leaders. Obama conceded too much when he promised not to eavesdrop on a host of them. Foreign governments will certainly not return the favor and stop what is often a relentless effort to spy on America's top officials and CEOs.

There is a gaping hole in the left's understanding of U.S. intelligence work. The U.S.--its government, businesses and people--is under massive, sustained surveillance from and infiltration by criminals, terrorists and foreign governments. The Chairman of the Joint Chiefs of Staff pointed out recently that since 2011, cyberattacks on America's critical infrastructure--chemical, electrical, water and transport systems--have risen seventeenfold. The National Nuclear Security Administration, which is responsible for the country's nuclear power plants, reported in 2012 that it faces 10 million cyberattacks every day--that's 3.65 billion in one year. Every major bank and corporation, from Bank of America to Goldman Sachs to the New York Times, faces almost continuous efforts from abroad to penetrate its networks, mine its data, disrupt its procedures and steal its secrets. The effects can range from disruption of transactions to systemic damage that feels more like a military invasion.

It would be impossible to defend against these attacks without allowing intelligence agencies to spy on foreign governments and groups abroad. But it is also crucial that the NSA and others have some ability to enter into telecommunications systems at home to track cyberattacks, figure out where they come from and render them ineffective. Former Justice Department official Jack Goldsmith notes that the New York Times objects to foreign cyberattacks yet wants the NSA to shut down its surveillance at home. In fact, he writes in the New Republic, "To keep our computer and telecommunication networks secure, the government will eventually need to monitor and collect intelligence on those networks using techniques similar to ones the Times and many others find reprehensible when done for counterterrorism ends."

We all live, bank, work and play in a new parallel world of computer identities, data and transactions. But we do not seem to realize that this enormous freedom of activity in the cyberworld, as in the real world, has to be defended. Just as the police need basic information about your life and activities, the government will need information about the cyberworld. As General Keith Alexander, the NSA's director, has pointed out, there is no way to defend these systems without getting into them in the first place.

In "Federalist No. 51," father of the American Constitution James Madison wrote (along with Alexander Hamilton) that in setting up a government, "the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself." That is the balance we have to strike, in cyberspace as anywhere else.

TO READ MORE BY FAREED, GO TO time.com/zakaria

Roll Call / Getty Images

GOP, Dems Set To Collide In “High Risk Corridor”

Democrats want the Republicans to pick another fight with them over raising the U.S. debt limit, and it looks like the Republicans may oblige, thanks to a little known provision in ObamaCare. At stake are the full faith and credit of the U.S. dollar, the GOP‘s (outside) shot at capturing the Senate and the party’s prospects for widening their influence in the House during this fall’s elections.

Despite a score of polls which show that the country holds the GOP primarily responsible for shutting down the government in October, and for leading the country to the brink of default in other debt ceiling showdowns over the past three years, some leading Republicans say they will look to the late February debt limit deadline to extract concessions.

“When the debt ceiling is hit, I think that’s an opportune time to also talk about making the reforms to control spending,” says Rep. Steve Scalise (R-La.), chairman of the broad House conservative coalition known as the Republican Study Committee. “What we’ve been looking at recently…is this high risk corridor,” says Scalise.

The risk corridor is a feature of ObamaCare that will reimburse insurers with fewer healthy people than they originally expected to enroll, acting as a cost buffer during the experimental early years of the health reform program. The insurers will be paid by the Department of Health and Human Services if their costs are more than 103% of their target amount. Likewise, if a surprisingly high number of healthy people sign up, the insurers will pay the HHS. The program will only run through 2016, according to the American Academy of Actuaries, because “as more data becomes available on the health spending patterns of the newly insured, the ability to set premiums accurately should improve, thereby reducing the need for risk corridors.”

Some Republicans are calling the program a government bailout of insurance companies, and want to do away with it in negotiations over raising the U.S. debt limit, which the Treasury says it will reach at the end of next month. Conservative columnist Charles Krauthamer floated the idea of doing away with the risk corridor reimbursement in his first Washington Post column of the year, calling on the GOP to “attach the anti-bailout bill to the debt ceiling. That and nothing else.”

At least one influential Republican has signed on for the idea. “I think it would be a real tough position to sell to say that when we’re running out of money, when we’re maxing out our credit card, we should also be borrowing money from China to bail out insurance companies,” says Scalise.

It is not clear whether other Republicans will decide to push that or other concessions, or whether they will ultimately back down and raise the debt limit without much fanfare. That will come down to a calculation of political and economic costs.

The Government Accountability Office estimated that the delay in raising the debt limit in 2011 cost the Treasury Department $1.3 billion that year alone, while the Bipartisan Policy Center tallies the cost at nearly $19 billion over 10 years. The fight also lowered the country’s S&P bond rating from its sterling AAA status to AA+.

Jennifer Duffy, in her most recent Senate overview for the Cook Political Report, mentioned that the debt ceiling could cause “real problems” for Republican candidates this cycle. “Senate Democrats are very adept at setting traps for their Republican colleagues,” writes Duffy. “The test will be whether Republicans can avoid them.”

The Republicans seem to be moving in the direction of a fight. In October, Mitch McConnell told National Review, “We’re not going to do this again in connection with the debt ceiling,” noting that it’s “unlikely” President Obama “will do much” on his signature health care issue. Just two months later, however, McConnell told reporters he “can’t imagine” passing a “clean” debt ceiling raise, because “Every time the president asks us to raise the debt ceiling is a good time to try to achieve something important for the country.” Last night, Speaker Boehner spokesman Michael Steel said that while “we should not default on our debt, or even get close to it,” a “’clean’ debt-limit increase simply won’t pass in the House.”

Democrats, for their part, seem to be hoping for a fight. In his end of the year press conference, President Obama said, “we’re not going to negotiate with this Congress on the bills that it has accrued.”

GOP, Dems Set To Collide In “High Risk Corridor”

Democrats want the Republicans to pick another fight with them over raising the U.S. debt limit, and it looks like the Republicans may oblige, thanks to a little known provision in ObamaCare. At stake are the full faith and credit of the U.S. dollar, the GOP‘s (outside) shot at capturing the Senate and the party’s prospects for widening their influence in the House during this fall’s elections.

Despite a score of polls which show that the country holds the GOP primarily responsible for shutting down the government in October, and for leading the country to the brink of default in other debt ceiling showdowns over the past three years, some leading Republicans say they will look to the late February debt limit deadline to extract concessions.

“When the debt ceiling is hit, I think that’s an opportune time to also talk about making the reforms to control spending,” says Rep. Steve Scalise (R-La.), chairman of the broad House conservative coalition known as the Republican Study Committee. “What we’ve been looking at recently…is this high risk corridor,” says Scalise.

The risk corridor is a feature of ObamaCare that will reimburse insurers with fewer healthy people than they originally expected to enroll, acting as a cost buffer during the experimental early years of the health reform program. The insurers will be paid by the Department of Health and Human Services if their costs are more than 103% of their target amount. Likewise, if a surprisingly high number of healthy people sign up, the insurers will pay the HHS. The program will only run through 2016, according to the American Academy of Actuaries, because “as more data becomes available on the health spending patterns of the newly insured, the ability to set premiums accurately should improve, thereby reducing the need for risk corridors.”

Some Republicans are calling the program a government bailout of insurance companies, and want to do away with it in negotiations over raising the U.S. debt limit, which the Treasury says it will reach at the end of next month. Conservative columnist Charles Krauthamer floated the idea of doing away with the risk corridor reimbursement in his first Washington Post column of the year, calling on the GOP to “attach the anti-bailout bill to the debt ceiling. That and nothing else.”

At least one influential Republican has signed on for the idea. “I think it would be a real tough position to sell to say that when we’re running out of money, when we’re maxing out our credit card, we should also be borrowing money from China to bail out insurance companies,” says Scalise.

It is not clear whether other Republicans will decide to push that or other concessions, or whether they will ultimately back down and raise the debt limit without much fanfare. That will come down to a calculation of political and economic costs.

The Government Accountability Office estimated that the delay in raising the debt limit in 2011 cost the Treasury Department $1.3 billion that year alone, while the Bipartisan Policy Center tallies the cost at nearly $19 billion over 10 years. The fight also lowered the country’s S&P bond rating from its sterling AAA status to AA+.

Jennifer Duffy, in her most recent Senate overview for the Cook Political Report, mentioned that the debt ceiling could cause “real problems” for Republican candidates this cycle. “Senate Democrats are very adept at setting traps for their Republican colleagues,” writes Duffy. “The test will be whether Republicans can avoid them.”

The Republicans seem to be moving in the direction of a fight. In October, Mitch McConnell told National Review, “We’re not going to do this again in connection with the debt ceiling,” noting that it’s “unlikely” President Obama “will do much” on his signature health care issue. Just two months later, however, McConnell told reporters he “can’t imagine” passing a “clean” debt ceiling raise, because “Every time the president asks us to raise the debt ceiling is a good time to try to achieve something important for the country.” Last night, Speaker Boehner spokesman Michael Steel said that while “we should not default on our debt, or even get close to i