I attended a luncheon today as part of Elon’s Legends of Business series. The speaker was Bud Baker, former CEO of Wachovia. Among his insights:

- The middle class is doing significantly better than is being reported. Baker claims the financial numbers for the middle class (income, assets, buying power, etc.) are skewed lower because the large number of new (and mostly low-wage) immigrants pull the averages for the middle 50% down. I haven’t looked into these numbers closely enough to have an opinion on that one way or the other, but I know the comparison between the middle class buying power now versus the middle class buying power in past decades doesn’t look good. Immigrants were obviously counted in the earlier numbers as well. Are there a significantly larger number of immigrants now (as a percentage of the population) than during the 1950s, 1960s, or 1970s?

- Interest rates will remain flat or increase only slightly over the next 12 months. Good news for those of us trying to buy a new house and take advantage of the current rates. Prime is still at 4%, which is the lowest it’s been since 1958. That was preceded by a long period (1932-1958) where Prime never climbed above 4%. We’ve been at 4% for almost two years (the rate was dropped from 4.25% to 4% on 6/27/02) now. Are we at the beginning of another long period of very low rates?

- Social Security is in desperate need of reform, and his first recommended reform is to stop paying Social Security to those above a certain income or wealth threshold. Baker’s quote: “I’ve been working since I was 14 years old and have paid a lot of money into the system. But frankly I don’t need it” (Baker’s retirement package with Wachovia pays him $1.5 million per year for life). This reform makes a lot of sense to me. It makes even more sense if it’s coupled with some system that allows individualized Social Security accounts. The elimination of benefits for the wealthy keeps the system solvent for many years into the future without reducing the benefits of those who really need them, and the individualized accounts (with a safety net and restriction on how it can be managed) allow everyone to build wealth.

All in all a provocative lecture and discussion. He also has a Bachelor’s in English and an MBA (same academic profile as mine), so that’s another point in his favor.