Episode 95: The IRS Wants to Snoop on You with Patrick Hedger and Jim Amundson

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This is The WealthAbility® Show with Tom Wheelwright. Way more money, way less taxes.

Tom Wheelwright:

Welcome to The WealthAbility Show, where we’re always discovering how to make way more money and pay way less tax. Hi, this is Tom Wheelwright, your host, founder, and CEO of WealthAbility. So there’s a huge movement right now, one that we’ve never seen before of the United States and a large portion of the population looking towards socialism communism as a solution to some of our social and economic issues. And we’re very fortunate today to have Dr. Yuri Felshtinsky, and I’ll let him introduce himself, but what’s great is he’s an authority on Russia and the Soviet Union.

And of course, the Soviet Union and communism being kind of the ultimate socialism, if I may, and I wanted to get his… I really want to get your view, Dr. Felshtinsky on socialism, on the Soviet Union, on Russia and on what our issues are going on in the US today. So could you give us just a little bit of your background, please?

Yuri Felshtinsky:

So I was born in the Soviet Union in ’56. I left Soviet Union when I was 21 in ’78, and I left it for the United States. Now the Soviet Union, of course, as we knew, it was a communist/socialist country. The United States where I came, was a capitalist country and these were two opposite poles of the world. Now there is nothing what is good about Soviet Union. I mean honestly, objectively, after its collapse in ’91. We know of course about free education. This was fine. We know about free medical help. This was not fine. The free education was fine with understandings that the Soviet Union, which is a huge country was a country of mainly two cities, Moscow, and Leningrad in those years. Now it’s St. Petersburg. And in those particular two cities, the education at some universities, and the rule was that actually just one institution would carry the name university. All other places would be called institutes.

So in Moscow, a higher education was quite well. There was some limit. I mean, there was some problems, there were some limits. There were some limits for Jewish people, for example. Jews were not actually allowed to enter those places where they wanted to go. But aside of Jewish issue. For example, we could say that higher education in the Soviet Union, in certain places, in certain cities, for some people was fine.

This had nothing to do with socialism, which in theory should be equal for everybody. Now, there was no, literally there was no socialism. The political system was the communist system. It was a communist dictatorship. And this was a communist dictatorship.

Tom Wheelwright:

Let me ask you a question, Yuri. How would you distinguish communism and socialism? Because I think they get confused a lot.

Yuri Felshtinsky:

Well, for a reason. The reason was, or is that we either never seen communists or either never seen socialism. Because we know about the Soviet Union, this was a real experience. We know about China, of course, this was another real communist experience. And we know about Eastern Europe, which was when you saw it from the Soviet Union, the Eastern Europe was kind of almost the West.

I mean, they had much more freedom than the Soviet Union had. In the Soviet Union, this is very important to understand everything was under government control. Literally, everything. There were no private businesses at all. So if we’ll call it communism, fine. If we call it socialism, fine. That’s how it was. In Eastern Europe, it was slightly different. In some countries and they were different from country to country, they had some private sector.

Tom Wheelwright:

Really then we’re just talking about a degree, right? So socialism is more government control and communism would then in what I’m hearing is, would be ultimate government control. So, what’s wrong with that? What’s wrong with the government controlling everything?

Yuri Felshtinsky:

Or everything. Everything is run with government control. Let’s put it this way, in the Soviet union, if you said, and this is a nuclear superpower, existed with two very serious conditions, right? One, that the borders are closed because the borders of the Soviet Union were completely sealed. And two, that there is no market economy. And this is the main definition. There is no market economy in socialist death, death communist system, whatever you call it, because again, no one knows how to call the Soviet Union.

Some people say it’s a communist state. Some people say it’s a socialist state. In reality, this was probably something else. But the main issue is there is no market economy. And there is no private sector.

Tom Wheelwright:

You’ve done a lot of study, research, writing about the current, about Russia as it is now. So what’s the difference in your opinion, from an economic standpoint, from a financial welfare standpoint and the people between, is it better now under Putin? Is it better without the communist control or is it worse, or is it similar?

Yuri Felshtinsky:

If I’m forced to choose between a yes and no, black and white, let me tell you the following, yes. This is better under Putin. And it’s better for the same reasons. Russia today exists with open borders and with market economy. We could claim that this is a corrupt market economy. It is so, and Russia is a corrupt country, but this is market economy. We could claim that it’s run by a KGB officer or FSB officers, or mafia from state security. And this is precisely how it is.

Nevertheless, this is corrupt market economy. We could say, of course, that those people rule Russia unconditionally, that there are no free elections. There is no free press. It’s not a free country. They kill everybody who is competing for power, or they try to kill people like Navalny, et cetera. But again, this is kind of market economy.

This is very important. But for the same reason, we may say that the Soviet Union collapsed because there was no market economy. And the borders were sealed. Putin created a system which is very flexible and very dynamic. And we do not really see any issues with the system. I mean, we know that there are people like Navalny who are against Putin, who are competing with him for power. We know that from time to time, we see waves of opposition inside Russia.

But I would say it’s fair to say that majority of Russians, although it’s very difficult to figure out what majority of people are thinking since there is no free press, no free post, no freedom, et cetera, et cetera, et cetera. And those who go against are killed from time to time, but the majority of Russians survive the situation.

Again, saying this, we need to understand this the Soviet Union or Russia as a state, never existed as democracy. It was monarchy prior to 1917, it was dictatorship up to 1991. Then we had several years from ’91 to ’99. When the Russia was trying to become a democratic state, a part of contemporary Europe. It failed. And in 2000 KGB, which is now the FSB, came to power, took control of the state. And now they’re running the country without any political control, including the political control in the form of communist party, which existed prior to ’91.

And this is a very interesting moment. We are looking at Russia and we are trying to understand what’s going on there. What’s happening there. Who are these people who are running the country? What do they really want? And we do not actually understand what’s going on there because this is the first time we are faced this problem.

The problem was that the Soviet Union existed with KGB as a major power controlling the situation, and with the communist party as a kind of political institution controlling the KGB. Now with the collapse of the communist party in ’91, and with the disappearance of the communist party in ’91, the KGB took control of the state without any political control from above. That’s why it’s very dangerous. It’s very new. This never happened before. That’s why nobody understands what actually is happening in Russia. What Putin actually wants. What are those people who are ruling the country? Because those are KGB people. And I mean, the new name is FSB, but these are the same people. And they’re trying to destroy. They were never trying to build. And they’re very good in destroying or very good in subversive activity, which we see all over Europe and even in the United States and they do it, I mean, quite, quite well.

Tom Wheelwright:

Yuri, did you find that in Soviet Union, as well?

Yuri Felshtinsky:

Well, no, because it was the Soviet Union they exert at times, the very strict communist party control. And again, whether this was good or bad for the society, I do not know, but this was definitely bad for KGB. So they were trying to get rid of this control and in ’91, they succeeded. And if you look at this democratic revolution of August of 91, from this point of view, the KGB happened to be the major winner of this events, because finally they got rid of the communist party. And then in 2000, they took control of the state. And this was the only Soviet institution which survived. The Soviet Union collapsed in ’91. Everything actually collapsed.

Tom Wheelwright:

So if I could, Yuri, let me take you back to Soviet Union for a minute. You grew up in the Soviet Union, and what we’re seeing for the first time in America, a kind of a push towards socialism. And first question I have for you is, is that when you’ve done your studies and when you were living in the Soviet Union, what actually causes that kind of revolution, where people are willing to get rid of any kind of economy and freedoms, in exchange for that autocratic and socialistic rule? What is it that allowed that? And do you see any parallels with what’s going on in the US today?

Yuri Felshtinsky:

Well, I think that there is some confusion and misunderstanding about terminology, right? As I started, there is nothing good about Soviet Union. I mean, we could talk about Soviet Cosmos or Russian Ballet or hockey teams, but this really has nothing to do with socialism or Soviet Union, in reality. When we think about socialism, we usually mentioned Scandinavian countries like Sweden or whatever, Finland or Norway. Europe lived with a very low so-called Social Democrat tradition. It started in 19th Century. It started with Karl Marx and developed into something.

I mean, if you look at European countries there, you’re right. If we compare them with the United States, they’re more, “socialist” than the United States, of course. The government is more involved in everyday life. The government has more control. The social security system or whatever we call it in Europe is more developed. More widespread.

Europe is trying to create a more equal, economically speaking society. This doesn’t mean that there are no rich people in Europe, but it’s very much different from the United States. But here’s the problem. The major problem I think is, and I do not really think that it’s not good. I think the United States is very much different from all other countries, including the United States. And is this the view of a person who again, was born in the Soviet Union. What I think is important.

The United state is different because it allows you to have an opportunity to become a billionaire in a matter of minutes, if you come with the right idea, right time, have ability to create a new business, et cetera, et cetera. And that’s why we see in the United States more people who are able to create iPhones, and [inaudible 00:15:48] and Tesla.

So this is not by chance. This is because the American system is built this way. There is a problem with this. The problem is that, unfortunately, at the same time, we see a huge amount of people who are not poor. Poor is a wrong word. Who are completely, well out of the train. Who are below the poverty level. Who are lost by the society. I mean, we see them as homeless. We see them as kind of criminals who are forced to become criminals because they really do not care about their life. And I will say that this has nothing to do with socialism, but that we have to do something about this problem, right?

Tom Wheelwright:

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Clearly Yuri, in the 1900s, that was an issue in Russia that you had a lot of people that had absolutely nothing. And you had some people that had an awful lot. So you end up with a revolution. So…

Yuri Felshtinsky:

In a very different way, in a very different way. You see, in the Soviet Union money didn’t actually play a major role. Technically speaking, or officially speaking, all salaries were almost the same. I mean, a low salary allowed by the law would be literally, I’m talking about literal figures, 62 rubles and 50 kopeks per month. And the high salary would be like 300 rubles per month. So it’s very easy for you to see that there the difference would be five times.

This is not the most important point, the most important point that it actually wasn’t very important how much money you’re getting, how many new rubles you’re getting as your salary, because connection would be the most important. So the system was not built on the salary, on rubles, which people would get.

Tom Wheelwright:

What I always say is that, that you either are going after money or power, right? And the Soviet Union and Russia today is very much based on power to a large extent. And if you don’t have money, if you can’t go after money, then really, your only option is to go after power because certainly the elites in the Soviet Union had some very nice luxuries because they had the power, not because they had-

Yuri Felshtinsky:

Correct. Not because they had money. Correct. And if you look at Brezhnev who was like general secretary of the communist party and the most powerful person in the Soviet Union, if you look economically at his life, he had nothing, literally nothing. The car, which was driving him from and to his place of work was a government car. The driver was a government driver. His summer house was a government summer house. His apartment was a government’s apartment. He was using a plane, but this was government plane. I mean, in terms of money, he had nothing, but he had everything. Well, this was literally like Communism, right? Because this was a communist idea when money had nothing to do with real life.

In the United States, of course, this is not so. In Russia today, it’s more complicated. You might be a billionaire, as long as you follow the rules, which are established by Kremlin. And we have good examples of people who are billionaires like Michael Khodorkovsky, who were arrested and became literally nothing in a matter of days when Putin for one or another reason, decided that he doesn’t need him anymore.

And Khodorkovsky was probably the most well known case, or the most important case economically, but we had several billionaires prior to him, like Vladimir Gusinsky, who was arrested and forced out of Russia. Boris Berezovsky, who was forced off of Russia, who lost all his empire, et cetera. So enough of us, you are allowed to be a billionaire or a very rich man, as long as Kremlin agrees to what you are doing. And if you are starting to compete with Kremlin for political power, then you are just ruined in a matter of days.

Tom Wheelwright:

What do you think about this trend, certainly by the American political left towards socialism? What’s your view of that? When we see Bernie Sanders and AOC, and even President Biden really going, and even Nancy Pelosi going very far left of where we’ve ever been before. Okay. What’s your view of that, of going to that more socialistic, more entitlements, the Childcare Credits, the payments, all of this more socialistic viewpoint, more control, more government regulation. I’m really curious, what’s your view of that?

Yuri Felshtinsky:

I’m in a difficult stage, honestly, because on the one hand, I do believe in capitalism. I do believe that this is very important that people know when they think about something new, when they have new ideas, when they’re thinking about new business, then they know that they would be allowed to build this business and the government or tax system whatever, would not take business away. And I know that without those beliefs, the United States would not be able to be the United States, which we know for the last… Well, which I know for the last 40 years when I live here, right? Which I live here.

At the same time, we have to agree that those people who are doing well and there are a lot of those people. And I see them and I know them and some of them I know personally have to somehow, to agree to carry some responsibility for the wellbeing of society. Indeed, I think it’s dangerous from the point of view of risking a revolution when a huge percentage of population is unhappy and considers itself to be below the level of human existence which should be respected by everybody.

You see, in other words, when you see one homeless person, it’s fine, two is fine, but when we understand this is a major problem, I think everybody, including those people who are doing quite well, have to understand that it’s their problem as well.

Tom Wheelwright:

Interestingly enough, Paris has just as big a problem as San Francisco has, from a homeless standpoint. And this is a much more socialistic country in France. So I don’t think there’s any question. I don’t know anybody, any entrepreneur who doesn’t say, “Well, yes, we do have this issue. We do have a responsibility there.” At the same time, I think you bring up a good point and that is that we do risk some type of revolution if we don’t pay attention to it. That it’s actually good for the rich people to pay attention to it, because if they don’t, they could literally end up in the extreme, like the Soviet Union where the entrepreneurs lost everything. I mean, the state took everything away from the entrepreneurs in the Soviet Union in the 1920s. So, we have that issue going on here. So I certainly agree, that I think it’s something that we do need to pay attention.

Yuri Felshtinsky:

That’s where the problem is. No, we could wait. The government, unfortunately, I have to say, the government unfortunately, is probably looking at this problem from a very simple angle. All right, let’s increase taxes and use those taxes to deal with the problem which exist. And I will say that there is nothing wrong with this approach, except that unfortunately, we do not see that the increasing of taxes necessarily liquidates the problem. And that’s where the problem is. You see, I mean, I would be for increasing taxes with two hands, with [inaudible 00:26:12], if I know that, that’s the way to liquidate the problem. But unfortunately, this is not happening. This is usually not happening, that probably something else should be involved. There should be another approach, unless those taxes we shall increase, they go the wrong way. And this is probably so, as well.

You know, during the pandemic, during the pandemic we know, I mean, we know this, several trillion dollars were printed. We could divide this several, whatever $9 trillion for the entire population of the United States, and we realize that this means that for every particular person, a huge amount of money was printed. We do not see them. We never got this money. Somebody else did. Those money flew somewhere away.

And that’s unfortunate, I think. It’s happening every time. The government increase taxes. Theoretically speaking, the higher taxation should bring prosperity to all those poor people who are having difficulties and who probably after the taxation is increased, have to stop to have those difficulties. In reality, this is not happening. That’s why I do not think that the increase of taxation, let’s put it this way is the best way to deal with problems.

Tom Wheelwright:

It’s a pretty rare situation where the government can do something better than the private sector. So if we can get the private sector to do it, we’re going to end up in a better spot. Like building housing, for example, or building, I mean, the Soviet Union, you know this so well, government building housing and the private sector building housing, you get two different types of housing. And so the government’s not the most efficient. They don’t use the money the best. The private sector seems to use it a lot better. And, I agree. It’s not an easy answer, but I do agree also though, it is something we need to pay attention to, particularly as entrepreneurs. Because I think as entrepreneurs, I think we have an option, we have an opportunity to do some service through the private sector and whether that’s through our own charitable work or even through our products, where we make it easier for those who are disadvantaged. I agree.

Yuri Felshtinsky:

Again, I think the most important thing is, and people usually ask me, “How do we deal with Putin who is obviously a problem for the free vote?” And I ask every time that the most important part is to understand the problem, to understand what the problem is. To say openly that Putin is the problem. That Russia is a problem. And then at least, we would know since we know now what the problem is, we at least should start to think in the right direction how to deal with the problem.

The same with the internal problems of the United States. First, we need to explain what the problem is, and I’m not even sure that I have the answers to this, because the problem is not… Well, we have homeless. This is a problem, but is this the answer to a question how to deal with it? No. We have a very certain percentage of Black population who thinks that they are exploited or unhappy, and this is a problem. We have to deal with this. We could, of course, not very serious about some minority issues thinking, “Well it’s overstated, but the society, where is a serious percentage of people is unhappy, whether this is because it’s their fault or not, could not actually exist as a happy society all together.

And our ideas. And I mean, including those people who are doing well, who are very rich, some of them extremely rich, but I was living in New York for the last several years prior to this, I was living in Boston. And you know, of course, how New York is built. You have houses where billionaires lives, and at the same time or the same neighboring street has homeless people lying throughout the street, right? And I always saw that if I would be in their position, you know, billionaire, I would feel uncomfortable. From my personal, egoistic point of view, I would be uncomfortable to see this. And I would think, “Well, what should be done?”

Tom Wheelwright:

If you could make a suggestion to the general public, entrepreneurs, business owners, just anybody, what would be one or two things that you think we could actually do ourselves, not the government, but a couple of things that you think that individually we maybe should be doing?

Yuri Felshtinsky:

Well, individually, I have problems with this. I do not really think that we are capable to [inaudible 00:32:14]. You see, you could be nice, you could give money to charitable organizations. Unfortunately, the problem is more serious than this. I do not think that this will help.

Tom Wheelwright:

You think this is more a function of, we need to let our elected representatives know what we think they ought to be doing?

Yuri Felshtinsky:

Well again, but the issue is that they need to understand what they really want to achieve and they really want to do. And I think at this point, no one actually has this clear, understanding what should be done. We have “conservatives” who are against raising any taxes because their argument is that, “Look, every time we increase taxes, nothing is changing.”

And I have to say that, that’s probably correct. You have a liberals or whatever you call them who are saying that we need to increase taxes, because this is the only way to deal with the problem. And, well probably if there is more money to deal with the problem, there are more possibilities to deal with the problem. But then we see that nothing has changed. So I do not really think that this is a matter of money, which we do not spend enough to deal with the problem. I think the problem is with the approach.

And let me give you a simple example and I might be politically incorrect, but I’m not a politician, I do not really have to be. I mean, to gain or to lose. We see homeless people in the cities. This is not financial problem. You may offer those people money. They will not leave that place where they stay. This is not financial problem. This is something else.

Unless this is a problem which is so expensive that yes, it could be done through finances, but a different way, in a more expensive way, probably. But this is the [inaudible 00:34:38]. I mean, you see [inaudible 00:34:40]. Let’s talk about New York. I’ve been in Los Angeles just a couple of times, so I would not talk about Los Angeles. But New York, I see quite well and like, “every” day, the city is daunting. And we know that it’s just a matter of, you know, issue of money, which should be spent on cleaning the streets. Right?

Maybe it’s a lot of money. I do not know how this should be done, but this probably should be done for cleaning the streets. And this, if we talk about New York, these are the main issues; the homeless people and the trash on the streets, right? And I think both of those issues could be resolved and then the city would look differently and then prices, by the way, for real estate in New York would go up and then this would be economically profitable for everybody.

Tom Wheelwright:

I like it. Doctor Dr. Yuri Felshtinsky, author of Blowing up Russia and The Corporation. Russia and the KGB in the Age of President Putin. Thank you so much, Dr. Felshtinsky, for spending some time with us.

Yuri Felshtinsky:

Thank you, also.

Tom Wheelwright:

And if people wanted to know more about you or what you’re doing, where would they go?

Yuri Felshtinsky:

Oh, difficult to say, I’m like a freelance author.

Tom Wheelwright:

So best, is your books.

Yuri Felshtinsky:

My books. I am on Facebook, of course. So they always could write me on Facebook.

Tom Wheelwright:

Awesome, awesome. Well, thank you very much.

Yuri Felshtinsky:

Of course.

Tom Wheelwright:

Just remember everyone, when we get educated and this is not our typical program, but I wanted to make sure that we had somebody who has a very different perspective, having grown up in the Soviet Union and see this idea of socialism, that it’s not good, bad, it’s degree. And we do have problems that we need to solve. And when we do that, we know that we’re always going to make way more money and pay way, less taxes. Thanks, and we’ll see you next time.

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