Personal finance from around the Web:

• 2009 was the year of cheap-chic-living. Here is a summary of frugal trends that took over the year. [It's Your Money]

• Three-year default rates for federal student loans were released yesterday and the numbers are not pretty. For loans that entered repayment in 2007 the three-year default rate is at 11.8%  up from the two-year default rate of 6.7%. For-profit schools had the largest percentage of defaults with a whopping 20%. [Student Lending Analytics Blog, WSJ.com]

• Ever thought of donating a goat in a relative's honor as a Christmas present? Well, research now shows these "ethical gifts" might actually offend some. So be careful, or risk Grandpa getting grumpy. On the bright side, it turns out that mothers will always love whatever their kids get them. [The Consumerist]

• About 40% percent of parents have paid off debt owed by an adult child. Highest on the bailout list: car loans. [WalletPop]

• A fear that haunts the unemployed: falling out of one's social class. [Economix]

Follow More Money on Twitter at http://twitter.com/moremoneyblog.

• You won’t get trampled in search of great deal on Black Friday, as major retailers are preparing crowd control measures to keep the shopping frenzy under control. (The Washington Post)
• Being underwater on your home is a more significant factor than being unemployed in predicting the likelihood of mortgage default. (Housing Wire)
• According to one blogger, it might actually be detrimental to your income to have two adults working in a household. Go figure! (Gather)
• Looking for an easy way to find coupons this holiday season? Check out Target’s Coupon Generator. (Wallet Pop)
• When traveling this season, you can use these websites to keep track of the frequent flier miles you’ll rack up. (The New York Times)

Follow More Money on Twitter at http://twitter.com/moremoneyblog.

• Laptop warranties pay for themselves — taking into consideration a 20% failure rate, a 10% accident rate and the near-certainty that the battery will die. [Gadgetwise]

• Many economists believe tax deductions for mortgage interest are a bad idea. Here's the history behind the deduction and why it does no one a favor. [NPR]

• This really cool time-lapse map shows a really uncool thing: How unemployment has infected America, on a county-by-county basis, since January 2007. [American Observer]

• Warren Buffett and George Soros are betting on retail giant Wal-Mart. But that doesn't signal the resurgence of the retail industry, nor does it mean that you should invest in retail yourself. [The Motley Fool]

• Coin collectors haven't, uh, changed their minds about the value of numismatics. Rare coins are more popular than ever. [WalletPop]

Follow More Money on Twitter at http://twitter.com/moremoneyblog.

Personal finance highlights from around the Web:

• Fears on HINI have spawned discussions over the lack of paid sick leave for American workers. [Think Progress]

• Americans are nearly split on the topic of health care reform and whether or not it will make things better in the long run. Surprisingly, nearly 15% don’t care one way or another. [Vertex News via Ozarksfirst.com]

• Credit card companies are racing to prepare for the new rules of the Credit Card Act 2009 to go into effect next February, and some credit experts think you’re being screwed in the meantime. [The Business Insider]

• Senate banking committee chairman Chris Dodd introduced legislation Tuesday that would create a new bank industry regulator and establish a consumer financial protection agency. [The New York Times]

• Health insurance premiums could be lowered for older citizens and raised for younger people based on a provision in the house health care bill. [The Wall Street Journal]

Why they're a buy: With luxury apparel sales in a slump, many high-end shirtmakers are cutting prices. The best shirts are made of two-ply Egyptian or Sea Island cotton with 100-plus thread count; they have a collar that's sewn, not glued, and buttons that are mother-of-pearl, not plastic. The ready- to-wear shirts normally retail for about $150 to $250, but right now you can find one for as little as $90.

The strategy: Look across the pond; the shirt shops that started on London's famed Jermyn Street – such as Russell & Hodge and T.M. Lewin – are fighting a fierce price war. The R&H shirts at left currently sell at russellandhodge.com for 53 pounds (about $90), with shipping, vs. the usual 95 pounds.

Get more value: Pick a style that works for the office and evening: a tight poplin weave, not oxford, and point or spread collars instead of button-down, says Andy Gilchrist, founder of AskAndyAboutClothes.com, a site about men's apparel.

Usual cost: $150

The deal: $90

The White House says President Obama will donate the $1.4 million in cash that comes with his Nobel Peace prize. Which made us wonder: What are the tax implications of this?

Over at Politico, Josh Gerstein reports on some of the possible legal complications of accepting the monetary award, even if the President immediately gives it away. His source suggests that Obama could, among other things, end up owing some tax.

Maybe only if he has a terrible accountant. As the Politico item notes at the end, there's an exception. Kail Padgett at the Tax Foundation's blog points us to the relevant section of the IRS tax instructions. One surprise: It actually mentions the Nobel. Here it is:

Pulitzer, Nobel, and similar prizes. If you were awarded a prize in recognition of accomplishments in religious, charitable, scientific, artistic, educational, literary, or civic fields, you generally must include the value of the prize in your income. However, you do not include this prize in your income if you meet all of the following requirements.

1. You were selected without any action on your part to enter the contest or proceeding.
2. You are not required to perform substantial future services as a condition for receiving the prize or award.
3. The prize or award is transferred by the payer directly to a governmental unit or tax-exempt charitable organization as designated by you. The following conditions apply to the transfer.
   1. You cannot use the prize or award before it is transferred.
   2. You should provide the designation before the prize or award is presented to prevent a disqualifying use. The designation should contain:
      1. The purpose of the designation by making a reference to section 74(b)(3) of the Internal Revenue Code,
      2. A description of the prize or award,
      3. The name and address of the organization to receive the prize or award,
      4. Your name, address, and taxpayer identification number, and
      5. Your signature and the date signed.
   3. In the case of an unexpected presentation, you must return the prize or award before using it (or spending, depositing, investing it, etc., in the case of money) and then prepare the statement as described in (b).
   4. After the transfer, you should receive from the payer a written response stating when and to whom the designated amounts were transferred.

Long story short: It looks like Obama will be okay with the IRS as long as the money goes directly to charity. But he'd better get a receipt from the Norwegians.

Update: At TaxProf Blog, tax law professor Ellen Aprill points out that Obama might be okay even without the rule above. You can deduct charitable contributions up to 50% of AGI, and Obama's income from sales of his book may be high enough to put him in the clear.  Aprill speculates that even if it isn't, Obama might decide to declare the income anyway, for political purposes. Not sure I see the point of that… is there really that much hay to be made over Obama not paying taxes on money he didn't ask for and didn't take?

If you want evidence that our economy may be on the way to recovery, forget about car sales and new home starts and all that stuff — and instead look at men's underpants. If they don't have holes in them, good times may be coming soon.

That's the premise of an interesting theory proffered — at least half seriously — in a recent article in the Washington Post by writer Ylan Q. Mui. "Here's the theory, briefly," she writes. "Sales of men's underwear typically are stable because they rank as a necessity. But during times of severe financial strain, men will try to stretch the time between buying new pairs, causing underwear sales to dip."

What do our shopping habits tell us about the economy?

There's an appealing logic to the underpants theory, but the track record of these sorts of whimsical economic indicators is mixed, at best. Remember the Lipstick Index? This was the notion, set forth by the chairman of Estee Lauder back in the dogs days of 2001, that lipstick sales would actually go up in a recession, as women who couldn't afford Manolo Blahniks tried to pamper themselves with cheaper indulgences.

Unfortunately for Estee Lauder, that hasn't happened in this recession, with sales of lipstick down 8 percent over the past year, as Mui points out. Indeed, as The Economist noted earlier this year, a look at what data we have on the subject suggests that lipstick sales bounce up and down seemingly independently of what's going on in the economy.

Then there is the Hot Waitress Economic Index, recently put forth by New York magazine writer Hugo Lindgren. As he explained the notion: "The hotter the waitresses, the weaker the economy. In flush times, there is a robust market for hotness. Selling everything from condos to premium vodka is enhanced by proximity to pretty young people (of both sexes) …. That leaves more-punishing work, like waiting tables, to those with less striking genetic gifts. But not anymore. A waitress at one Lower East Side club described to me what happened there: 'They slowly let the boys go, then the less attractive girls, and then these hot girls appeared out of nowhere. All in the hope of bringing in more business.'"

So how's that indicator at the moment? Lindgren noted that he'd recently been served by a waitress "who looked like Winona Ryder in her Heathers heyday." That's bad, bad news.

On the other hand, I'm thinking about buying some new underwear. So maybe there's some hope for this economy yet.

Apparently Fed Chairman Ben Bernanke has more to worry about than interest rates and financial bailouts: he and his wife were recently the victims of identity theft after Anna Bernanke's purse, containing credit cards and a family checkbook, was snatched from the back of a chair in a D.C. Starbucks.

Though it's not every day a Fed chief finds himself the victim of such a low and petty financial crime, the case was fairly typical in one regard: the information stolen was stolen not in cyberspace but in the real world. According to a recent survey by the Identity Theft Resource Center, only about 9 percent of victims have their information snatched through phishing scams and other internet skullduggery; another 13 percent lose their info through computer database breaches.

The rest are victimized in relatively old-fashioned ways: by people stealing wallets or purses or burglarizing homes or cars; rifling through their mail or garbage; poking through their desk at work. Chillingly, some 40 percent of the time the info isn't stolen by some nefarious stranger but by someone close to the victim — a relative, neighbor, co-worker, roommate or "friend." (You can see the group's press release, or download a copy of the whole report, here.)

Does that mean you should stop worrying so much about hackers, and worry more about your skeezy uncle? Well, no. While you definitely should try to protect your info from the prying eyes of disreputable relatives and perpetually broke roommates, hackers are nothing to sneeze at. Indeed, they're getting more sophisticated — and more businesslike — by the day.

As hacker-turned-journalist Kevin Poulsen put it in a recent article in Wired, the future of hacking is "professional, smart, and above-all well-funded. In the old days, hackers were mostly kids and college-age acolytes sowing their wild oats before joining the establishment. Today, the best hackers have the skill and discipline of the best legitimate programmers and security gurus. … Money is the catalyst for this change: Computer criminals are scooping in millions through various scams and attacks."

While there's nothing you can do to prevent large-scale database breeches — of the sort these recently arrested hackers were allegedly involved in — there are lots of things you can do to make yourself safer online or off.

Here are some useful resources:

Protect yourself from Identity Theft
Keep yourself safe from scams while searching for a job
Thwart ID Thieves
Protect your information online
The FCC on ID theft

These sites will give you some basic strategies that can make a big difference. Do you need to go further and subscribe to some fancy and expensive ID theft protection service? Probably not. If you're tempted to, read this article first. Prudence will do you far more good than panic.

How much do you worry about ID theft and what, if anything have you done to prevent it?

There doesn’t seem to be much Washington can agree on these days. But I don't think I'm going to go out on a limb by saying that one issue with widespread bipartisan support is the need for Americans to save more for retirement. So you have to imagine there is going to be some quick hustling to avert an oncoming p.r. train wreck: the IRS soon may be forced to impose a lower maximum contribution limit for 401(k)s in 2010. Yes, Washington may tell us it is forcing us to save LESS next year. Not exactly what you want to center your mid-term election campaign on.

The culprit here is low inflation. The annual 401(k) contribution limit is set by comparing the Consumer Price Index (CPI)  for the third quarter of the preceding year to a base level. If the August and September CPI numbers come in as low as July, the Q3 inflation number plugged into the calculation could trigger a decline in the 2010 contribution limit. According to an analysis by Mercer’s Washington Resource Group the 2010 limit might drop from $16,500 to $16,000 for individuals younger than 50, and the catch up contribution for the 50+ cohort might decline from $5,500 to $5,000.

The IRS is scheduled to announce the 2010 limits on October 15. Even if the IRS regulation mandates a reduction in the contribution limit it would be a shocker if Congress doesn’t jump in with a fix.

But the unfortunate reality is that even if the limits were reduced it wouldn’t have much impact on Americans retirement savings. According to a Financial Engines survey of more than 550,000 401(k) accounts, only 7% of participants came within $500 of contributing the maximum allowed by the IRS or their plan limit. So for 93% of Americans this is a bit of a non-issue. (The fact that 93% of Americans should be saving more is an entirely different topic.)

IRAs don’t face the same low-inflation pickle. The formula for computing IRA limits uses the trailing 12-month CPI (through August) to set IRA limits and that stat is expected to show an increase. It won’t likely be enough to budge the IRA limits up for 2010, but will ensure the limits can remain at their 2009 level: $5,000 for individuals under 50; $6,000 if you are 50 or older.

Social Security payouts are where low-inflation is going to do real damage. For the first time since annual cost-of-living adjustments were mandated in 1975, it looks like there will be no COLA increase for 2010 Social Security benefits. In fact, the Obama Administration’s budget forecast assumes there will be no COLA increase in 2011 either. Yet Medicare Part B premiums are expected to rise. That means the net payments to Social Security beneficiaries will be declining in 2010 (and probably 2011.) Let’s see what Congress has to say about that.

How much is walkability worth? An intriguing new study suggests that people are willing to pay considerable premiums for houses in neighborhoods that are highly walkable — that is, where you can actually get to nearby stores, schools, and parks without having to hop in the car.

The study, conducted by a group called CEOs for Cities, looked at 90,000 homes in 15 different markets in the US, mashing up home sales data with "walkability" scores from WalkScore.com. (See the press release describing the study here, or download the study itself, in pdf form, here.) In 13 of the 15 areas studied, homes in highly walkable neighborhoods sold on average for $4000 to $34,000 more than homes in neighborhoods of average walkability. The pattern held in locations as diverse as Chicago, Tucson, and Jacksonville, Florida; only in Las Vegas were more-walkable neighborhoods less desirable than less-walkable ones. To the author of the study, Joseph Cortright, this suggests that neighborhood walkability is "more than just a pleasant amenity," and deserves far more attention from politicians and other urban leaders.

Is this study simply saying that people pay more for homes in high-density metropolitan areas? Well, no; the study controls for this effect, as well as for a host of other factors (like home size, neighborhood income levels, and access to jobs) that might have affected the results.

Still, the results should be seen as only preliminary, in part because the walkability scores they use are crude at best. The idea behind the WalkScore.com website is ingenious: you plug in your address, and the site uses Google Maps data on the locations of various businesses, schools, libraries and so on to calculate a personalized walkability score.

The problem is that this Google data is incomplete: many businesses aren't in the database and those that are can be mischaracterized. When I punched in the address of my Chicago apartment, I got a walkability score of 97 out of 100 ("Walkers Paradise"), which seems about right; my neighborhood is lousy with restaurants, grocery stores, and all sorts of little shops. When I used the address of my parents' suburban home, WalkScore declared their neighborhood "car dependent," which is also correct.

The results I got all seemed more or less accurate. But the way WalkScore generates these results is still somewhat problematic. Looking into the data they used for my neighborhood, I noticed that it omitted countless restaurants, including most of my favorites, and miscategorized a bunch of different performance venues as "movie theaters."

The authors of the study are well aware that WalkScore has what they call "both conceptual and technical limitations." But it is still pretty good as a rough-and-ready guide to walkability, and as Google's data gets better, so will WalkScore's results.

The implications of the report? In the broadest sense, as Cortright notes, the results seem to confirm that many urban residents agree with urban guru Jane Jacobs that dense, mixed use neighborhoods are more vibrant and interesting than soulless planned developments or suburban sprawl.

In more practical terms, CEOs for Cities head Carol Coletta argues in her group's press release, the study's results "tell us that if urban leaders are intentional about developing and redeveloping their cities to make them more walkable, it will not only enhance the local tax base but will also contribute to individual wealth by increasing the value of what is, for most people, their biggest asset."

For more discussion of the report, see here and here.

So how walkable is your neighborhood? How much is walkability worth to you?

In this year of the great belt tightening pet owners continue to give themselves a long leash to keep shelling out for Fido and Fluffy. The American Pet Products Association estimates we’ll spend $45.5 billion on pets this year, a 5% increase since 2008 and a near 60% jump from our 2001 pet outlays.  This comes at a time when June retail sales were about 10% lower than a year earlier and a Gallup survey of weekly consumer expenditures in mid-August was nearly 30% lower from a year ago.

Pet expenditures aren’t merely a kibble and kitty litter story. The APPA reports that 19% of pet owners admit to buying a “designer” item.  Exhibit A: The $935 price tag for the large version of  this cat condo would cover a few months of mortgage payments for plenty of human condos on the market.

But it’s not just about the pet bling. Basic food and care is driving some very big bottom lines. Nestle recently reported a 9% year-over-year pickup in its pet care division; PetSmart recently doubled its dividend payout, and drug maker Sanofi-Aventis SA is paying Merck $4 billion to buy its 50% share of animal health-care manufacturer Merial. Sanofi’s CEO told The Wall Street Journal that Merial sales are up 50% the past five years and the firm’s operating margin is near 30%.

I know all about that trend; the epileptic dog sleeping at my feet as I write this requires twice-daily medication, and will see her vet more this year than I have seen my primary care physician in the past decade.

But I just had to sigh in disbelief at a House Resolution introduced last month that would allow an annual tax deduction of up to $3,500 a year for “qualified pet expenses." No, I am not making this up.  As Howard Gleckman so pithily wrote at the Tax Vox blog, this non-essential tax break seems a bit out of touch for the times given the massive federal deficit. What’s your take on this pet project?

Finally, some happy news for credit card holders. Late last week, Bank of America announced it will no longer require customers who sign up for their credit cards, bank accounts and certain loans to give away their right to sue in a dispute.

Bank of America’s decision is the biggest yet in a growing movement away from mandatory arbitration clauses, which force consumers who have a problem with a service provider into private arbitration forums to settle disputes. These forced arbitration clauses have become ubiquitous in consumer contracts, from cell phones and credit cards to nursing home agreements and employment contracts. Consumers have a lousy track record of winning in these private arbitration forums.

BofA’s change follows news in July that the National Arbitration Forum is halting hearing mandatory consumer arbitration cases (thanks to a lawsuit it settled with the Minnesota Attorney General that the NAF hid its ties to the debt-collection industry). The American Arbitration Association also announced it will halt debt collection arbitration cases until it overhauls its guidelines. In July, JP Morgan Chase also said it would no longer submit consumer disputes regarding credit cards to arbitration. According to USA Today, other credit card issuers, including American Express, are weighing similar moves.

While consumer advocates say the changes are a victory for credit card users, it doesn’t help customers of thousands of other banks, cell phone companies, and other service providers who are still forcing people into private arbitration to settle disputes. Still, the moves should give a boost to a bill pending in Congress called the Fairness Arbitration Act, which would eliminate mandatory arbitration clauses in most consumer contracts. This is an issue on the president's radar screen, too: In June, Obama called for an end to forced consumer arbitration as part of his financial market reforms.

Tell us: Have you ever had a dispute with a service provider that went to arbitration? How did you fare?

Opening the August credit card statement is going to send the blood pressure of some Chase customers skyward.  For the second time this year the bank has changed up the rules for how it calculates the minimum payment due for certain customers, increasing the rate from  2% of the outstanding balance to 5%.  If you’re carrying a $5,000 balance that means your required minimum payment went from $100 in July to $250 this month.

That move, in turn, has raised some serious hackles. Over at about.com the call to action is to file a complaint with the Federal Trade Commission over this “unfair practice.”

Hmmm. Unfair? I’m not so sure. Unfriendly, absolutely. There is no question that tightening the payment screws at a time when unemployment is at a 25-year high and furloughs are the hot new employment trend isn’t exactly consumer-friendly. Yet there is indeed a residual benefit for cardholders. Increasing the minimum payment rate by 150%  means Chase customers will pay off their debt a whole lot faster. That’s a boon for their personal balance sheet as well as saving a bundle in interest costs. While I don’t believe for one second that Chase’s motivation is to help its customers — this is all about Chase reducing its risk — I think Curtis Arnold over at CardRatings.com got it right by tagging the change a case of “tough love.” What's your take? The poll is open.

The big economic news this week is the May unemployment report, which comes out Friday morning and is expected to show that the jobless rate topped 9% for the first time in a quarter century. Bad news indeed but employment is a lagging indicator of how the economy is doing and even as the unemployment rate climbs toward double digits, the pace of job losses is slowing markedly.

For a better sense of what lies in our economic future, check out two other economic reports and an employment survey of large companies out Monday.  These paint a more telling and sobering picture of the future as it affects you and me.  First, there’s the news that frugality continues to reign. In April, consumers once again cut back spending, with consumer expenditures down 0.1%.  That’s the second straight month that consumer spending dropped after a burst of buying in January and February as shoppers took advantage of deeply discounted goods. Meanwhile, personal income was up 0.5% in April but that was largely due to tax cuts and stimulus payments from the government. Which is why it’s no surprise that Americans’ personal saving rate soared to 5.7% in April, the highest level since 1995, according to the Commerce Department.  People are worried about losing their jobs, so they’re socking away more money.

All that’s well and good – people are spending less and saving more.  But even if you don’t lose your job and the economy continues to improve (which the stock market certainly seems to be anticipating after hitting its highest point since January today), a more worrisome trend is what’s happening with wages.  Wages and salaries remain flat and for many people, lower. That’s because in this recession, companies not only are cutting staff, they’re slashing salaries too. According to a survey by outplacement (that’s a nicer word for companies that specialize in helping people who have been laid off find jobs) consultants Challenger Gray & Christmas, more than half of human resource executives surveyed in May said their companies instituted salary cuts or freezes to cut costs, up from 27% in January. While salary cuts and furloughs are preferable to outright job cuts, the trend has major implications for what kind of economic recovery we can expect.  If people who hang onto their jobs or get laid off and get a new one can’t count on their earnings growing, they’re going to keep being thrifty. And without a real rebound in consumer spending, it’s unlikely we’ll have a strong economic recovery. Have you had your salary cut? Or been furloughed? Have you cut back your spending? Tell us what’s happening with you.

- Donna Rosato

You’d think in a year when major banks received billions in taxpayer aid and face billions more in defaults on credit card debt, tackling anti-consumer practices by credit card issuers would be a slam dunk in Congress. There’s certainly been lots of buzz about changes coming to the credit card industry, served up by feisty Democrats eager to show American consumers that they're looking out for the little guy. The House approved Rep. Carolyn Maloney’s Credit Card Holder’s Bill of Rights in late April and this week, the Senate is wrangling over Sen. Christopher Dodd’s Credit Card Accountability, Responsibility, and Disclosure Act.   It’s strong sounding legislation but the powerful banking lobby is hard at work on Capitol Hill trying to water down the toughest provisions. Unfortunately for consumers, the bank lobbyists are having some success.

Here are just a few provisions that have been dropped or not made it out of committee:

• Speedy reform. Maloney’s original bill included a provision that would require card issuers to implement changes within 90 days of the bill becoming law. Maloney’s bill is very similar to new regulations that the Federal Reserve approved in December , including banning card issuers from raising rates on existing balances unless your payment is late and giving consumers more time to make payment before fees kick in. All that's good but the Fed’s new rules don’t kick in till July 2010. And ever since the Fed regulations were made public in December, credit card users have been slammed with rate hikes and higher fees, which consumer advocates say is a purposeful move by banks to soak consumers before the new rules kick in.  Now the only part of Maloney’s bill that will go into effect within 90 days of signing is a provision that would give consumers 45 days notice that their rate is being increased.

• An end to universal default and multiple overdraft fees. According a report in the Huffington Post, an earlier version of Dodd’s bill explicitly prohibited universal default (that's when a card company raises a user’s rate when they are late paying another creditor) and limited the number of overdraft fees that hit a cardholder when a cardholder goes over their limit. The latest version contains neither of those provisions.

• A cap on rates. Sen. Bernie Sanders, a Vermont Independent, proposed a provision that would cap credit card interest rates at 15%. Noting that one-third of credit card holder’s pay interest rates higher than 20% and up to 41%, Sanders said this would end “loan sharking” by banks and consumer advocates said the provision would put real teeth in the bill. That effort was defeated last week.

President Obama asked Congress to deliver a credit card reform bill that he can sign by Memorial Day, one that would provide “strong and reliable protections for consumers.” Sure some reform is better than no reform. But let’s hope the legislation that lands on President Obama's desk is still worth signing. Tell us: What do you think would be the most effective change to credit card practices?

- Donna Rosato

Move over, The Money You Could Be Saving With GEICO. Obama trumped the poor little fellow with googly eyes when he announced earlier this week that bigwigs in the medical, hospital and insurance industries had pledged to him that they could shave some $2 trillion off our nation's health care costs over the next ten years.

Naturally, any time a government official says he can produce $2 trillion out of nowhere, it's hard not to be a little suspicious.

Indeed, Republican Senator Chuck Grassley quickly issued a statement essentially saying: We'll believe it when we see the details. On the National Review Online, meanwhile, conservative economist Larry Kudlow declared that Obama's plan would "bankrupt the nation." (Rush Limbaugh, meanwhile, compared Obama to Don Corleone.)

At the other end of the political spectrum, a blogger for the Leigh Valley Pennsylvania Express-Times wondered how it was that the health care industry could suddenly find $2 trillion in savings. If all that free money is just sitting there, he wondered, doesn't that suggest that "they've been stealing from us for all these years[?]"

It's not quite as simple as that, of course, and the health care industry isn't quite as villainous as the blogger makes it out to be. But he's right about one thing: the trillions in savings may actually be more than a pipe dream.

The confidence that Obama and other in his administration have that big savings in health care are possible stems from their reading of some very interesting research conducted over the last couple of decades at Dartmouth. Led by researchers Jack Wennberg and Elliott Fisher, the folks at what's called the Dartmouth Atlas of Health Care found out two very interesting things when they began examining regional patterns of health care spending.

First, they discovered that spending varied tremendously from city to city, region to region, and that much of this variation had nothing to do with demographics or any other factor that might logically explain the differences.

Second, they discovered that those regions that spent the most on health care didn't actually get better results than the regions where spending was much lower. Patients in the high-spending regions got more MRI scans, and spent more time in the hospital, but all that extra attention didn't make them any healthier. More money, in other words, didn't mean better health care.

That's the glass-half-empty way of looking at it, anyway.

The glass-half-full way suggests something rather extraordinary: if we can figure out what the more effective hospitals are doing right, we could save a lot of the money we now waste on ineffective care. We could get the same or even somewhat better results than we get now, while spending a great deal less — by some estimates, as much as a third.

Of course, getting to this rather utopian state of affairs will require a lot more than mere pledges like the ones Obama got this week.

For more of the gory details of the research and the reforms that may come out of it, check out this story in Dartmouth Medicine by health journalist Maggie Mahar.

Researcher Fisher points out a few options in this New York Times roundtable; if this merely whets your appetite for more, check out the white paper titled "An Agenda For Change" on the Dartmouth Atlas' own web page.

In any case, you can rest assured that you'll be hearing a lot more about this research in the months and years to come.

–David Futrelle

Chrysler's plan to shut down 789 dealerships, about a quarter of the car company's franchises (see related news story here), may have you wondering: What does this mean for me? Let's break it down like this:

If you own a Chrysler, Dodge or Jeep: Your biggest issue is likely convenience, says Philip Reed, consumer advice editor for Edmunds.com. A factory-backed warranty will be honored at any of Chrysler's remaining authorized dealerships. You may just have to travel farther for service.

The one exception: if you bought a service plan, extended warranty or a pre-owned certified vehicle backed by the dealership or a third party, not Chrysler. In that case, there's no guarantee your agreement will be honored at other dealerships. And in the past, says Reed, "there have been reports of dealerships going out of business and leaving people out of luck."

Take heart:  Even if a dealership is axed, it may not go out of business, says Reed. The dealership could turn into a service center or a used-car shop, and, as a result, continue to honor its contracts. Joe Wiesenfelder, senior editor at Cars.com, also notes that these are "extraordinary circumstances." There's hope, he says, "that other dealerships will honor those [third-party warranties]."

If you want to buy a Chrysler, Dodge or Jeep:  According to Chrysler's proposal, dealerships would close by June 9. That means there's less than two months to unload inventory (only authorized dealerships can sell new cars). So look for discounts on top of existing incentives–today, as much as $4,000 in cash rebates–offered by Chrysler. "If you're shopping," says Wiesenfelder, "chances are you can get a good deal."

A word of caution: Make sure the warranty you sign up for is factory-backed. That way, it will be good at any dealership. Also, don't get caught up in the lure of a good deal. First, find a car that fits your needs. Then start negotiating.

-Carolyn Bigda

By Jeanne Fleming, Ph.D. and Leonard Schwarz

Question: My fiancé’s wealthy aunt and uncle agreed to let us use their beautiful lake-view home for our wedding, and we’ve sent out the invitations. But now they’re insisting that each guest sign a form releasing them from any liability in the event of an accident. I’m appalled. Are they being unreasonable, or am I just naive?

Answer: You’re naïve only if you imagine that liability isn’t an issue here, because it is. Too bad no one thought of it before the invitations went out. We’d place most of the blame for that on your fiancé’s aunt and uncle, as presumably they’re worldlier, as well as wealthier, than you. But we can’t blame them for getting nervous, especially if you’re planning to serve alcohol.

So where do you go from here? These folks are sure to have homeowners’ insurance, and it almost certainly covers personal liability. If they don’t realize this, a call to their insurance agent may put their minds at ease.

If it doesn’t, talk to your insurance agent about “special events coverage.” A one day policy will insure your fiancé’s aunt and uncle against any liability arising from your wedding and will cost you a lot less than a ballroom or banquet hall.

If neither of these approaches satisfies them, then we’d agree: Your fiancé’s relatives are being unreasonable. It’s one thing to be more-than-a-little late in raising the liability issue. But once the invitations go out, it’s wrong to insist that your guests sign the kind of legal document they might expect to be handed were they signing up for skydiving lessons, not attending a wedding.
Questions? Email Money Magazine’s ethicists – authors of “Isn’t It Their Turn to Pick Up the Check?” (Free Press) – at FlemingandSchwarz@right-thing.net.

Well, Schwab can't do anything about the stock market, but the the financial services company can make it cheaper for people to invest. This morning, the mutual fund operation of Charles Schwab made deep cuts in the expense ratios of its equity index funds and lowered costs throughout its fund family for individual investors.

The news comes only one month after Morningstar forecast that mutual fund expense ratios will rise in 2009.

Under its new pricing, Schwab is giving all investors in a given fund the same expense ratio, whether they're making the minimum initial investment of $100 or investing a larger amount. For example, expenses for a small investment in Schwab's popular Dividend Equity fund will drop from 1.04% to 0.89%, a ratio previously available only to people with a minimum investment of $50,000. Ratios on other funds will have higher drops: For small investments in the Schwab Fundamental U.S. Large Company Index fund, expenses will go from 0.59% to 0.35%.

Playing a game of expense-ratio limbo with other brand-name mutual fund giants–and with ETFs, such as the SPDR S&P 500, that are stealing dollars from index mutual funds–Schwab is claiming the industry's lowest expenses in three categories of index mutual funds: the S&P 500, the total US stock market, and small-cap stocks. For example, Schwab's S&P 500 Index fund, which used to have an expense ratio of 0.36% for small accounts, now has an expense ratio of 0.09%. The expense ratio for the Vanguard 500 Index fund, which has a minimum initial investment of $3,000, is 0.15% for most individuals, while the Fidelity Spartan 500 Index–a $10,000-minimum fund–has an expense ratio of 0.10%.

"This is not a promotional offer or anything like that," said Schwab's Peter Crawford, senior v.p. of investment management services, at a press conference Tuesday morning. "These are permanent reductions."

Granted, Schwab's index fund expenses may not have the absolutely lowest expense ratios out there. If you're lucky enough to have at least $100,000 to invest, your Vanguard 500 Index Admiral Shares will have a ratio of 0.07%. The SPDR S&P 500, by the way, has an expense ratio of 0.0945%, but you'll have to pay brokerage commissions on any transactions.

Keep in mind, also, that some of these numbers won't exactly right all the wrongs the stock market has recently inflicted on your portfolio. On an investment of $10,000, a 0.09% ratio on Schwab's 500 index amounts to expenses of  $9 a year, compared to the $15 you'd be paying if you were holding Vanguard's index shares. In other words, you'd be saving yourself $6 a year. That's not quite enough to turn your retirement picture around, but maybe it would make an appreciable difference in your investments given enough time and money in the market.

And who knows? Maybe this will be the first round in a mutual-fund price war. That's a battle all investors would be happy to see.