Thursday, October 18, 2012

Invest in the Future! Hope for Tomorrow!

The other day I wrote some reflections on "Hope for a Better World." Today, the day after the second debate between presidential hopefuls, Obama and Romney, I reflect on "How can we invest in the future?"

Here we are, and together with a handful of economically important nations in Europe, with more national debt than we can afford to pay. We are spending more, as a nation, than we are earning: not just in governmental coffers, but in far too many corporate and private lives as well.

Our presidential candidates are sparring off with two basic and opposite approaches: Barack Obama wants to pull ourselves out of our economic doldrums saying the government must lead the way with continued deficit spending. This was the now famous approach of FDR during the Depression which I believe originated the term "deficit spending" under the heading of Keynesian economics. It is debated to this day whether it this approach is what took the U.S. out of the Depression, or whether it was World War II itself. (During the War the government was able to control the economy in ways far beyond anything even the Depression could justify.) I can't possibly weigh in on this debate that professional economists themselves can't agree on. Yet, how much more debt can our government possibly take on before our currency collapses under evaporating consumer and global confidence in our sanity and economic common sense?

The Republicans seem to say that we must bring out spending under control. In its simplest terms, this is a good policy and is reasonable when it comes to a family or a business. They seem to indicate that we need to cut government spending to reduce the deficit while also reducing taxes to spur the economy. But unless the tax reductions or other causes spur the economy to increase tax revenues to cover most if not all of the tax cuts, it will backfire. And, in the meantime as we wait for it to succeed, we might find that massive spending cuts in the federal budget could put a lot of people out of work and a lot of others out in the street. Easy to imagine social unrest and a very short four-year term for Governor Romney!

Either way, then, we are in a pickle. Whether we cut our way back to prosperity or spend our way there we could be doomed never to arrive. This is why it could also be said it doesn't really matter much which party wins the election because neither solution can float over the tsunami that's building and running rapidly towards our financial shores.

Is there, perhaps, a third alternative? If spending, both government and private, were re-directed towards investing in our future, it wouldn't be fast or an easy cure, but it could be a solid boost to confidence in the future. We could  INVEST IN OUR OWN FUTURE! Society and economists are beginning to realize that expectation and confidence are more important than so-called financial reality in determining economic activity and decision making. Creating a culture of innovation and optimism can do more for our current problems than paralyzing debates.

Now if that sounds a little bit like the same snake oil the politicians are selling, well, I would sympathize with your skepticism. But let's explore it, anyway. We've little to lose.

When I go to college, or start a business, or move "out west," or embark on a new career, in each case I am investing in my future with pluck, luck, vim and vigor. This inborn optimism to launch ahead into a new direction attracts to itself opportunity and success. By contrast, belt tightening is boring and a downer and continued excessive spending feels like one is coming apart at the seams. But an investment strategy is bound to inspire much more confidence and support than either slash and burn deficit reductions or spend and borrow towards currency collapse. In fact, this investment-in-the-future campaign would combine elements of each in order to work. That's what makes it so magnetic and potentially successful.

Under current conditions consumers are necessarily cautious. But what if we find incentives to encourage home improvements, energy cost savings, better diet and health maintenance, higher education, job retraining, and new, small (family and home-based) businesses? Get people going in new and interesting directions.

What if government re-directed some of its funding for social, farm, and military subsidies and entitlements (by attrition, delay of projects, cost reductions or holding back cost of living adjustments) and, instead, moved funds towards infrastructure repair and improvements, mass transit development, broadband highways, job retraining, higher education support, and research & development in emerging or much needed fields and technologies? I know none of these specifics are new but if we consciously re-direct funds this can inspire confidence rather than deflate it. Those areas being asked to pare down would be making a sacrifice for a greater good and a better future.

Here is a more or less random collection of incentives and dis-incentives we could consider to encourage investment in our national future:
  1. Higher taxes on consumption of food and other goods or services which are unhealthy or energy consumers or otherwise unhelpful economically or socially. For example, if there was a way to increase the cost of fast food (some kind of national excise tax on ingredients or removal of farm subsidies?) and at the same time create incentives for healthier meals and foods and education, then we all could benefit. Sacrifices would be for the common good. An increased gas tax that directed the proceeds to areas of new investment (road improvements, research in fuel and driving efficiencies, and mass transits, esp in low tech solutions). Luxury goods, resorts, and services should pitch in an extra share to help the nation invest in its future.
  2. A new program to re-direct big business agricultural to healthier foods and sustainable farming techniques. Support re-training and experimental farming techniques that preserve and improve soils and expand farmland through micro-farms. A whole new and younger generation of people would rise to the occasion to start a new industry and reform one in much need of long-term changes.
  3. Liberal investment tax credits or write-offs for investments in research and development, energy efficient equipment and related facilities.
  4. Creation of a national public service network operated at state and local level but guided by national goals and broad principles. Service could earn participants credits toward higher education while simultaneously providing skills training to participants and providing services to local needs. Sacrifices from existing unions or employment interests that would make provision for enrollees to serve in schools, municipal services, elder care, or farming would be, again, seen for the greater good. People of all ages could obtain new opportunities for service and skills, sacrificing by way of subsistence earnings but serving both a public need and their own future.
  5. How about offering student loans for higher education that are repaid back, in whole or part, by the simple fact that such students become taxpayers by virtue of their skills and higher earning capacity? We'd be investing in taxpayers which are needed for reducing national debt. The student loan reduction would be tied to level of taxes paid on salaries earned in the future.
  6. Too much emphasis and value is placed upon monetary wealth as a measure of personal worth. Research is taking place around the world for measuring happiness and success in ways more important than money. An active national dialogue and research is needed to help people understand that what we seek is happiness, not just things, consumption, or pleasure. A new culture and emphasis on sustainability in energy and resources, health, diet and exercise, the value of serving one's family and community, and other time tested social values needs to be developed for our schools, families, entertainment and culture.
  7. Short-term financial speculation erodes the underlying value and utility of the financial markets to provide jobs and goods and services to society. Speculation, therefore, needs to be curbed. Holding periods for financial instruments should be lengthened, regulated and restricted to valid business purposes. Restricting or eliminating short sales, complex derivative instruments whose real value is all but entirely speculative....all of these require a tough stance to help focus the financial markets on serving the greater good of society at large and not just personal financial greed or self-interest. 
  8. Guidelines for reasonable executive compensation should be established by industry-wide analysis and representative participation of stake holders, including with government oversight. Industry guidelines should establish how boards of publicly traded corporations can more fairly represent all major stakeholders (employees, public, vendors, customers, creditors and stock holders.)
  9. As referenced above, a form of voluntary national service, complete with training, can help utilize the energies of young adults, perhaps even older adults, for basic subsistence pay and credit for future higher education, pension benefits, or even health care benefits.
  10. If America is to remain both true to its founding principles of freedom and a strong leader of nations, we must recognize the importance of acting cooperatively with other nations for the common good. Unilateral actions, especially military, are corrosive to our political, social and moral influence and, most importantly, to our own moral standards at home. Therefore...
  11. Commitments to size and readiness of armed services needs to be reviewed with intent to scale back our tendency to intervene unilaterally in conflicts abroad. 
  12. Participation in U.N. should be scaled back in favor of working cooperatively with nations of like mind in programs and policies that provide aid, education, protection, investment, or relief to other nations. Why argue all the time with negative nations and leaders. Work with people who share a broader and more expansive outlook!
  13. More resources and dialogue should go to work and support emerging economies, cultures, and governments who are moderate and forward thinking rather than just fighting those who are stuck in narrow mindedness and tribal politics. Freedom and democracy is a direction, not a goal or a mere fact. It exists only in a cultural context not a vacuum. Work with positive leaders and nations and peoples. Nothing succeeds like success, cooperation, and strength in numbers. Active cultural exchanges should be encouraged and funded with creative partnership strategies between business, government and NGO's.
  14. Investment in future technologies and cleaner energy should be encouraged by tax incentives which are put into place for a long enough term that businesses and individuals can depend on them and can make pragmatic investment decisions.
  15. Instead of deducting home mortgage interest, what about deducting (e.g. via depreciation allowances) home improvements for weatherization, energy efficiency, and other valuable improvements (rather than luxuries like spas and pools etc.). Subsidies for home ownership seem excessive and thus have bred misuse. A fast changing economy and culture can benefit by greater mobility and flexibility, especially among younger people. Home ownership is surely a good social policy but it has become excessive and obsessive in a time when mobility and flexibility are the hallmark of success and creativity. 
  16. Limit travel and meal deductions for business to 50% of the amount paid. This would approximate eliminating a tax deduction for the personal, non-deductible aspect of such expenditures.
  17. Eliminate statutory depletion allowances for extraction industries (oil, gas, etc.). Let extraction industries use their actual costs like other industries as expenses or as amortized or depreciated in accordance with standard accounting and tax principles.
  18. Eliminate depreciation allowances for passenger vehicles used for business. Personal aspects of such expenses render their fair business use difficult to monitor and why subsidize it?
  19. Establish national guidelines for encouraging use of mass transit in high density environments. Evaluate the energy and fuel (and time and cost) trade off in short inter-city flights with inter-city high speed transit. Set guidelines for premium charges for short flights with proceeds to support the more efficient ground transportation (assuming it is more fuel and other efficient!) Private auto usage should help subsidize or make local mass transit free at least in high density environments.
  20. Help homeowners who are financially "under water" by allowing a reduction of their mortgage payment in proportion to the reduction in value based on the ratio of their current assessed value to their original purchase cost. Crude but simple. At the same adjust mortgage interest rate to current 30-year fixed rate by national average. Allow the banks to "bank" the resulting write-off as a kind of future second mortgage which would stay on the books and stay on the deed (separately) for a contingent and future recovery, sharing in future value increases with the homeowners in proportion.  Banks would be allowed to carry these contingent assets at book value for tax and financial accounting purposes. Would be allowed to bundle for sale such instruments under certain conditions. Each sale of the property in the future would determine a fair paydown of the deferred debt.
  21. Citizens abroad resent paying double taxes to resident country and U.S. Review policies to be more fair and equitable to our citizens working abroad. Same with corporations. It's important to at least be neutral in regards to incentives or penalties for working or operating overseas. 
  22. The health care debate is stuck on a theme of "socialism" vs. free enterprise. But neither fit the reality of human health care needs. Health insurance should be a mutual savings rather than a private company so all policy holders benefit or not according to their own participation. People of shared interests or healthy lifestyles should be allowed to pool resources and benefit thereby. Most hospitals should be run not for profit but for the benefit of those served. We need to look honestly at health needs, balancing individual initiative and responsibility with compassion and social benefits at large. 
  23. A three-tiered health care system might provide a bridge between the extremes: We need basic health care free for all, better health care for those who participate in funding their care and make the effort to take care of themselves, and room, too, for private health care for those with greater resources. Let's make allowance for genuine charity from individuals, faith groups, or NGO's for those for whom the basic free care is insufficient or at least beyond what the society can reasonably afford to or at least agree upon to provide. Perfect? Heck no. But is it now? One size does not fit all.
  24. Phase out social security benefits to those who really don't need them based on their assets and retirement income. Sure they earned them but gee whiz, they are lucky not have to have to draw on them and to let others have their share.
  25. Reinstitute more dignified levels of asset retention for those who have to spend down to receive gov't assistance for health care or retirement. Don't make liars or paupers out of people. If they choose to enhance the level of basic care they receive by using what remains of their assets then let them.
  26. Whenever possible, and when national policies make the most sense, let the states or other smaller entities handle the details subject only to broad guidelines and goals.
  27. Get the federal government out of primary education except for research and development and for giving general broad guidelines for public education that fairly benefits all citizens.
  28. Nothing beggars a person more or creates more resentment than to live on the crums of society. Handouts, as a way of life, demean both giver and recipient. Give recipients the opportunity and hold out the expectation that there are services they can render to society in return for their support until such time as they no longer need some or all of it. Dependency breeds contempt and discontent. Along with a handout, lend a hand to help a person stand up and give back. Being engaged and active can bring dignity and self-worth, while being idle is degrading. This will take some skill and tact but it is both fair and reasonable. Employment related vested interests will have to be convinced that for the greater good such recipients can be integrated into the workforce and all will benefit.
  29. Recipients of workmens compensation and unemployment should also, as and where appropriate, be expected to pitch in with community service.
  30. Re-structure tax deductions for charity "above the line" so that we encourage citizens (including lower and middle income) to participate financially in helping others around them.
  31. A comment about labor provided by national service or by welfare recipients: federal, state, and local governments are sorely pressed to meet service levels and this workforce can provide some measure of relief. Further, provision should be made for businesses (all sizes) to have access to this workforce. This will require re-aligning our attitudes and employment boundaries towards a more flexible paradigm. Community service should be seen as not merely limited to public services but as a way to help businesses get back to business. 
 Well, I've said enough, surely.

Nayaswami Hriman