I just finished reading a book by John Bogle- founder of Vanguard Mutual Funds- called Enough. Bogle reminds his readers of what made the US such a prosperous nation. He urges readers to return to the roots of viewing work as a calling that you never retire from; having a stewardship versus salesmanship mentality and returning to 18th century values of frugality, thrift and contentment. We are in the midst of a financial mess worldwide. At best, we could be in store for a nasty recession. It can get worse if habits are not changed.
World governments are going to throw trillions of dollars at deflationary pressures in hopes to prevent anything close to another Great Depression. It is likely to have some success. But every solution has the potential to cause another problem.
I have a short list of changes that need to be made to lift our nation out of financial distress and leave our kids and grandkids with a brighter future.
1. Health care needs to be reformed. I have some optimism that this is going to happen in 2009. I read Tom Daschle's book Critical. Daschle was recently appointed Health and Human Services Secretary. He knows politics and why Harry Truman and Clinton's plans to reform health care failed. Democrats have the votes to get something significant passed and there is also the political will.
Initially, the plan will be to work with the current employer provided health care structure with an option for uninsured to adopt a plan that is similar to what is offered to government employees. The Democrats goal is to eventually move to a single payer system. Surprisingly, more conservatives are moving to this camp.
Eventually, I hope that employers are not in the health care business. It is terribly inefficient. Too many workers are working in jobs that they don't prefer just for health care benefits. Too many employers are making decisions to lay off older workers due to health care costs.
Daschle wants to set up a medical board similar to the Federal Reserve board for monetary policy. This medical board will be entrusted to make decisions on what treatments are the most effective. There are plenty of valid arguments against large government intervention. But I think radical reform is the only path towards fixing a broken system. Hopefully, through trial and error a better system will emerge that can deliver quality care, eliminate waste and cut costs.
2. Push the retirement age for social security and medicare back to age 75. Politically, this will be unpopular. But we need to face reality. It is the only cure to preserve the entitlement promises made to Americans. The vast majority of Americans are able to work well into their 70s and 80s.
Social security and medicare were set up at a time when life expectancies were in the 60s. Now people are living on average to their 80s. Adding 20 years of pulling benefits out and not contributing to the taxes is completely unsustainable. The problems could be fixed by telling the population that there is a new reality. And that reality is that you need to think about retiring at 75 versus 65.
3. Tax any investment that is held less than a year at 50%. Cut the capital gains tax to zero for investments that are held longer than one year. Our investment markets have become too much like a casino. The average holding period for stocks is around 6 months. From 1935- 1980, the average holding period for stocks was over 3 years. The focus has become on speculation and trading versus investment. This is not good for investors and not good for our economy.
You can reorient this gambling/speculative mindset by taxing speculation. People can still speculate, but let them pay a big penalty to do so. Reward long-term investors which has much greater economic benefit and stabilizing force by eliminating the capital gains tax on any investment held longer than a year. We need to encourage the average holding period for stocks to increase.
These are all secular reforms. What we really need in this land is the same thing that is needed in every corner of the world. We need reformation of hearts towards God. We need people who are living and breathing for the kingdom of Christ. One day we will live under a perfect economic system. Until then, we need to live for changes that align with God's revealed will. We need to live and model biblical principles daily. This is our hope of true and lasting change.
Looking forward to a New Economy,
Ashley Hodge
