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WILLIAMS: Americans need financial primer
Question of the Day
As quickly as a sense of optimism settled into the market, as witnessed in part by the surge in the stock market in April and the announcement of a few positive economic data points, the reality of our economy and the financial crisis is weighing on us once again.
But, neither Congress nor the administration is up to the task of fixing our financial crisis. Much of the leadership that is now reviewing, amending, legislating and regulating proposals to fix the problems was responsible for creating the environment that incubated all the elements of the crisis. I agree that others have shared a similar view before, but what does this really mean?
Congress is not up to the task because it does not understand the issues it is trying to fix. Like the rest of the American public, members of Congress and other government officials lack the most fundamental financial education - let alone an education that empowers them to understand and regulate the complex financial structures created on Wall Street. It would be enlightening to have members and leadership in the administration take a basic financial education assessment to test their “financial IQ.” It would be surprising if their performance was much different than that of the general public.
Of course, there is no such evaluation that serves as the national standard or one that is part of every American’s education in public classrooms. To me, this is a testament to and evidence of the magnitude of the financial illiteracy issue in America. In fact, “financial literacy” really only formally appeared on the government’s radar last year when President Bush formed the President’s Advisory Council on Financial Literacy.
However, don’t be lulled into thinking that there is now a shared vision and strategy to make financial education a national priority. This is the government after all, and we can only move as fast as the obstructionists, lobbyists, unions, special interest groups and members allow, regardless of the consequences in the short and long terms.
More important, is Congress really smart enough to fix this issue? Can Congress view the nation’s financial and economic problems through the lens of problem solvers as opposed to lawyers and politicians trying to win a point? Can we really expect Congress to have the expertise across the spectrum of financial concerns that are plaguing Americans across the country to effectively craft meaningful legislation?
It is no different than every April 15 when we are reminded how ineffective and inefficient our tax code is. Help me understand why we have tax laws that are so complex that beyond the most basic returns, we need to pay a professional to navigate the complexities of the code - for fear of excessive penalties and punitive audits.
Help me understand why the American consumer is fearful of the Internal Revenue Service when essentially no Americans are given an education or foundation in personal finance. Help me understand why there is any debate of whether or not to make financial education mandatory in schools - immediately. It is no wonder that most Americans struggle to effectively manage their finances and plan for the future when the road map doesn’t exist or the one we are given is more confusing and treacherous than the road ahead.
But all of this is understandable.
Congress is good at what it does. Many members of Congress are lawyers who are rewarded with handsome hourly rates to make the most simple of answers undecipherable or too convoluted to be meaningful.
Is there any chance that the credit card companies, banks and other financial institutions learned from your ways as they buried their abusive financing and credit terms in the fine print? Why in the world is it OK to allow the most important information to be subordinated to the marketing fluff? Why do you allow this to happen? Be honest, do you really understand these issues yourselves?
It is hard to imagine that you do when you allow fees, penalties, interest rates, etc. to be so excessive that they snuff any hope of financial security, independence and freedom from the victims of these predatory and abusive practices. It is hard to imagine that if you understood the gravity of the situation there is any debate or any delay - on either side of the aisle - to legislate financial education as a requirement in every classroom in America.
Part of the problem with Congress is that most of its members are lawyers. Lawyers are not trained to efficiently solve business and financial problems. Lawyers are usually paid by the hour, so it is in their interest to make issues more complicated than necessary. Try to read a simple real estate contract if you disagree. Businessmen generally try to solve problems in the most efficient and profitable manner possible. Lawyers are also trained to be adversarial so they win or lose in the courtroom. Most economic and financial issues are not zero sum games. The object is not to win a point but to come up with a solution that creates the greatest value for all the participants.
Perhaps, Congress, the lack of financial education is why we are the most indebted industrialized nation, why our financial literacy rates are abysmal and why so many people struggle to save effectively for retirement. You can offer money, tax cuts, grants and subsidies to individuals, but you will never fix the problem of financial illiteracy this way. You will only throw good money after bad. In fact, like many people who do not understand the financial problems before them and become frozen from fear - when their bills pile up, they become overextended and bank accounts run dry - you bury your heads in the sand as though the problems will go away. When will you lead by example?
So, Congress, show the American public that you have the financial acumen to provide the leadership and to craft legislation that will be meaningful and effective - and not create a solution more complex than the problem like our tax law. Show us that you understand that simply crafting more regulations for the financial services sector will not fix the most threatening problem to America’s long-term financial health: the lack of financial education.
The last thing America needs is a fatal blow of piling reckless spending upon reckless investing. Across the board Americans are being starved of financial education, and our economy is showing all of the advanced symptoms.
• “The Armstrong Williams Show” is broadcast weeknights on XM Satellite’s Power 169 channel from 9 to 10 p.m.
About the Author
By Michael P. Orsi
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