On the Economy and America’s Future: A Long Range Plan.

There’s good news in the recent tanking of the American economy. Much of the world’s
economy is headed in the same direction. It remains to be seen whether this world
problem is good for America in the long run, but I discern hope in the ruins. The best can
be ahead…if we start planning for long-term recovery. In disruption is opportunity.

This document examines certain aspects of economics, society, and education. It is

primarily the result of my own thinking and it is presented in hopes that you will examine
critically elements of society which impact on spending and the credit which fuels that
spending. I hope that the reader will think about my ideas and start thinking for him-or
herself; and, perhaps, enact some of the recommendations that I will make. Perhaps
you’ll come up with better ideas for yourself. If so, publish them. If your ideas have
merit, perhaps American citizens will adopt them and use them to improve their life.

Economics: We live in an economy based not so much on need as on desire. We

humans need food, shelter, water, clothing; we need medical care and financial support
when we’re sick or too old to work. We need transportation so that we can work and
earn a living. A lot of the other places we spend our money are based on learned, or
perceived, needs; we need various toys to keep us amused and luxuries to bolster our
economic status. A lot of our economy is based on things we don’t really need, but want.
Those parts of the economy representing perceived needs are in a precarious position.

Advertising is ubiquitous, and is based on the idea that we can be persuaded to buy
something we don’t really need, often with money we don’t have, that may well be
consumed or wear out before we’ve paid for it. Now that the economy is in trouble,
we’re urged to spend more; but we consumers have already spent next year’s money,
perhaps the disposable income that we could expect to acquire for the next three or four
or five years. Banks are more reluctant to loan money, particularly to people who are
already overextended. Those are the people who have those credit card balances in the
$10k levels or higher and whose annual income is less than $50k. Those are the people
who are more likely to spend, based on past history; but they spend credit, borrowed
money, not cash. No credit, no spend; and no immediate recovery for the economy
without fundamental change. We as a nation are committed to flexing military muscle,
providing health care, carrying out social programs, and all without paying for it. We
borrow, and put off the payments to future generations. We elect politicians who make
those decisions. But we, as citizens, cannot escape eventual responsibility.

Debt: We’ve managed to become a nation that owes money to most of the developed
world. Per capita debt is now about $20k (the last time I checked; it won’t have
decreased), and it’s rising. All of the bailout schemes plan to use money which will be
raised through increases in deficit spending. Deficit spending is borrowing, simply put.
So the per capita debt will increase in the short term. Much of this debt is owed to
foreign entities. They got the money to lend us by providing commodities (oil, other
minerals) and goods (automobiles, televisions, a host of other goods that they can
produce and ship to us cheaper than we are willing to produce for ourselves). All those
trade deficits come back to us as loans, and we pay interest on those, which results in
even more dollars being sent out of America. Producers are, in effect, loaning us the
money so we can continue to buy their products. We need to consider this cost when we
look at balance-of-payments. The goods we buy cheap aren’t cheap at all when you add
the eventual cost of borrowing the excess money back and then repaying the loan with
interest. It’s a good deal for the Chinese, among others. They provide clothes or toys or
whatever, perhaps by subsidizing their industries, then recoup the cost of such subsidy by
loaning the money they get back to us and making interest from the loan. Win-win for
them, lose-lose for us. We as a society believe that the free market will prevail, but this
idea does not apply to international trade. Internationally, other nations (and perhaps
America too, on occasion) use subsidies to gain favorable trade balances and use
monopolies to inflate prices of commodities to unrealistic heights. We, as a nation,
attempt to control these practices, but internationally, they are either uncontrolled or
hidden.

We need to get rid of the foreign debt we owe. We need to provide for a better society
for American citizens. The economy, and its troubles, gives us an opportunity and a
motivation to change things for the better. This is not the first economic disruption
caused by fluctuations in the credit market; it will not be the last unless we take steps to
change the environment in which credit is provided. Eventually, this debt must be repaid,
or we will have no choice but default or payment with watered-down dollars. The first of
these options will be hard, but the last two lead to catastrophe, for America and for the
world. Think Great Depression, political upheaval, and world war.

I suggest that we citizens require that our political representatives be forced to raise the
money, by taxation, for any new spending initiative they pass. I’d suggest that this tax be
a part of the original bill, that the Senate and House’s rules be changed to reflect that, no
spending bill without a tax rider so that the president can only approve or veto the whole
package. It’s far too easy to do social engineering on borrowed money; note that the
current health care reform, in whatever form it finally passes, is being pressed despite
opposition from a majority of voters. Also note that that opposition has no effect at all on
your representatives. Much of the opposition comes from those who know that, in the
end, there are going to have to be tax increases to pay for it.

I, for one, don’t mind paying taxes…so long as those tax dollars aren’t being wasted.
“Waste” includes pork or special deals for members of congress; waste includes junkets
and free trips on Air Force planes to the member’s home state. There are a lot of
examples of waste; add your own. Taken one at a time, none of these are particularly
costly; taken all together, they are significant, even in a multibillion dollar national
budget.

We also owe money, in the form of promises, to various segments of our population. Our
government has promised certain things and then collected payments, in the form of
taxes, for these promised benefits. Social security…medical care…education…
protection from enemies foreign and domestic…the list goes on and on.
There’s an underlying assumption behind all this debt; that matters in the future will
improve, and that we as a nation and also as citizens will be able to repay all that we’ve
borrowed from these improvements to be gained. One of the bases of this belief in future
improvement is based on education and future technology to be developed by these
educated people.

Education: American schools are failing…but not for the reason you probably believe. It
is, despite the reports, possible to get a quality education in most American schools. It
happens every day. Graduates of American schools go on to get jobs, go on to study
successfully at world-class institutions of higher learning, go on to invent new and better
things and procedures. The failings of American schools are usually laid at the feet of
teachers and, occasionally, administrators…but neither of these is the root cause of the
problems. Attempts to change American education by focusing on these two groups
simply haven’t worked, and cannot work. We need to identify the real faults and tailor
our remedies to address the real shortcomings.

I believe that the failures in education can be narrowed down to three things. These are
the things that schools must teach, or none of the other things they are trying to
accomplish will be achieved.

The first of these is discipline. Discipline is simply the willingness of the student to
cooperate in the education process. Discipline can be external in the early, primary,
grades, but it must have become internal by the time the student reaches middle school.
Middle schools and even high schools contain numerous failures who have not succeeded
in internalizing this concept. And there is no provision for removing them or providing
alternative settings which can serve to educate these failures in some venue that might be
more suitable. Instead, these students (up to one third of the student body, based on my
own experience when I was a teacher) are responsible for dragging down the scores that
the student body achieves on the annual tests that schools now undergo. They also
occupy a disproportionate amount of a teacher’s time, which means that other students
can’t benefit from that teacher’s time (more teacher-to-student interaction has been
identified in studies as a positive influence on education); and they are the source of most
of the disciplinary problems in any given school. And in the end, they themselves don’t
benefit from school. They drop out or their indiscipline lands them in the hands of the
criminal justice system, or they are eventually pushed out when they turn 18, with
perhaps a diploma (no longer a respected document) but no education.

The second is self-responsibility. Again, this must be achieved by middle school. Once
the basics of reading, writing, and thinking are taught, then teaching is no longer the
correct word for the process of education that students undergo: in middle school and
high school, schools don’t teach, they assist the student in learning. This needs to be
considered in detail, since it’s a radical change in what politicians usually focus on.
Instead of focusing on teachers or administrators or socioeconomic conditions, this
requires placing the failure squarely on the student. Consider that in every school, no
matter how low in achievement it might appear, some students will gain an education.
Why them, and not others? In a classroom of 30 or more students, all of the students are
exposed to the same environment. Some succeed, some fail; and as a general rule, the
ones who succeed also succeeded last year with a different teacher, and those who fail
have a record of previous failures.

The third thing is ethics. This goes along with the first two of the three core values. At
one time ethics education might have been carried out by family or church, but both these
institutions have changed to the point that this is no longer an option. And yet, some
agency must teach this as a core value, else democracy, business, or society as a whole
will eventually fail. In school, only the grade matters; copy assignments, use your cell
phone to send or receive answers, do the absolute minimum to achieve a passing grade.
And then watch the school’s average fall when annual tests are taken, even though 90%
of the students are receiving passing grades at the time of that annual test. Note that it’s a
lot harder to cheat on that annual test. This is a generalization, of course; a few of the
students will have done their own work, taken tests and passed them on their own, and
will receive passing marks on that annual qualification test.

At this point I think it’s fair to say that no one is teaching ethics, at least not to many of
our citizens. There are repeated failures, in politics, in business, in sports, in law, that
indicate how very widespread this failure has become. Unethical behavior is the norm.
Egregious violations of rules are widespread. Pass a bill that favors a person or an
industry, then accept a “campaign contribution”. If you’re an industry or company, try to
get your political representative to exempt you from whichever law you find
inconvenient. Hide your money so you won’t pay your fair share of taxes. Refuse to
vote for a bill unless your state has some additional benefit or earmark, which you can
then take back and point to with pride in order to gain votes next election. Tackle an
opposing player with intent to do injury, 15 yard penalty, but only if you get caught. Or
elbow a player who goes up for a shot, one or two free throws. Women’s soccer? Yank
an opponent down by her ponytail. Only golf appears to be free of the worst of these
excesses. For now. In business, the same standard applies. If you have a customer for
your credit card, charge fees, because you aren’t making enough profit on interest alone.
Raise the rates you charge for any or no reason. Base your business model on
maximizing profit, rather than the idea of providing a service and getting paid for it. Use
any means to prevent your client from being convicted, regardless of any concept of
“justice”; due process is more important. Add your own examples.

What to do; we’ve managed, through commission or omission, to get ourselves into a
hole. How do we get out?
I would recommend we start with education. Educated citizens have a better chance of
achieving that future improvement that our economy, individually and collectively, is
counting on.

Restructure education. Recognize that the function of school is education, not social
engineering. Change the focus from the teacher (don’t ignore them; when you discover
someone who shouldn’t be teaching, remove him/her) to the student. Recognize that
some students aren’t college material. Provide alternate tracks to other types of education.
In Germany, perhaps in other places, students are switched to a different track when they
demonstrate that they’re no longer benefiting from a college prep curriculum. These
students go into apprenticeships with some supplementary classroom courses, and when
they have successfully completed the apprenticeship program they can qualify for low-
cost loans so that they can set up their own shop or perhaps buy their own farm. I suggest
that this would be a much better approach for us as Americans. For those students who
can benefit from the college prep model, I suggest that we let them continue as long as
they are able, all the way to PhD, so long as they are demonstrating adequate progress
and show promise of employment after graduation. I would limit the number of PhD
graduates in disciplines which might promise limited opportunities for postgraduate
employment; but others go on to graduation and their education should be paid for from
public funds. Past public-funded education attempts (the GI Bill, for example)
demonstrate that graduates will repay the cost of their education manyfold over a lifetime
of employment, from taxes on higher incomes, and from their increased contributions to
society. Graduates should not have to mortgage their future in order to gain an education.
Students with disabilities are not routinely included in all classes. We need to realize that
some of these students cannot benefit from the class.

If they are physically or mentally not equipped to benefit themselves or society by

inclusion in a particular class, then remove them. It’s not fair to the handicapped student;
but leaving him or her in a class in which they are an observer, rather than a fully
involved participant, is unfair to all the others in the class and contributes to the failure of
the education system, while not providing commensurate advantage to the disabled
student. I do not advocate blanket removal of all such students from regular classes; I
suggest a case-by-case approach. Steven Hawking, for example, is a world-class
theoretical physicist; but I wouldn’t call on him if I needed brain surgery. Universities
provide classes for majors in a discipline, less rigorous classes for those students who
need some degree of familiarity but not the expertise that would serve as a foundation for
advanced studies in a particular subject. Schools already provide similar separate classes,
but are unable (due to legal constraints) to provide these separate classes to all those
students who would be best served in such. I suggest that, in our well-intentioned efforts
to be fair and kind to those who have not been blessed by nature, we are hampering the
efforts of our schools and hindering the progress of our “normal” students.

Restore ethical standards to politics, business, and American life. Remove those whose
ethics are failed or wrong. Recognize that it is not ethical for failed politicians to move
across the street and become lobbyists to their former colleagues. It is not ethical for a
governmental employee who is engaged in regulating an industry to leave government
employment and then go to work for those he was charged with overseeing. Penalize
companies who demonstrate a lack of regard for society by recklessly polluting or failing
to make a due effort to provide safe and effective products. Add your own ideas here.

These are my ideas. If you like them, spread them to others. If you disagree, enumerate
your disagreements and publish them so that others can benefit. They are ideas, no
more; and some of them are good and some are not and others are impossible goals. You
can choose which is which for yourself. Thanks for reading…Jack Knapp