{PART 4 OF 4} THE SOLUTIONS TO OUR COMMON NATIONAL PROBLEMS IMPACTING EVERY AMERICAN

(OUR) GOVERNMENTS (FEDERAL, STATE AND LOCAL) MUST BE BETTER AND MORE EFFECTIVE.   WE CANNOT AND WILL NOT SUCEED WITHOUT THEIR HELP!  

THE REST OF US MUST DO A BETTER JOB TOO! 

{Excerpts FROM JAMIE DIMON, CEO J.P. MORGAN CHASE, CEO AND CHAIRMAN OF THE BOARD, ANNUAL LETTER- Public Policy} 

“The U.S. federal government is becoming less relevant to what is going on in people’s lives. People have generally lost faith in the ability of institutions to deliver on their mission and meet societal needs. They are demanding change, and we must recognize that change is needed. We need dramatic reform of our global and federal institutions and how we attack our biggest societal challenges. There are signs of progress, particularly in how local governments are starting to attack pressing problems – the ones that directly affect people’s lives, like education, housing and employment. Look at Detroit and see how excellent leadership is fixing a once failing city. We should continue to empower local governments to address the needs of our society, but we should be asking our federal government to do the same.

I have already commented about needing real policies that include thoughtful plans to increase growth and create more opportunity for everyone. Faster growth will raise incomes, generate opportunities and create the wherewithal to fund improvements in our social welfare programs. (In the sidebar below, I describe some possible solutions to the problems previously highlighted above). These solutions are not my own but are a synthesis of some of the best thoughts that we have seen. Some of these solutions are simple, and some are more complex. And obviously, if they were politically easy to put into practice, that would have been done by now. However, I am convinced that if we could get ideas like these implemented, economic growth and opportunity for all would be greatly enhanced.

Some solutions to how we might drive growth, incomes and opportunity

EDUCATION

We know what to do. High schools and community colleges should work with local businesses to create specific skills training programs, internships and apprenticeships that prepare graduating students to be job-ready — whether they go on to earn a credential, to work or to attend college. With 7 million job openings and 6 million unemployed workers in the United States, there is an opportunity for companies to work with local institutions, including community colleges and local apprenticeship programs. Business must be involved in this process, and it needs to be done locally because that is where the actual jobs are. Germany does an exceptional job at apprenticeships. Germany has one of the strongest education and training systems in the world, with about 1.5 million young people annually participating in apprenticeship programs that are paid opportunities to gain in-demand skills along with an education. The vocational schools and apprenticeship programs work directly with local businesses to ensure students are connected to available jobs upon graduation. Germany’s youth unemployment rate is one of the lowest in the world.

Some countries are now implementing mandatory preschool for children at three years of age. This is a wonderful policy. It makes childcare less expensive and has proved to be extraordinarily good for student education short and long term. Parents like it, too. Of course, the benefits may not be seen for many years, but this is precisely the type of long-term thinking in policymaking that we need.

HEALTHCARE

This may be our toughest, most complicated problem, but we know there are some things we can do to make the system work better. Some of the solutions may include aligning incentives better; trying to eliminate the extraordinary amount of money wasted on bureaucracy, administration and fraud; empowering employees to make better choices with upfront transparency in employer plan pricing and options and the actual cost of medical procedures; developing better corporate wellness programs, focusing particularly on obesity and smoking; creating better tools to shop around for non-emergency care and manage healthcare expenses; and reducing the extraordinary expense for unwanted end-of-life care. Another obvious thing to do is to start teaching wellness, nutrition, health and exercise in K-12 classrooms nationwide.

REGULATORY REFORM

Starting a small business today generally requires multiple licenses, which take precious months to get. But it doesn’t end there. Talk with any small business owner and that person will describe the mountains of red tape, inefficient systems and a huge amount of documentation involved to operate the business. We need to reduce the number of licenses that are required to open and run a small business. In addition, we should look at the excessive state and local rules affecting small businesses, consolidating and eliminating unnecessary rules and regulations where possible. And all regulations should have a thorough cost-benefit analysis and be periodically reviewed for current relevancy.

INFRASTRUCTURE INVESTMENT

The 2015 transportation-spending bill, Fixing America’s Surface Transportation Act (FAST Act), is intended to fund surface transportation programs — including highways — at over $305 billion through 2020. Its aim is to improve mobility on America’s highways; create jobs and support economic growth; decrease bureaucracy in getting projects approved and completed — and we need to finish its implementation. Again, experience from other countries may help. We could learn from Germany and Canada, for example, whose officials endorsed large infrastructure projects and sped through permitting in two to three years by forcing federal, state and local approvers to simultaneously work through a single vetting process. Significantly reducing the time of permitting also dramatically reduces the cost and uncertainty around making major capital investments.

TAX CREDITS AND BENEFITS

The business tax changes in the 2017 tax law made the United States more competitive, benefiting American workers today and strengthening our economy for the long term. In 2018, nominal wages increased 3.3% — the fastest rate of growth since 2008 — and job openings exceeded the number of unemployed workers for the first time since the federal government started tracking these data in 2000. Beyond this important progress, there is still more that policymakers could do to help working Americans. Of the 150 million Americans working today, approximately 21 million earn between $7.25 an hour (the prevailing federal minimum wage) and $10.10 an hour. It is hard to live on $7-$10 an hour, particularly for families (even if two household members are working). While it would be acceptable to increase minimum wages, this should be done locally and carefully so it does not increase unemployment. Perhaps a more effective step would be to expand the Earned Income Tax Credit (EITC). Today, the EITC supplements low- to moderate-income working individuals and couples, particularly with children. For example, a single mother with two children earning $9 an hour (approximately $20,000 a year) could receive a tax credit of more than $5,000 at year’s end. Last year, the EITC program cost the United States about $63 billion, and 25 million individuals received the credit. We should convert the EITC to make it more like a negative income payroll tax, which would spread the benefit, reduce fraudulent and improper payments, and get it into more people’s hands. Workers without children receive a very small tax credit — this should be dramatically expanded, too.

LITIGATION

While the rule of law and the right of plaintiffs to get their day in court are sacrosanct, there have to be ways to improve this system. One example, which works in many other countries, is to have the loser pay in some circumstances. Clearly, this would have to be done in such a way as to ensure that aggrieved parties are not denied appropriate access to our justice system. But we need a way to reduce frivolous litigation designed principally to extract fees for lawyers. We also need to reduce the time and the cost necessary to achieve justice by adding more judges and creating more specialty courts to deal with complex issues.

IMMIGRATION

There has been support for bipartisan comprehensive legislation that provides substantial money for border security, creates more merit-based immigration, makes DACA permanent and gives a path to legal status or citizenship for law-abiding, hard-working, undocumented immigrants. We know this is no easy feat, but we should pass and enact legislation to resolve immigration.

MORTGAGE LENDING

Things can be done to reform mortgage markets, which would increase mortgage availability — as I mentioned in the previous sidebar.

LABOR FORCE PARTICIPATION

We have already mentioned two critical solutions that would help improve labor force participation — make work pay more by expanding the EITC and provide graduating students with work skills that will lead to better paying jobs. Remember, jobs bring dignity. That first job is often the first rung on the ladder. People like working, and studies show that once people start working, they continue working. Jobs and living wages lead to better social outcomes — more household formation, more marriages and children, and less crime, as well as better health and overall well-being.

Reducing recidivism of those who have been incarcerated is not only important to citizens with a criminal record and their families — but it can also have profound positive implications for public safety. Last year, we welcomed the Federal Deposit Insurance Corporation’s proposed changes to allow banks more flexibility in hiring citizens convicted of a crime. Our responsibility to recruit, hire, retain and train talented workers extends to this population, and we will support re-entry programs and give convicted and/or formerly incarcerated Americans a path to well-paying jobs. Finally, we should all be gratified that the government now seems to be taking the opioid problem very seriously.

STUDENT LENDING

We should have programs to ameliorate the burden of student loans on some former students. We would be well-advised to have more properly designed underwriting standards around the creation of student loans. Direct government lending to students has grown almost 500% over the last 10 years – and it has not all been responsible lending. It would also be helpful for the government to disclose student lending programs as if they were accountable on the same basis as a bank. Addressing these factors would lead to far better, and healthier, student lending.

PROPER BUDGETING AND PLANNING

All levels of government should do proper budgeting and planning — and on a multi-year basis. It is particularly important that most federal programs — think military, infrastructure and education — have good long-term plans and be held accountable to execute them. When the government says it is going to spend money, it should tell the American people what the expected outcome is and report on it. It should account for loans the same way the private sector does, and it should be required to do cost-benefit analysis.

Somehow we need to help reinvent government to make it more efficient and nimble in the new world. While the federal government remains somewhat in a stalemate, we have seen governors and mayors at the state and local levels taking active control and framing effective solutions. They are helping to create a laboratory of what works and are often at the forefront with initiatives that restore confidence in the ability of government to deliver. We also call upon CEOs and other leaders to step up and offer non-parochial solutions.

One final thought: If I were king for a day, I would always have a competitive business tax system and invest in infrastructure and education as a sine qua nonto maximize the long-term health and growth of our economy and our citizens. I would not trade these issues off – I would figure out a way to properly pay for them.

CEOs: YOUR COUNTRY NEEDS YOU!

Despite the fact that CEOs are not generally viewed with high levels of trust, surprisingly, the 2019 Edelman Trust Barometer global report – encompassing a general global population of more than 33,000 respondents – shows that 76% think CEOs should take a stand on challenging issues and that 75% actually trust their employer.

We believe CEOs can and should get involved – particularly when they or their companies can uniquely help design policies that are good for America. At JPMorgan Chase, we are strengthening our public policy teams to take our advocacy and ideas to the next level. We believe the best way to scale programs that we have seen work in cities, states and countries around the globe is to develop actionable public policies that allow more people to benefit from economic growth.

We can use our unique capabilities, data and resources to help inform infrastructure policies, corporate governance policies, affordable housing policies, financial education policies and inclusion policies, as well as small business financing and formation, community and economic development, and others. In addition, while almost all companies can help further job skills, training, and diversity and inclusion efforts, each company can also add value where it has distinct capabilities, like expertise around healthcare, infrastructure or technology.

It’s not enough just for companies to meet the letter and the spirit of the law. They can also aggressively work to improve society. They can take positions on public policy that they think are good for the country. And they can decide, with proper policies and regulatory oversight, with whom and how they will do business.

However, this does get complex. What companies cannot do is abridge the law of the land or abrogate the rights of voters and their representatives to set the law of the land. There are circumstances in which JPMorgan Chase is called upon to do things and/or set policies that should have been set by the federal government – in effect, these are decisions that the voter must decide. We work very hard to try to stay on the right side of all these issues.

In any event, things have changed. In the past, boards and advisors to boards advised company CEOs to keep their head down and stay out of the line of fire. Now the opposite may be true. If companies and CEOs do not get involved in public policy issues, making progress on all these problems may be more difficult.

AMERICA’S GLOBAL ROLE AND ENGAGEMENT ARE INDISPSESABLE

One of the biggest uncertainties inthe world today is America’s role on the world stage. A more secure and more prosperous world is also good for the long-term security and prosperity of the United States. And America’s role in building that more secure world has been and will likely continue to be indispensable.

While there are many legitimate complaints about international organizations (the North Atlantic Treaty Organization, the World Trade Organization and the United Nations), the world is better off with these institutions. America should engage and exercise its power and influence cautiously and judiciously. We should all understand that global laws, standards and norms will be established whether or not our nation participates in setting them. It is certain that we will be happier with the evolution of global standards if we help craft and implement them. We should not abdicate this role. To the contrary, it is critical that America help develop the best global standards in trade, immigration, corporate governance and many other important issues.

In closing – While I have a deep and abiding faith in the United States of America and its extraordinary resiliency and capabilities, we do not have a divine right to success. Our challenges are significant, and we should not assume they will take care of themselves. Let us all do what we can to strengthen our exceptional union.

I would like to express my deep gratitude and appreciation for the employees of JPMorgan Chase. From this letter, I hope shareholders and all readers gain an appreciation for the tremendous character and capabilities of our people and how they have helped communities around the world. I hope you are as proud of them as I am.

STYRON POWERS’ CONCLUSION

Jamie Dimon presented a concise and logical summary of the issues we face in our country, along with recommended changes desperately required.  Many today focus on America’s past sins and errors.  We must put that energy into America’s future, by living in today’s world and planning a better tomorrow for self and future generations. As President Kennedy once said: “Ask not what your country can do for you, ask what you can do for your country.”

God Bless the United States of America and all the people of the world. 

You can read Jamie Diamond’s entire annual letter by clicking the below link.

https://reports.jpmorganchase.com/investor-relations/2018/ar-ceo-letters.htm?a=1

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DISCLAIMER

I am a proud nerd (my beautiful wife and daughter told me so) investment and finance blogger, with University Rutgers, MBA and Harvard University, Advanced Management education.  

I started my first business at ~13 years of age. I am a successful investor in equities and real estate and happy to share my personal finance and investment lessons learned with you.  I am NOThowever, a licensed financial advisor.  Please do not construe my suggestions on this blog, as recommendations for your personal situation.  For individual finance advice please seek your own licensed CPA or financial advisors.  

Powers Investments Management, LLC

This blog will provide, information and simple strategies, that will assist you to achieve YOUR financial objectives and long term targets. For over 30 years, I solved multi-million dollar problems, for Fortune 10-250, companies. My formal education includes: Business, Finance and Chemical Engineering {Problem Solving} at: Harvard, Rutgers and North Carolina State. And an additional 30+ years, managing my family’s investment decisions. I currently manage/advise people with net-worths ranging from the tens of thousands to several million dollars.

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