The Question: Is the U.S. Government’s teaching financial literacy a good idea, and has it been working?
The more you look behind the scenes at what is going in any government program, the more perplexed you become. At least that’s been my experience. Pick any topic and take a look at which pieces of the puzzle your government has its fingers on. Any piece of the puzzle that the government is holding is costing you dollars. Tracing the results and benefits taxpayers receive from government programs and bureaucracies is most often a conundrum. More taxpayers should try it. I honestly believe few taxpayers are attempting to find and measure the results, benefits, and costs associated with government (let me help you) programs. My belief is based upon the fact that that the number of programs continue to grow exponentially without real accountability. When is the last time any of us questioned one of our elected officials on the necessity or efficacy of any government program or bureaucracy? This post is one simple example of the maze that the government constructs in its attempt to help you.
Given the “financial crisis” and all the news talk regarding massive numbers of mortgage foreclosures, and fortunes being lost in the stock market, I recently took at look at the topic of financial literacy in the United States. “What’s the government been up to?” That was the question in my mind; so I decided to start with the Executive Branch to perhaps locate an answer.
I quickly discovered that this past January President Bush signed an Executive Order creating a new government counsel. At the time, Bush had one year remaining in office. The purpose of his Executive Order was to create the President’s Advisory Counsel on Financial Literacy. The Executive Order Section One promulgation is:
- [T]o promote and enhance financial literacy among the American people. To help keep America competitive and assist the American people in understanding and addressing financial matters, it is the policy of the Federal Government to encourage financial literacy among the American people.
Arising from the above, a nineteen member President’s Counsel was created. At first, I was a tiny bit impressed. I then looked at the purpose and function of this Counsel. The Executive Order states in part that the Counsel is to advise the President from time to time on the status of the citizenry’s financial literacy and the progress of achieving the policies set forth in Section One above, and make recommendations for ongoing further implementation of the policies stated in Section One above. Uh? In any event, my general reaction was; too little, too late. Note to self. This is almost December, has the President’s Counsel “advised” him yet? The answer is: “No,” but there is a First Draft report in place. An optimist might believe that Bush will receive the first report on the Financial Literacy of Americans before he leaves office in less than two months!
But, We Already Have A “One-Stop-Shop” For Financial Literacy.
I instantly became unimpressed with the fact that Bush created another layer of government inefficiency and duplicity. How and why, you ask? Because, the Advisory Counsel was created for a term of two years by a lame duck President. Furthermore, because I soon discovered the website, mymoney.gov and thus, the conundrum appeared!
The Mymoney.gov website proclaims to be the “[s]tarting point for information intended by the US government to help improve the financial literacy and education of persons in the United States.” Read the additional quote below and then ask yourself, is it a content problem or a marketing problem that caused the obvious failure of its mission. The website states:
- MyMoney.gov can help you.
MyMoney.gov is the U.S. government’s website dedicated to teaching all Americans the basics about financial education. Whether you are planning to buy a home, balancing your checkbook, or investing in your 401k, the resources on MyMoney.gov can help you do it better. Throughout the site, you will find important information from 20 federal agencies government wide. (emphasis added).
Wow! The government is definitely here to help you! It may take 20 different federal agencies to get the job done, but they are dedicated to at least help Americans balance their checkbooks. Click on the image to see the comprehensive governmental commitment to assist you in checkbook reconciliation. Quite the plethora. How could there have been a “financial crisis” with so much government educational assistance available for years?
I am fascinated by the fact that the Mymoney.gov website says that it “serves as the one-stop shop for federal financial literacy and education programs, grants and other information.” Uh? This commission’s primary mission is for “[p]roviding financial education resources for all Americans. After reading these introductory statements at the Mymoney.gov website, I couldn’t help but ask myself, so why did Bush create an Advisory Counsel on Financial Literacy? Moreover, why did he do so with only one year remaining in his administration? This puzzle becomes more labyrinthine. The Mymoney.gov website was put up by the U.S. Financial Literacy and Education Commission. Where did this commission come from? This commission was created by the FACT act. The FACT act was created:
- under Title V, the Financial Literacy and Education Improvement Act which was part of the Fair and Accurate Credit Transactions (FACT) Act of 2003, to improve financial literacy and education of persons in the United States.1
Moreover, get this.
- The FACT Act named the Secretary of the Treasury as head of the Commission and mandated the Commission include 19 other federal agencies and bureaus. The Commission coordinates the financial education efforts throughout the federal government, supports the promotion of financial literacy by the private sector while also encouraging the synchronization of efforts between the public and private sectors.2
Let’s review where we are so far. Five years ago, Congress passed a law mandating Fair and Accurate Credit Transactions (how’s that been working?). The savior for America’s financial literacy was born–the Financial Literacy and Education Commission (FLEC)! The FLEC put up a website; Mymoney.gov and a “National Hot Line.” The fact that the FLEC put up a National Hot-line infers an emergency or a sense of urgency, does it not? The number is 1-888-MyMoney. I dialed the number but the call could not be completed from Canada which is where I live. You try it and please let me know what you discover. The purpose of the hot line is to serve as a primary portal to provide consumers the educational information they need on a wide-variety of important financial topics. Congress charged the FLEC to:
- improve the financial literacy and education of persons in the United States through development of a national strategy to promote financial literacy and education.3
So, the FELC was to develop and implement a national strategy to improve the financial literacy of Americans. Two years later, the National Strategy was complete; it’s 162 pages and available in .pdf format. In its content, The FLEC touts its effort of thoroughness. You decide. First, about nine months after the FACT was passed, the Commission published a notice in the Federal Register seeking “succinct and responsive” comments from the public on the development of a national strategy. In the event you misplaced your copy of the notice, you can click on the link and review it. A massive public response ensued with the FLEC receiving “more than 150” comments. Obviously, it took some time to read and absorb the content of the these many comments. But, indeed the FLEC did move forward in its development of an urgent national strategy by next holding a series of “six-sector specific” meetings (all held in Washington D.C.) to gather more information from respondents to the Notice in the Federal Register! These meetings concluded in March 2005. The finale of its thoroughness was that it convened a working group consisting of 13 government agencies. The working group met eleven times between June 2004 and June 2005. There you go. A year or so later, the FLEC produced our National Strategy. The cost to develop the National Strategy was only $1,000,000 dollars, not including salaries or travel expense.
Again, note that the National Strategy is dated “2006.” In attempting to determine what the FLEC has been doing since it published its national strategy report, I discovered that as of April 2007, there has not been a FLEC meeting since September 2005 according to the Office of Domestic Finance.
This is troubling given the fact that the FACT contains a specific provision that requires the FLEC to report to Congress annually. I was unable to locate any progress report made to Congress. However, I did find that the Government Accounting Office produced a report and submitted it to Congress in December 2006. In that report, it is noted that Congress did not provide any funding for fiscal year 2006 to the FLEC Commission. That might be why there were no meetings beyond September 2005. Nonetheless, the GAO in its report, pretty much labeled the National Strategy as a good narrative but not very strategic.
The Commission (FLEC) is still in existence and is being managed so to speak by the U.S. Treasury Department (an Executive Branch Cabinet) but up-to-date information on what it is actually doing is nonexistent at the official web address. Despite the fact the GAO refers to the National Strategy as not being strategic in content, the U.S. Treasury Department has taken a lead role by initiating a profusion of meetings across the country. These meetings have been the Treasury Department’s independent attempt to implement the various calls to action contained in the National Strategy report. What comes to mind here is that the Treasury Department is one of the President’s Cabinets. So, given the close relationship between Bush and Treasury Secretary, Hank Poulson, a taxpayer would think that Bush would be aware of the FLEC and all of its strategic calls to action and work.
SEC Chairman Cox Provides Startling Testimony.
Again, despite the apparent fact that the FLEC has not provided Congress with annual progress reports, this past May, the Senate Committee on Banking, Housing, and Urban Affairs held hearings to discuss FLEC’s agenda of boosting financial literacy in the United States. Various representatives of the 20 different governmental agencies testified before the Senate Committee. The Securities Exchange Commission big-dog Christopher Cox provided Congress with “new information” in his testimony to the Committee:
- The SEC Chairman Christopher Cox noted that a growing population of retirees is [sic] being targeted by financial scam artists. He called for more education and scrutiny of “free lunch” investment seminars aimed at seniors. “Sadly, some industry professionals target seniors for inappropriate investments,. . .4
Now, there’s some new vital information that Congress can work with. How come we didn’t know this before? One Senator, claiming to be a proponent of financial literacy (who isn’t?), Sen. Daniel Akaka (D-Hawaii) reported to the Senate Committee that progress was being made toward promoting more user-friendly investment materials. “I’ve noticed that the materials are becoming less complex,” he said.5
There’s a Treasury Department Teleconference You Can Participate In.
I’m still trying to answer the question: Why did Bush create the President’s Advisory Counsel on Financial Literacy? Maybe Bush has not been very impressed with the FLEC’s work. Also, where is that first advisory report to President? Well even though there is not a First Report to the President by the Advisory Counsel made available to the public yet there is a draft report available. Contained in the draft report are a number of tentative recommendations to the President. By the way, The Chairman of the President’s Advisory Counsel on Financial Literacy is Charles Schwab. It is mind-boggling to me that one of the recommendations is that we need according to the Advisory Counsel is to:
- Create an Internet-based resource center that consolidates the best financial education information and resources into one new financial literacy web site, designed to help employers quick and easy access to tools they need to design workplace financial literacy programs tailored to the specific needs of their employees.6
Uh? Don’t taxpayers already pay for the on-stop-shop financial literacy website, www.MyMoney.gov? Why do we need a second one Charles? There are a couple more draft “recommendations” that I like, to wit:
- Develop and launch a federal government public service communications campaign to encourage Americans to set financial goals, live within a budget, build savings, and participate fully in financial education opportunities.6
Amazing. How come we didn’t think of that before? My favorite “recommendation” is the following:
- Conduct additional research into the feasibility of requiring college students to take a course in financial literacy or pass a competency test as a condition of receiving government-backed student loans.6
How can you argue with that one? If taxpayers are going to provide government backed student loans, you, the taxpayers, should make ensure the students understand they have to be financially literate and pay the loans back. Makes sense to me; not sure why additional research is necessary.
In case, you also misplaced your copy of the Federal Register again, here’s the public notice for anyone wishing to listen in on this Counsel’s sixth meeting via teleconference next week. You’ll have to email the Treasury Department to obtain the teleconferencing phone number.
The President’s Advisory Council on Financial Literacy will convene its sixth meeting on Thursday, December 4, 2008, via teleconference beginning at 2 p.m. Eastern Time. The telephone meeting will be open to the public. Members of the public interested in listening to the meeting should e-mail the Treasury Department at financialLiteracyCouncil@do.treas.gov to obtain the information on how to listen to the call. Individuals needing special accommodations to take part because of a disability should notify the contact person listed below.
Since Schwab is Chairman of the President’s Advisory Counsel, I assume he will be leading the call so to speak. I hoping that some participant will ask Mr. Schwab if the right hand of the government knows what the left hand is doing, or visa versa. “Mr Schwab, are you familiar with the National Strategy on financial literacy already developed by the FLEC?” “Also, Mr. Schwab, are you at all familiar with the dozens of independent financial literacy educational programs 20+ other government agencies have in place?”
Please participate in the upcoming teleconference.
Speaking of participating, what really would be cool and educational would be for every reader here to obtain the phone number for the teleconference call from financialLiteracyCouncil@do.treas.gov and then drop a quick email to every person in their address book providing them the phone number to hook up to the financial literacy call. Maybe, someone could record it, if that’s legal.
There are people who believe the government is wasting its time and money.
No doubt there are plenty of folks in the U.S. that believe as I do that the government’s attempt to “educate” people on financial literacy will not work and is a misuse of an incredible amount of money. In any event, it is acutely apparent that it has not worked to date–else the U.S. would not be in the “financial crisis,” right? There are credible opinions out there that suggest the government’s attempt to “teach financial literacy” is a waste of time. For example, in a Money Magazine article, “Why you can’t teach money,” Law professor Lauren Willis suggests that we just give up on financial literacy – she says it’s a waste of time and can even get you into trouble. Professor Willis further states:
- Financial literacy classes give people the illusion that they can successfully manage their finances. So rather than seek help, they end up making worse decisions.
I tend to think she’s correct and for additional reasons. Just because the government makes various programs available does not necessarily motivate the folks to engage. The state of affairs suggests that no matter how much taxpayers’ funds are thrown at the problem, people do not respond to government mandates that they become more savvy. I like the manner in which Professor Willis sums it up. “The Government should stop trying to make everyone a financial planner. Instead, people should simply be “educated” to understand that sellers of financial products often do not have a consumer’s best interest in mind.” No kidding.
One thing the President’s Advisory Counsel has accomplished is that it created a program for high school students to be tested on financial literacy. The program is the Financial Literacy Challenge. The idea is to get high school students across the country to accept an academic challenge and take the test. Charles Schwab kicked in scholarship money for students with the highest scores. Initially, the Challenge ended on November 3, 2008 however, based upon “tremendous response” the Challenge has been extended and is open until December 12, 2008. If you know of any high school students (home-schoolers included) send them to the website. A few sample questions are posted at www.lifesmarts.org. It is interesting that one of the first scholarship recipients from the Charles Schwab supported Financial Literacy Challenge was a home-schooled student, Nicholas Bruno from Richmond, Texas.
One thought-provoking private sector program (i.e. having nothing to do with the government) designed to increase meaningful financial literacy is the Stock Market Game. This is an educational program with many private sector supporters. The game is a teaching tool that has been around since 1977. The game is open to international students. More than 10 million students have participated in the game to date. The game is administered by teachers. Teachers are instructed in the application and implementation of the game. They are provided a host of teaching materials, lesson plans, and support. It is not unusual for the game to last an entire school year. As a home school parent, I hope to receive the teaching materials myself to administer a game to a group of home-school students here in British Columbia.
Well, in any event, the purpose of this post was to further bring to light the somewhat ridiculous maze like manner in which the U.S. government operates and spends taxpayers’ money. I literally could go on for a couple more days, but I think I’ve made my point. You decide, you heard it here. We welcome your comments.
Thank you in advance.
- See http://uscode.house.gov/download/pls/20C77.txt.
- See http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=108_cong_public_laws&docid=f:publ159.108
- See http://www.treas.gov/offices/domestic-finance/financial-institution/fin-education/commission/
- See http://www.cfo.com/article.cfm/7108995/3/c_7129649?f=insidecfo
- See http://www.cfo.com/article.cfm/7108995/3/c_7129649?f=insidecfo
- See http://www.ustreas.gov/offices/domestic-finance/financial-institution/fin-education/council/PACFL-recommendations.pdf