In Defense of the Welfare State and Invest America

Brad Gerstner's plan to reduce inequality and make more people wealthy

I’m pro-capitalist and pro-market because the evidence is irrefutable that free markets plus technological innovation has led to the wealth and prosperity that the developed and developing world has accumulated today. Look at the increases over time in average income, life expectancy, health advancements, and all of the amazing things we can buy that make our lives easier and enrich our experiences on earth.

But that doesn’t mean I’m anti-welfare. I’m anti bad welfare policies. Either because they are ineffective in getting people out of poverty and on a path to financial independence, or there is too much wasted money, with little positive effects to show for it. In a country like the U.S., with about 258 million adults, unemployment insurance, tax credits, and other welfare spending policies are undeniably necessary.

Private charity is no longer capable of dealing with this the way it could when many people lived in small tight-knit companies. There are a lot of great policy people online with specific solutions for improving the welfare state. Much of it is obscured by the average Republican being hostile to welfare and wanting to cut it whenever possible, and the average Democrat being so in favor of increased welfare spending that it obscures other policy changes that would be more effective in improving incomes, like cutting occupational licensing regulations that keeps people out of jobs.    

The other reason to be in favor of welfare is the moral argument. Helping people who are in need is an act of kindness from the government. It redistributes money from those who have done well financially by their hard work, skill, and good fortune, to those who have less. Critics love to point out that there are people who game the system and live off their welfare checks, rather than get a job and be productive members of society. This is not to be commended, but there is no welfare system that can totally remove this problem. But there are ways by policy and culture to incentivize work and productivity.   

The more I learn about public policy and the world the more I see the need for morality to become more central to these conversations. We live in a secular society, where being openly religious is often looked down upon. And in this necessary secularization we have forgotten the importance of faith and spirituality to leading a good and connected life. As David Foster Wallace said, “we all worship something.” And if it’s not God, it’s going to be something else. And often the substitute is money or politics. 

Many have also forgotten that many of America’s most cherished values come from Judeo-Christian values of equality, dignity of the human person, and compassion. You don’t have to be Christian or Jewish or ay specific religion to believe in these values, but when it comes to controversial issues like welfare and immigration policy it helps to have a common-sense morality to go with it.

In our rush to be understanding and tolerant of differences we’ve accepted immorality in our discourse, policies, and actions as an unfortunate byproduct. But any cruelty, xenophobia, or benign neglect is something people with common values can agree is wrong, even if we can’t agree on the solutions. Improving the moral foundations of this country have to come from somewhere. If there is a better answer than religion I’m all ears.

Separation of church and state is also fundamental to this country, but I’m not sure secular morality is strong or common enough to replace it. Secular morality too often is hijacked by political and ideological extremists. I’m not arguing that everyone has to believe in God or go to Church on Sundays, but fundamental values like not stealing and helping out your neighbor, or people in need, come from Judeo-Christian values and should be honored in both religious and secular contexts. We should be able to have respectful disagreements about morality, but finding common ground is the only way to heal deep divisions. 

Brad Gerstner a founder, entrepreneur, and current CEO of the venture capital firm Altimeter Capital has a great idea for making capitalism work for more people called “Invest America 2024”:

“The wealth and opportunity gaps in America are unfair and threaten our democracy.  Financial literacy is at an all time low.  And over 50% of Americans don't have investment accounts or financial upside in the great engine of American innovation and compounding.

Invest America is spearheading legislation to create a private investment account for the 3.7 million children born each year in America - seeded with $1,000 from the federal government.

A bi-partisan and enthusiastic group of House and Senate Democrats and Republicans are currently working on legislation that we hope gets passed BEFORE the next Presidential Election.” 

This is simply a great idea for getting average Americans to share in and have a stake in American economic growth. One of the basics of financial literacy is to invest in index funds–a conglomeration of stocks–like the SP500 (SPY) because it is a diversified and low risk way to get your money to compound at a very high rate of about 10% a year for 30 plus years, for when you retire. This way you don’t have to work against the vagaries of the market and time the market, i.e. buy low, sell high. Which is hard to do multiple times. 

CEO pay and the amount of wealth concentrated in the 1 to .1% is ridiculous. While I do believe a lot of those CEOs and the .1% have earned their money fairly and are invaluable at creating companies and value for the rest of the world, we still need a more equitable system. And one where opportunities are plentiful for those who work hard, have good skills, and are generous. An “Invest America” account plus and effective and generous welfare state is what the U.S. needs to harness the powers of capitalism, American ingenuity, and the state.