Newton’s Third Law: For every action, there is an equal and opposite reaction
Sir Isaac Newton (1643-1727).
Sir Isaac Newton was an English physicist, mathematician, theologian, astronomer, and author. He was one of the most influential scientists of all time and a key figure in the scientific revolution whose discoveries gave way to the Industrial Revolution.
Newton’s third law suggests that in every physical interaction there exists a pair of forces acting on two directly related things. The size of the force on the first thing equals the size of the force on the second thing. The direction of the force on the first thing is opposite to the direction of the force on the second thing.
To apply this to socioeconomic, consider a change in socioeconomic policy as a force of action. That action -the policy change-moves the direction of our socioeconomy.
Looking back over policy decisions in the USA for the last 80+ years, we have the following:
August 14, 1935 – The creation of Social Security.
The Social Security Act was signed into law by President Franklin D. Roosevelt in 1935. It was originally intended as a support system of old-age benefits for workers, benefits for victims of industrial accidents, unemployment insurance and aid for dependent mothers and children, the blind and the physically handicapped. During the Great Depression, who wouldn’t have supported this new policy? When Social Security was enacted, the old-age benefits for workers kicked in when they turned sixty-five. But in 1935, the average life expectancy in the United States was 61. Today the average life expectancy is 78.7 years old.
Newton’s third law reaction, the consequence of Social Security? Lower private sector savings and more people dependent on Government.
July 30, 1965 – The creation of Medicare & Medicaid
In 1965, President Lyndon B. Johnson enacted Medicare, a health support system for the elderly. Today there are over 60 million Americans on Medicare. The current hospital trust fund is set to run out of money in 2026.
How did health care get so out of hand?
It all started with a change in tax policy in the 1940s. The new tax policy allowed companies to deduct the cost of health insurance paid for an employee. Before this, everyone paid for their own insurance. The consequence was that now individuals no longer were directly responsible for or understood the true cost of health care.
The Unintended Consequences
These are three policy’s that were enacted with good intentions, yet no one ever considered the unintended consequence of human behavior.
Social Security influenced people to save less.
Medicare impacted individuals’ approach to self-care.
The company paid insurance created a lack of awareness of health cost and the true cost of care.
Today and Tomorrow
Social media was introduced just over a decade ago. Today we have seen some of the unintended consequences but how many will there be in a decade?
We also have many other policies being offered and discussed all across America.
The question we must ask ourselves is what the unintended consequences are before we take action.
Take the time and learn about these policies and discuss them with others. Educated input and conversation is needed.
Michael Tannery CPA CDFA® AIF® ● CEO
Be A Financial Olympian™