by Archie M. Richards, Jr., CFP^®
May 31, 2004

Darra writes that she and her husband wonder how to fund the education of their son, who's 18 months old. Should they adopt "an adjustable comp-life insurance plan," or a 529 college savings plan, or just "dabble in the stock market?"

The chances are your son will live for 130 years or more, Darra. Why are you even considering insurance on his life? Never mind funding a program that will benefit his children and grandchildren after he dies. First things first. Fund the boy's education and let him solve his own estate plan problems.

"Dabble" is a terrible word to use in connection with investing. Investing is serious; the more boring it is, the better. You're putting hard-earned cash to work in other peoples' businesses - money you'll spend later on important needs. Acquire as many types of no-load index funds as you can, concentrating heavily on foreign and U.S. stocks. Hold the funds for years, until the money is needed for spending. Investment dabbling is dangerous. It benefits no one but stockbrokers.

529 college savings plans are usually the best way to fund for education. You can sock away hefty amounts. The contributions are not deductible, but the earnings within the plan are not taxable. Distributions from the plan are exempt from federal taxation providing they're used for educational purposes. You can name anyone in the family as beneficiary and change beneficiaries whenever you like. You can even name yourself.

In a recent column, I said that the world's most important economic trend is rapid technological advance. Powerful efficiencies will bring on a flood of goods and services that will outpace increases in the money supply. Eventually, consumer prices will come down.

Tim questions whether these trends have ever happened before "on a meaningful scale."

They certainly have, Tim. From 1815 until 1897 - that's 82 years - Great Britain enjoyed the reduction of inflation to about zero. Interest rates also fell, personal income rose, and stock prices went higher.

The causes were twofold: Significant technological advances, which we now call the industrial revolution, brought an outpouring of manufactured goods. Also, improved political policies, particularly the reduction of tariffs, enhanced the gains.

The same trends - technological advances and improved government policies - prevail now. Yes, even the regulations discussed below will begin being reversed. The results will be the same as those enjoyed for so long in England, namely, the reduction of inflation, lower interest rates, higher personal income, and higher stock prices.

This time, technological advances are even more rapid and significant than they were in England. Productivity will be so powerful that inflation will not just drop to zero; it will turn negative. The general price level will fall, and we will enjoy benign deflation.

The United States has 2.1 million people locked away in prisons. One out of 75 of the nation's males are housed in jails. What a terrible waste! It's not because America has too much wickedness. It's because America has too many laws.

We're a nation of laws, right? Boy, are we ever! The requirements contained in the laws and regulations of our federal, state, and local governments number in the millions.

For example, the IRS Code is 60,000 pages long.

In 2002, the daily record of federal regulatory activity, the Federal Register, numbered 75,606 pages. That year, the various federal agencies finalized 4,167 regulations - one for every half-hour of the working week. These gargantuan efforts reflect portions of only one of our governments, albeit the biggest.

Some of the requirements imposed by American governments are essential, of course. But most are not, and many government requirements do more long-term harm than good. Every single one of them, however, restricts our liberty.

Speakers at this year's Memorial Day celebrations proclaimed that liberty was what our soldiers fought for. Maybe so, but we have less liberty than most people think.

It's time for our governments to stop imposing new requirements and start repealing the old ones. It's time for large portions of the nation's legal monstrosities to be torn down.