I’ve been warned to steer clear of politics as a topic lest I alienate nearly half of all potential readers. While such warnings are wise, I don’t plan on taking sides but rather addressing the shortcomings of both candidates when it comes to the way their proposed policies (to the extent they have detailed policies) will likely impact investors and savers like you and I. In that way, I suppose this approach could alienate both the right and the left, but unlike politicians I don’t need to avoid touchy subjects to pander for your vote.
With that out of the way, the third and final presidential “debate” wrapped up last night. At this point, nearly everyone has made up their minds - probably even Ken Bone. I do not expect to, nor am I attempting to, change anyone’s mind at this stage in the game. I would, however, like to focus some attention on a topic that, at least in my opinion, has not been given nearly enough attention by either the Republican and Democrat presidential candidates - that is the economy. More specifically, how each candidate’s plans impact you and I, average, everyday Americans when it comes to having a little extra cash in our wallets.
Sure, both candidates have talked about jobs and taxes and economic growth and trade, all of which impact the economy, but there are other, maybe more pressing economic issues. Issues that directly impact your personal saving and spending habits, dictated by how much money you have in your pocket and what you can buy with it.
While the economy and related issues like jobs, trade, the national debt and entitlement reforms are not sexy and likely command far fewer eyeballs and attention than bickering over missing emails, tax returns, sex scandals and Benghazi, they have a far greater impact than these other issues. That is not to say these issues are not important – they are – but they do nothing to help you pay your mortgage or address how to save for retirement, a child’s education or an ill family member.
John Adams once said: "There are two ways to conquer and enslave a nation. One is by the sword and the other is by debt." During the three presidential debates and even including the sole vice presidential debate, the national debt was brought up as a topic sparingly. In those instances, it was merely a bullet point to hit the other candidate on spending. No solutions were offered by either side.
Regardless or your political leanings, whether they be left, right or center, our failure to address the debt - the biggest financial issue facing our country - will result in this problem getting worse and ultimately becoming uncorrectable without tremendous pain.
In theory, the solution to our national debt is simple. It’s just like getting into better shape: you need some combination of eating less and exercising more. In this example those two sides of the coin are spending less and increasing government revenues (taxes).
If you’re the type of person who is willing to let a cold turn to pneumonia or an engine knock turn into a roadside barbeque before seeking help, then by all means continue to bury your head in the sand and pretend all is well. If, on the other hand, you’re a reasonable and rational person, as I believe most Americans are, who would rather spend a dollar to fix a problem now rather than spend a hundred dollars to fix it later then we should have an open, non-partisan discussion about how to do so.
While we’re at it, and perhaps more importantly, we should also encourage our elected officials to do the same. Unfortunately, the only way I know how to do so is to get their attention at the voting booth (or perhaps through large campaign contributions).
The national debt is an issue that has been largely overlooked. Let’s come up with a plan to pay it down. Maybe we start by not increasing it, which means getting spending under control – something neither candidate seems keen on. Proposed tax cuts don’t help our overall debt without offsetting spending cuts. Hint: walls are not free (and no, some other nation won’t pay for it) and neither is increasing defense spending (we’re already far and away number one worldwide is military spending and it’s not even close).
By the same token, expanding government programs but without offsetting tax increases will have the opposite result of lowering the national debt. Ignoring the fact that the government is often inefficient at implementing most things, we would still need to balance new spending with income, just as you must prioritize expenses in your family’s budget. Spending more now, in anticipation of a future raise (growth) is not a strategy I would recommend.
Neither candidate addresses both sides of the taxes/spending equation. While we’re collectively avoiding discussing realistic plans to cut the national debt, some estimates indicate the debt has grown $236,991,525,500.74 just since the first presidential debate – unsustainable is the first word that comes to mind. While that number may seem so astronomical that you may be tempted to think I made it up – I didn’t – it is from an estimate cited in a Drudge Report article dated 10/20/2016.
But, but, but can’t we just print more money to pay off the debt? Certainly, the Federal Reserve could do that, but you wouldn’t like the impact that has on your next shopping trip. It’s time we stop trying to use government to solve all the nation’s problems and focus on the massive problem it created, one that it is also shirking from.
Let’s also touch on another issue that is threatening to take an ever-larger percentage of your wallet. What we should be talking about now, in greater detail, is out of control medical care costs, including insurance. The unfortunately named Affordable Care Act touts a greater percentage of insured Americans, no doubt a worthy accomplishment (one that is easily achievable if you make it mandatory and implement fines for failure to comply), but out of control price inflation is making it unaffordable for many.
I for one, am paying significantly more for health insurance than ever before and doing so with a worse plan than ever. I am also reasonably young and healthy. Let’s begin by addressing healthcare costs and we can start with transparency in pricing.
Entitlement reform is another hot issue that gets virtually no attention from politicians running for office, maybe because discussing it is the most sure-fire way to not get elected. Programs like Social security need to be reformed in some way. The current system, without massive revisions, will not be solvent for much longer. The longer we delay, the more painful the ultimate adjustment will be. Perhaps we start by offering young people the opportunity to pay into their own retirement savings, rather than into the Social Security trust fund and take control of their own retirement?
I trust myself a whole lot more than I do the government when it comes to knowing the money will be there when I decide to call it a career. This shift from a defined benefit to a defined contribution plan has largely already happened in the corporate world with the shift from pensions to 401(k) and 403(b) plans. I see no reason why it can’t work for some on the national level – unless of course our elected officials don’t want to give up the option of raiding the so-called Social Security Trust Fund for their pet projects.
So, while issues like immigration, foreign policy, sexual scandals, ongoing wars and supreme court selections continue to grab headlines, the issues that affect you and I daily, both now and in the future, continue to get pushed back further and further until we are faced with an undeniable and unavoidable crisis. At such time, predictably, both sides will then blame one another thereby continuing to deepen the already broad divide and continuing to fail to solve the issues.
Election day in November 8th. Educate yourself on the issues most important to you and vote accordingly, but please consider looking past the headlines and factor in the financial impact your choices will make on you and your family, now and for years to come.