Why No Modern Political Party Will Seriously Address Fiscal Spending and Close the Widening Wealth Gap
I waited until after the election to release this article. I realize it will likely make a lot of Democrats, Republicans, and even Independents uncomfortable, if not outright upset. So be it, because I’m not currently running for political office. You see, we’ve kicked the proverbial can — out of control spending at the federal level — down the road long enough. In fact, this “can” is sabotaging the financial future of our young people, specifically those born after 2000. We know them as *Gen Z and Gen Alpha, approximately 120 million in aggregate. Even worse than out of control federal spending is the growing wealth gap that it has created over the past two decades, which the Covid pandemic exacerbated. Our nation hasn’t had a surplus or balanced federal budget (where annual tax inflows meet or exceed yearly spending outflows) since Bill Clinton left the White House. Think about it. Did either Vice President Kamala Harris or President-elect Donald Trump ever mention on the campaign trail how their administration would reduce deficit spending and pay down, actually slow down, our ballooning national debt that will reach $50 trillion by the end of this decade? Of course not. As you’ll read, I’m an equal-opportunity critic when it involves the financial future and emotional wellbeing of the next generation and beyond. Buckle your seatbelts; it’s going to be a bumpy ride.
*Reference: https://www.usatoday.com/story/graphics/2024/10/08/generation-names-years-explained/74701974007/
We can never pay off our current $36 trillion national debt; at best, we can only slow down its astronomical growth.
While in Miami for a retired NBA players event on March 3, 2013, I had a brief discussion on wealth disparities with former President Bill Clinton. He was the headline speaker that evening. No doubt, he was (and still is) a polarizing figure. *But whether you like him personally or not, his eight-year tenure in the oval office from 1993 to 2001 was spectacular. The largest economic expansion in American history, a record 115 months of sustained growth. The creation of more than 22 million new jobs. The highest homeownership rate in U.S. history, reaching nearly 68 percent at its peak. The lowest unemployment during a 30-year span, falling from 7.0 percent in 1993 to 4.0 percent in 2000. The Clinton Administration raised education standards, notably reading and math scores for 4th, 8th, and 12th grade students. The welfare rolls were reduced to their lowest levels in 32 years (I was a welfare recipient throughout my childhood.) The poverty rate dropped to 20-year lows. And here’s what really stood out to me as a certified financial planner and economic empowerment crusader on his stellar accomplishments as the 42nd Commander in Chief. In bipartisan fashion, President Clinton and a Republican-led Congress paid off $360 billion of national debt from 1998 to 2000. Just as impressive, American families owning publicly traded stock increased by 40 percent during his administration.
*The Clinton Presidency: A Historic Era of Progress and Prosperity, https://clintonwhitehouse5.archives.gov/WH/Accomplishments/eightyears-01.html/
Former President Bill Clinton
It’s true about President Clinton, he makes you feel like you’re the most important person in the room. Like him, I too am a conversationalist. I also have a knack for steering a brief or prolonged discussion in a direction that benefits the whole and not just the privileged few. Yes, I did monopolize his time that evening before security stepped in to move President Clinton to the banquet hall for his 45-minute speech. Part of our conversation went like this:
Me: President Clinton, it’s an honor to meet you. My name is Lawrence Funderburke.
President Clinton: I know who you are. You played with Corliss Williamson on the Sacramento Kings. I followed Corliss in the NBA, a fellow Arkansas native, after he won a national championship with our beloved Razorbacks.
Me: Yes, I knew you were a huge basketball fan.
President Clinton: I am. By the way, what are you doing these days?
Me: I operate a nonprofit organization and for-profit company alongside my wife. We provide financial life skills to help bridge the wealth gap in America. Without these skills — earning money, making it grow, and protecting income-producing assets — it’s nearly impossible for disadvantaged communities to survive.
President Clinton: You’re right. The wealth gap is a big problem in America. I’m afraid it’s only going to get worse. Well, keep up the great work.
Me: Thank you Mr. President. (For those of you who know me as a germaphobe, yes, I did shake his hand.)
Alright, let’s address the elephant in the room — unsustainable federal deficits during times of peace and prosperity. Unfortunately, future generations (aka Gen Z and Gen Alpha) will have to pay these debts that accrue with parabolic interest. More on this later. On October 8th of this year, Jacob Bogage wrote an eye-opening article in The Washington Post, titled, “U.S. deficit hits $1.8 trillion as interest costs rise.” As the graph below points out, we have a massive spending problem relative to incoming tax revenues (which is why Vice President Harris campaigned on raising taxes on high-income earners and capital gains investments, with President-elect Trump targeting tariffs to close the shortfall). Take a look at interest payments on the national debt, nearly $1 trillion a year, and Social Security benefits to current retirees. Both line items will continue to skyrocket as federal spending accelerates and more Baby Boomers reach their retirement age.
Spending money we don’t have, as a nation or household, is a recipe for economic disaster.
Time to talk real-world solutions. Enough of the pie-in-the-sky mumbo jumbo. Brace yourself for the discomfort that follows. Now, Social Security and Medicare will become insolvent in 2035 and 2036, respectively. That’s a little more than 10 years away, folks! Seven options exist to deal with this entitlement conundrum, although most liberal pundits and fiscal hawks only highlight the first three.
Option #1: Reduce entitlement benefits across the board. The chorus of boos will be deafening loud if this is ever proposed by legislators in a meaningful way. As Darryl Hall and John Oates once sang back in the day, “I can’t go for that, no can do,” this won’t fly. But it does need to be seriously considered in spite of the impending backlash. As a voting block, 66 million in number, Baby Boomers have a powerful voice. Their political force is second to none, and rightly so. Mess with their money and watch what happens.
Option #2: Institute an annual financial means test. Those who have ample income and growth assets won’t receive a dime in Social Security and Medicare benefits. Doesn’t matter if they’ve paid more than their fair share over the decades into the system. As the logic goes, they simply don’t need the benefits and can fund their own retirement as well as future healthcare costs.
Option #3: Implement a wealth tax on the ultra rich. What might this entail? Well, those whose net worth (assets minus liabilities) exceeds a certain threshold, say $5 million, will pay an additional tax at graduated levels on their accumulated wealth in concert with income, corporate, and capital gains taxes.
Option #1 is somewhat palatable to Republicans. Option #2 and #3 appeal to Democrats. And for Independents, it depends on their fiscal leaning and appetite to sway an election.
Here are my insights on the last four options, which, in depth and breadth, are even more controversial than the previous three. (Option #4 and #7 are my proposals.)
Option #4: Weave in some combination of the first three choices, partially or wholly. Reduce part of a recipient’s Social Security and Medicare benefits if he or she has sufficient financial resources. Keep the benefits in place for all retirees but remove the cap on withholdings for Social Security taxes (as is currently the case with Medicare taxes). Offer high net worth individuals and families an incentive to lower their overall tax bill while writing off a portion of their graduated or tiered wealth tax.
Option #5: Allow Americans to opt out of Social Security and Medicare altogether. Trust me, most people won’t opt out; they’ll be too afraid to handle this task without a government backstop in place. Of course, those who do withdraw from the system will be responsible for their own retirement and healthcare needs. Yes, the federal government will lose out on some much-needed tax revenues. But in the long run, this will result in more cost savings for federal coffers. (On average, individuals and married couples do receive more benefits than what they actually paid for, in some cases by a 2 to 1 margin!)
Option #6: Reset the entire system and start over. As central bankers around the world deal with their country’s or union’s triple D problems — debts, deficits, and demographics (aka the ratio of takers to payers) — this digital-currency alternative will gain more traction. And it’ll likely be triggered by a far-reaching, global financial crisis that cripples the banking sector, stock market, household savings, consumer confidence, and government trust. I’ll leave it at that for fear of being labeled a tin foil hat wearing, conspiracy theorist. (Actually, I don’t care if someone calls me this; I have really thick skin.)
This last option should be initiated posthaste. Why? Because 99.9 percent of our elected politicians don’t want to risk being thrown out of office if (or when?) they reduce entitlement benefits for the elderly. Heck, this can’t even be a topic of contemplation, let alone deliberation. As a soon to be 54-year-old father of two young adults and “Papa Fundy” to thousands, I got nothing but love for grandma and grandpa. I too can see my entitlement benefits just over the horizon. But as a country, we’re left with some tough decisions among awfully painful choices, really concessions. It’s time for us to face the music and dance together. Until then, could we at least agree on this recommendation?
Option #7: Incorporate an empowerment-based curriculum that will help Gen Z and Gen Alpha take control of their financial future. Starting in fourth grade, if not earlier, foundational concepts would be introduced to students in three primary areas: career forecasting, money management, and wealth building (with a special emphasis on the eighth wonder of the world, compound interest).
The Funderburke Institute of Financial Empowerment, FIFE for short, would even license our curriculum to local, state, and federal governments at a steep discount to assist these agencies in their educational efforts for youth and young adults. After all, we are compassionate capitalists. 🙂 Feel free to share your thoughts on this article. You can also reach me at info@MrFundy.com.
