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No Impact From Washington DC?

I like to tell my son – “my turn running the world is over, it’s your responsibility now.”

With Biden now in office, I started looking at what impact the Democratic Party proposals might have on our household. I sold a lot of stock options for cash last year to get ahead of potential changes in tax rates, but that cash will only last so long.

In addition, the new President signed dozens of executive orders in his first two days in the White House across a number of topics. The latest CV19 relief proposal (is this the fourth now?) that he offered is now said to be on its way to Congress.

It’s always a flurry of activity at the beginning of a new administration, but I honestly don’t see any real impact on our household. For all the rancor and buzz that accompanies a change in political control it’s interesting that probably nothing in my life is any different:

– INDIVIDUAL INCOME TAXES – I sold off the last big chunk of MegaCorp stock options I had in 2020, so once I settle the tax bill on those I guess I’ll be in the clear. We’ll still have some income, but less than the impacted ranges shared in this Forbes article on the Biden Tax Plan and detailed in the chart below …

– 401K CHANGES – Biden is proposing significant new rules for 401Ks. He wants to make the contributions tax credits rather than tax deductions from income. I haven’t paid into a 401K since I left MegaCorp, so I guess I’m in the clear on this change, but I gave my son a heads-up, since he is just starting out.

– EXECUTIVE ORDERS – According to the New York Times, the immediate Biden executive orders focus on immigration/visas, the vaccine roll-out, and racial/LGBT equity. I wish them the best on some of those thorny issues, but none of them address my life directly. I don’t feel particularly at-risk from CV19, but will take the vaccine when it arrives.

– OBAMACARE: While campaigning, Biden has also made a lot of changes to the Affordable Care Act. We used to pay an extra $5K a year with our income taxes for ObamaCare, but I’m guessing we will be under the income limit now. We’re getting ready to switch our insurance to retiree MegaCorp coverage anyway.

– STUDENT LOANS: It’s very likely that Congress and the President team-up on some sort of student loan relief, but our son is now graduated and his college bills have been paid in full. I certainly doubt they are going to offer us a refund on what we already paid.

– CLIMATE CHANGE: We live in Minnesota and it’s January, so global warming wouldn’t be unwelcome here right now! Seriously, I really don’t think there is anything in the Paris Climate Accord that is going to do anything to change the weather.

– TAX DEDUCTIONS: Minnesota has been ranked the #1 “Least Tax Friendly State” by Kiplinger’s, so if anything, we may benefit if the so-called “blue-state tax deduction” is restored. I don’t think that’s fair to people in other states, but I’ll be glad to take it.

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Looking at all the proposals, I guess my biggest concern is the risk of inflation that could result from all of the new spending & debt the Democratic Party seems willing to take on. That’s on top of how much has been run up in the last 4 years under Trump. Still, has an incoming President ever proposed $1.9T in new debt before even taking office?

In the early going since Election Day, the stock market seems to like the continued increase in government spending. Several of the big investment houses on Wall Street stated before the election that a Democratic Party win would be the best for the market.

At the same time, Fed guidance and T-Bond rates suggest that inflation is in currently in check. Still, I can’t imagine that sitting on a historically large pile of debt ($30T / 150% of GDP) can come with no cost to inflation at all.

We’ll see how things turn out over the next two years, but soon enough it will be time for the mid-term elections and we’ll see what path we take at that point. At this point, I don’t see any further ‘moves’ that I would take with our retirement investments, spending, or lifestyle.

What is your read of the changes in Washington DC and how it will impact you?

Image Credit: Pixabay

9 thoughts on “No Impact From Washington DC?”

  1. Great post, as always, Chief. The immediate financial effects on me from administration change are negligible. If Democrats repeal by executive fiat or legislation federal tax deduction limits on state taxes, I’ll do better because I live in an all-blue high-tax state. The most immediate effect from blizzard of executive orders is devastation to lifestyle regarding female athletics. Here in CT, we have already seen the negative effects from allowing biological males who “identify” as females to participate in women’s sports. In track events, females no longer compete on an “even playing field.” They compete against biological males. No contest. The wins and records now in hands of biological males, erasing decades of progress in Title IX progress. By discriminating against half the population (females) in a failed attempt at equity for a few (identity transgenders) this has already caused young females to drop out of athletic competitions. Families who object to having biological males share intimate facilities with females, such as bathrooms, are also exiting public schools if they can afford private schools. I’d label these as “hidden costs” to individual lifestyles and collective society. Once again, the only law that’s never broken is the law of unintended consequences.

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    1. I’m completely confused about the whole Title IX issue. I’m not even sure how it is benefiting a ‘moderate’ like Biden politically. I have a politically independent friend whose granddaughter just got a full-ride swimming scholarship at one of the top collegiate programs in the country and he is mad as hell. I’m not sure how it will work with the highest levels across sports: the Olympics, WNBA, LPGA, or pro volleyball. Will those spots also likely to eventually go to stronger, biological males who ID as women?

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      1. As long as some humans want to win at any cost, of course, biological-males will compete as identity-females, at every level and type of sports, including professional. The physical advantage only works in one direction: Biological males competing as identity-females.We should not expect to see many biological-females competing as identity-males, unless they want to compete at great disadvantage; it is unlikely they would even qualify to compete based on relative performance to biological males. I’ve read the India considers Transgender to be a third-sex category. Presumably, this means 3 teams are possible for like-to-like competition: Males; Females; Transgender. Perhaps this is the direction that US must go now, with 3 separate sporting events, and all the facilities (including third bathrooms) to support those separate teams.

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  2. You forgot that gasoline costs will be going up significantly as well as natural gas prices so those long MN nights are going to cost you more. Also the influx of illegal immigrants will put a strain on the healthcare system making you wait longer for care and increasing to cost of auto insurance. Every thing this new administration has done in the first week is going to cost you time or money and it has just begun. Also As of today China has started flexing its muscles again knowing either that Biden is bought and paid for or is week and will let them do what they please

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    1. Thanks, Rick – no, I don’t doubt that energy costs will rise – I see that gasoline is up about 15%/30 cents since Election Day. I would guess that is in response to expected changes in regulation & potential “green new deal” legislation. Still, gasoline & natural gas aren’t much different than they were 5 years ago when I retired. They’ve were much higher in 2017/2018, too. Additional immigration may add demand to the healthcare system or increase car insurance costs, but it also brings potential benefits. For the record, I’m for increased legal immigration, against increased illegal crossings. Unfortunately, neither Biden or Trump seem to hold both of those views. Trump’s hardline against China on tariffs hasn’t worked out. A totalitarian country that has been around for thousands of years has no problem waiting for the next American election. In the end, the costs that we are talking about from all of these areas aren’t likely to be material to our family budget. We’re set. It’s our kids who will need to run the world and pay the bills now, don’t you think?

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      1. I’m with you on immigration, more legal immigration and no illegal crossings. Legal immigration lets people in who will help the country. I don’t remember the last leader who agreed on both these views. Maybe it’s all politically motivated. Illegal immigration ensures more voters for Democrats?

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      2. It doesn’t seem that hard to fix immigration does it? Politicians use the issue to play their bases off each other.

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    1. We had a nice dinner with our very TALL mutual friend in AV on Saturday and his new bride. He said you guys have hundreds of bikes ready for sale in 2021. That’s great!

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