Thursday, June 30, 2016

Baby Boomers Impact On Business & The US

78 million Baby Boomers are turning 65 at the rate of 10,000 a day for next 18 - 20 years.   Presumably, this huge demographic will begin collecting Social Security and Medicare, assuming they remain solvent, transferring about $46 Trillion of wealth from the federal government to these recipients.  In essence, instead of paying taxes into the system, most of them will begin taking their money out.  Of course, both Social Security and Medicare are headed toward insolvency unless Congress and the President, whoever he or she may be does something to modify these programs, one way or another.  

In any case, since this group is the largest single demographic in American history, their retirement will have a huge impact on global business and the US in general.  There is a good likelihood that half or more of these Baby Boomers are financially ill prepared to retire because they did little to save for retirement during their working years.  These people will have little disposable income depending on government and relatives, if they are lucky enough to have any with money, for their sustenance.  They probably will be living in smaller rental units because in many cases, they never paid off a home.  The smarter half, if it is half, may have the money to live happily ever after so to speak, assuming they are not supporting their kids in one way or another and or that government does not attempt to confiscate their assets to support those with nothing.  

It is the Baby Boomer half with money that will help shape the global economy in terms of their buying habits.  If they were smart they paid off their homes; but not all of them did so.  Some are still paying off mortgages, which will take a lot of their disposable income.  If their homes are paid off, they will spend money on experiences; travel, eating out, golf and other recreational activities, spending time with family out etc.   However, their need for new cars, new homes,  new furniture, new clothing etc will be limited.

By the time these Baby Boomers are 75, they will start to utilize home care and eventually assisted living services converting their home equity and other invested monies into the services they need to continue living life.   If they did not do so already, they will downsize their homes one way or another either moving to smaller houses and or moving into assisted living facilities.  There will also be a shift from many high cost cities to lower cost second tier smaller cities.  The Home Care and Assisted Living industries, built to deal with the World War II Generation, is already a Multi-Billion industry and it has not even started.  After a ten year lull, these industries will boom beginning in 2025 as Baby Boomers have need of these services. 

It is clear that 78 million Baby Boomers will have a significant impact on business and the US in retirement; but in very different ways than when they were working.  Happy Hour may start a lot earlier than 4 pm.  Cars that can drive themselves will be in demand; but instead of owning two, or three cars, there will one in a household.  The need for living space will be diminished as services will become much more important.  Businesses that adapt to this demographic will do very well. Those that do nothing to adapt will see their revenues shrink.    

Monday, June 27, 2016

Bigger Government Bad For Business

There is no doubt that Bigger Government is bad for business. In fact, bigger government grows through higher taxes and other revenue generation and more regulations at the expense of the Private Sector. We have clearly seen this during the Obama years as taxes and regulations have expanded dramatically resulting in higher government spending and very slow economic expansion of 2% or less each year that is not keeping up with population growth. Local, State and Federal Government spending now comprise nearly 40% of Gross Domestic Product about the highest in American history.  Of the roughly $15 Trillion US economy, government is responsible for about $6 Trillion in spending for goods and services. To make these purchases, government at all levels confiscates private sector monies in the form of income taxes, all sorts of fees and fines and further borrows billions more to fund government operating and other expenses. This is money taken out of the economy that is not available in the Private Sector to invest monies to create jobs.   It really is that simple.

Many economists have stated that the best economic growth in the US occurs when total government spending is around 25 - 27% of GDP. That is about 17-18% Federal and perhaps 10% Local and State. Even though the American people are experiencing a very high tax burden and regulations that are killing jobs and it has led to about 95 million people out of workforce, the lowest labor participation rate in four decades and the highest poverty rate since Jimmy Carter was President, Progressives call for even higher taxes and more job killing regulations.

Apparently, they never learned the lessons of Economics 101, or just plain common sense.  In order for the US economy to grow at the 3% or more a year, the rate needed to experience any kind of real economic vitality in our country, we must cut taxes and regulations dramatically. Just doing more of the same will lead to the same dismal economic results we have seen since the Fiscal Collapse in 2008-09. We also have to free up the Energy Sector to make energy cheaper and cleaner to raise the standard of living in the United States. This is not brain surgery. Government has to get out of the way and allow the Private Sector to do what is does best and that is to create economic growth and jobs.  As a side note, Big Government is also a threat to our Freedoms. 

Sunday, June 26, 2016

Brexit - Good For Great Britain

The British people wisely voted to leave the European Union.  In doing so, they cast aside more than 100,000 pages of stifling, job killing regulations that were a threat to their freedom and economic development.  The European Union, which should have simply been a Free Trade Zone and a vehicle for a common currency, morphed into another huge layer of Socialist government attempting to dictate regulations, written by unelected and unaccountable bureaucrats, that intrude into all aspects of daily life. In fact, the British people were losing control of THEIR borders and their country as more than 60% of regulations where completely out of their control.  Despite the short term dislocation from Brexit, in the long term Great Britain and the British people will be far better off by taking back their country.   

This decision has the potential for putting the word "Great" back into the name Great Britain.  Let's not forget that Great Britain is the 5th largest economy in the world.   They have been a global power for more than 500 years.  They don't need bureaucrats from little countries, with little economic success, dictating job killing regulations and or trade policy to them.  Most important, Great Britain is still a member of NATO, far more important than the EU, the G7 and has a permanent seat on the UN Security Council, all of which means that their voice will be heard loud and clear and with more impact than ever than just being one of 28 countries.  

The British people, through their elected representatives are now free to turn Great Britain into a business powerhouse by lowering taxes and getting rid of job killing regulations.   They are fortunate in that London, as business, financial, transportation and entertainment world class city is going no where. From London, Great Britain can attract companies from all over the world to move their headquarters there as they vote with their feet to get out of the European Union, as well as,  other countries seeking a more advantageous business environment.   History is our teacher.
Great Britain can now act in its best interests to bring jobs to their country and to control its borders so that immigration is not automatic.  All the way around, Brexit will be good for Great Britain, the British people and the world.