• Baby boomers represent a significant voter bloc, making their concerns on inflation, taxes, and social security crucial in political platforms.
• Inflation is driven by deficit spending, with rising interest rates potentially increasing the annual deficit by 50%.
• Optimal tax rates are uncertain; raising taxes could save Social Security and Medicare but might reduce tax receipts.
• Social Security and Medicare face insolvency in 10 years; immediate action is needed to avoid catastrophic financial collapse.

78 million baby boomers are about a third of the voter-eligible population and 77% of them vote, so there are 60 million baby boomer votes. That 60 million is 38% of the 158 million votes cast in the 2020 presidential election. The baby boomer voters’ bloc is a big deal.
 

 Here’s a quick overview of where the candidates stand on issues that affect baby boomers most.
 

Here are links to details on the candidates’ positions:

Inflation, Taxes, Social Security, Medicare

In the following I discuss each concern to put it into deeper perspective that excludes politics.

Inflation

Money spending is a bipartisan problem. It is the politician’s way of buying votes. No one talks about  balancing the budget.

Deficit spending – spending more than received in taxes – is inflationary because money is “printed” to pay the deficit. The US Treasury issues bonds to pay the deficit, and most of those bonds are purchased by the Federal Reserve.

The following image summarizes the spending problem:
 

The current low interest rate of 2.6% is heading toward 5%, when interest expense will become the largest expense. This transition will increase the annual deficit from $2 trillion to $3 trillion – a 50% increase.

 The 2.6% interest rate is heading up because it’s a blend of old and new. Old debt is being retired -- maturing. Current interest rates are 5%. Will they go down? Maybe, for a while. The long term average interest rates on bonds is 2% above inflation. Most of that history does not have ZIRP. And that rising interest expense is just the effect of rising interest rates – it excludes the very important effect of continued spending.
 

Current spending each year is $7 trillion. The 4 largest costs add to $5.3 trillion (76% of spending) , and are as follows:
 

As newer bonds are issued, blended interest on the debt will increase toward 5%, which will move it toward the highest source of spending. And that excludes the more dramatic effects of continued profligate spending on other expenses.
 

Cowboy wisdom advises that when you find yourself in a hole you should stop digging, but there’s no sign that profligate spending will end, so the only way to stop the hemorrhaging is with increased taxes.

Taxes

There is a tax rate that maximizes tax receipts, and it’s not 100% -- it’s t* in the following Laffer curve.

University of Chicago Professor Arthur Betz Laffer is an American economist and author who first gained prominence during the Reagan administration as a member of Reagan's Economic Policy Advisory Board.

Laffer postulated that tax receipts might be increased by reductions in the tax rate because such reductions would bring people out of the underground economy and also reduce the usage of tax shelters. This advice was implemented in President Ronald Reagan’s “Reaganomics,” and it worked to increase tax revenues.

No one knows what the optimal tax rate (t*) is, but the success of Reaganomics suggests that the tax rate in the 1980s was too high. But is too high now? Or perhaps too low? Raising taxes seems like the logical way to increase tax receipts, but it might do just the opposite. Reducing taxes might actually increase revenues. We’ll find out after tax rates are changed.

The politics are obvious. No one likes the idea of paying higher taxes, but that might be the only way to save Social Security and Medicare.

Social Security and Medicare

Social Security is forecast to pay full benefits through 2035 and Medicare until 2036. The estimated total unfunded liability is enormous

Source: US Debt Clock

The official debt is $35 trillion, but the off balance sheet debt is a whopping $219 trillion – more than 6 times the official number. Social Security and Medicare unfunded liability is  $69 trillion, twice the official number.

Boston University Professor Lawrence Kotlikoff has been sounding the alarm in articles and books like The Clash of Generations:

“In The Clash of Generations, experts Laurence Kotlikoff and Scott Burns document our six-decade, off-balance-sheet, unsustainable financing scheme. They explain how we have balanced our longer lives on the backs of our (relatively few) children. At the same time, we've been on a consumption spree, saving and investing less than nothing. And that's not to mention the evisceration of the middle class and a financial system that has proven it can't be trusted. Kotlikoff and Burns outline grassroots strategies for saving ourselves—and especially our children—from what could be a truly catastrophic financial collapse. “

Politicians ignore these warnings and recommended solutions, promising instead to make things worse by increasing benefits without a plan for paying these benefits. “Medicare for all” is a very expensive proposition. It is politically beneficial to ignore the problems, but that will be impossible in 10 years when these systems go broke. Acting now could alleviate the pain, but it would lose votes.

Baby boomers care because they love their children and grandchildren.

Guidance

IMHO neither candidate will solve the problems that baby boomers face. The choice is complicated. That's why I’ve written  Newsletter articles advising baby boomers  that have been read by more than 140,000 people. For example, please read Baby Boomers Get Out of the stock Market Now,   Baby Boomer Defensive Investing and Revenge of the Baby Boomers.

A reporter requested my opinion on which candidate  would be better for the stock market. Here’s my reply:

 Hi Laura. My advice to baby boomers is the same regardless of who wins the election. Protect your savings because you are in the Retirement Risk Zone when Sequence of Return Risk is a serious threat. Losses now could ruin the rest of your life. The election doesn't change that.

I'm an Independent voter, but I think Kamala is in way over her head and would be a pawn if elected. Trump comes with his loose cannon baggage, but I believe he is his own man. Dr Robert Haugen wrote a sequence of books, including the Beast on Wall Street that said the Crash of 1929 was the cause of the Great Depression, rather than a leading indicator. 15 years of rising stock prices portend another Crash of '29. Can a President stop it? I think not.

Conclusion

These are complicated issues. Everyone needs to listen carefully to the candidates’ platforms and recognize promises that cannot be kept – or worse, exacerbate the problems. Who will be best for America?

How will we pay for our skyrocketing debt? Will higher taxes help? What will happen to Social Security and Medicare/Medicaid? Who cares?

Should baby boomers care since they might not live long enough to suffer the consequences? After all, Social Security and Medicare are good for another 10 years. Or should baby boomers be concerned about future generations?

What do you think? Also see 22 Financial Threats Alarm Baby Boomers for the rest of the scary story. Baby boomers need to protect their lifetime savings.

How will baby boomers vote? Why?

More By This Author:

Baby Boomer Protective Investments Exclude Stocks And Bonds
Baby Boomers Vs. Greater Fools
Baby Boomers Better Get Out Of The Stock Market Now