What the Elections Mean For Our Economy

The elections last week will continue to be a discussion topic for many months, if not years.  The angst in the United States has reached a fever pitch, for some good reasons and also some bad ones.  The concern I have is the impact this political change has on our economy, and on our ability to recover from what has been the deepest recession in many years.  Many of the conservative candidates who won office made big claims about “repealing Obamacare” and “cutting off the spending.”

While there has been some waste and misdirection of resources, and perhaps targeting tax breaks and money to small business would be beneficial to the economy, let’s not forget that we have possibly avoided a much worse economic calamity. The economy appears to be improving.  Corporate profits are up, employment appears to be improving (slightly), and the housing market appears to be bottoming and possibly improving.

While attending one of my son’s hockey games this weekend, I mentioned this to a friend of mine from Canada.  I asked him why don’t we hear much about turmoil in Canada?  If you believe what you read and hear in our country, you would think that Canadians would be rushing our borders due to the pathetic nature of their health care system, if nothing else.

He remarked that Canada is in pretty good shape economically.  Due partly to the fact that home mortgage interest is not deductible, the Canadians really didn’t have a crisis in housing.  The Canadian banks are among the strongest in the world currently.  And, the health care system in Canada works for the most part.

While not perfect, their citizens don’t worry about receiving care or losing their coverage.  Those are the two components of the U.S. health care bill that I am most in favor of.  It seems to me we have reached a point in our economic evolution where we need to pay attention to the good of all Americans, and stop leaving the provision of health care to chance, or an employer-provided plan.  It just makes sense.  And it makes sense to small business also.  How many businesses in this country are imperiled or unable to start due to the inability of the owners to obtain health insurance?   Why in the world is it incumbent on businesses to provide health care for their employees?  Shouldn’t coverage be individual and follow the person wherever they go?  Shouldn’t it be permanent and not subject to pre-existing or developed health conditions?  Why is it acceptable for someone to have to mortgage or lose their home due to a serious illness?  To expect businesses to be primarily responsible for providing health insurance is no longer acceptable.  We don’t have the industrial economy that created our existing system.  We are now an entrepreneurial, small business economy and we need to make decisions to encourage that type of system.

Out of curiosity, I looked at some comparisons between the U.S. and Canada.  Now we all know, that the United States is the most capitalist system on the planet, but let’s take a look at how we compare to our friends up North.  According to unitednorthamerica.org:

  1. Total land area:  U.S. has .7% more land
  2. Renewable freshwater supply:  Canada has 7% more
  3. Energy supply per capita: Canada has 6.3% more energy per capita
  4. Population:  U.S has 9.2 times more people
  5. Age structure:  U.S. has a slightly younger population
  6. Birth rate: U.S. has a 25.3% higher birth rate
  7. Death rate: U.S. has a 8.4% higher death rate
  8. Live expectancy:  Canada has a 3.8% higher life expectancy
  9. Literacy rate:  No discernible difference
  10. GDP: U.S. has 9.5 times greater GDP
  11. GDP per Capita: U.S. has 3.5% greater GDP per capita
  12. Personal Disposable Income:  U.S. has a 29.3% higher disposable income
  13. Government Debt as % of GDP:  US has 10.2% greater marketable debt
  14. Military Expenditure as % of GDP:  US spends 3.7 times more money on military
  15. Educational Expenditure as % of GDP:  US spends .9% more money on education
  16. Health care Expenditure as % of GDP:  US spends 1.5 times more money on health care (15% of GDP)

You might well ask what the average taxpayer pays in each country.  According to Wikipedia, a married couple with two children pay on average 11.9% of wages in Federal taxes.  The same couple in Canada pays about 21.5%.

My Canadian friend was quick to point out that Canada, like many other countries around the world, gets a bit of a “free ride” on our military.  As the leader of the free world, we Americans are in a tough spot.  We are the nation that keeps the world free, in many respects.  And of course, that is not without its benefits to us.  It does a lot to fuel our economic strength and it keeps our oil prices relatively low.

It’s all about the choices we make as a nation.  I guess the point of all this is that we should be careful what we listen to, and be wary of politicians (who don’t tend to be great economists) who find it all to easy to criticize and who do not provide concrete, logical solutions to what are increasingly complex problems.  As investors, now is the time to be watchful of the actions of those who govern.

About the author

Doug Kinsey, CFP®

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