Will the Election Impact You?

The 2012 election cycle is finally put to bed. I can’t say I miss all the ads. Never have car, beer, Christmas or even Viagra ads been so welcome. Whether the outcome was good/bad/some or lots of each is a personal matter and not one I’m going to delve into. But what is certain is that the election will have consequences- for all. But how?

In this day and age, there are few political certainties but I think we can be fairly certain of the following:

The Affordable Care Act (ObamaCare) will move forward.
The Dodd-Frank Act for bank regulation will move forward.
Something is going to happen with taxes and spending.
Oh yeah, and there’s sure to be a whole lot of arguing and posturing in Congress and the White House.

Beyond that I think a lot has to do with how dysfunctional Washington becomes. After all, the 2016 election cycle started November 7.

Affordable Care Act: The Supreme Court ruled and President Obama was reelected, so we have to assume this is moving forward (probably not smoothly though). The Act aims to provide health insurance to a large percentage of the currently uninsured population. There are many parts to this beast, some of which are already up and running.

Children can stay on their parents insurance coverage until the age of 26
Lifetime coverage caps are prohibited
Pre-existing conditions for children under the age of 19 are prohibited. They will be similarly prohibited for adults by 2014.

But much is still to come. A couple of biggies are:

Starting in 2014, employers with more than 50 employees who don’t offer health insurance benefits will pay a penalty of $2,000/employee/year with the assumption the employees will then be enrolled in the new healthcare exchanges. The fears here are: 1. the financial burden on the employer may hinder growth; 2. Employers may drop insurance benefits and just pay the penalty.
Healthcare Exchanges: Each state will have an exchange set up either by it or by the Federal Government if it chooses not to. It will be where the uninsured will get access to insurance coverage, some with government subsidies.

Dodd-Frank Act: This was passed following the 2008 economic meltdown with the express purpose of reigning in what was perceived as banks taking excess risk. It seeks to impose further regulation and accountability on the banks. The impact? It depends upon who you ask. It’s either making consumers safer or quashing banks’ incentive to lend to businesses and home buyers. As with most things, it’s probably doing some of each. It has gotten much more difficult to get home mortgages through the system, especially if you’re a business owner. But the housing bubble we had before, with its no-verification loans and such, wasn’t very good either. Either way- I’m guessing there will be more regulation coming for the banks and other financial institutions.

Taxes: Ah, yes: taxes and spending. Something is going to happen here. Will it be a drop off the “Fiscal Cliff”, a temporary compromise, or a “Grand Bargain” deal? Who knows? My bets are:

Taxes will increase for the wealthiest among us.

0.9% increase related to Obamacare
3.8% additional Medicare tax for the lesser of net unearned income or excess income above $250,000 AGI for a couple.
Maybe tax rates will increase, or there will be limits on deductions like mortgage interest (above a certain amount and/or on second homes), or capital gains or dividend rates will increase.
????? Your guess is as good as mine

Taxes may increase for everyone else too, in some way.

Maybe Medicare tax increases (expiration of the temporary decrease)
Penalties for those who choose not to buy health insurance
Maybe some taxation on employer-provided health insurance (the part that the employer pays which is now tax-free).
???? Again- your guess is as good as mine.

I also think we’ll see some changes in the major entitlement programs: perhaps reduced benefits or older access ages. We’ll see some “can-kicking” as Congress kicks the problems down the road rather than deal with them. It will make sausage and hot dog-making look downright pristine before it’s all over.

You may disagree, but I don’t believe it’s possible—politically, socially or economically—to reign in the deficit solely by spending cuts. We need cuts- probably more than anyone will like- but that alone won’t do it. But it’s time we all took our collective medicine and got on to the path to long-term fiscal health in this country.

Washington: We’ll all be embarrassed by how badly it will work. Hopefully it will work in some way. My biggest fear is four years of getting nothing done and putting off the hard decisions. No one- on either side- will benefit from that.

We can always hope though, that the art of compromise will reassert itself into the process and move us forward. Can you imagine if the Continental Congress had been composed of these folks? We’d long ago have gone back to singing “God Save the Queen”.

If I can be of assistance in helping you plan for these changes, or to adjust to changes sure to come, please contact me at 919.403.6633 to set up an appointment.