Now Is the New ‘Golden Age’ As We Advise Clients

One of my colleagues, Paul McGillivray, recently graced me with his paperback copy of The Life and Times of the Thunderbolt Kid, Bill Bryon’s paean to growing up in Des Moines, Iowa in the halcyon decade of the 50s and the tumultuous 60s. Growing up in the Des Moines area myself, born but 4 years behind Bryson, the book set off waves of nostalgia for simpler and formative times. We recall together our first career as paperboys, delivering the Des Moines Tribune, the Bishop’s cafeteria for a Sunday dinner with its dazzling assortment of slowly revolving desserts. We recollect the “Shops Building” (where my Mom, Dad and Grandparents ran a small business), an eight story, central atrium building, circled with open hallways to the main floor below and the tables and patrons of its restaurant. When visiting, unbeknownst to Dad, many were the paper airplanes, launched by me and my buddy that wafted down into the dining experience of what must have become over time, wary diners below.

Bryson notes that America had experienced an explosion of manufacturing activity as one of the only large nations unscathed at home by the recently ended World War; in fact energized and poised for growth by the many factories created during war and burgeoning with pent-up consumer demand. We were energy flush, inarguably the richest nation on the planet, and homes were rapidly being filled with refrigerators, TVs, telephones and electric stoves. The time has been described by some as a “golden age”. Amazingly, it wasn’t driven by government spending, I’m sure to the chagrin of spendthrift economist, Paul Krugman. Federal spending adjusted for population and inflation are 4.5 times today what they were in 1951, only eclipsed by state and local spending which is 6.4 times larger. Certainly, the public has benefited from some of this dramatic spending increase and the trend is nearly ubiquitous among first-world nations today; it might be irrevocable. Estimated measures of regulation volume and regulatory cost reveal at least the same levels of increase.

What is the end game for our advanced societies with respect to the share of productive capacity consumed by our governments in the name of greater societal good? As always, there are diverse opinions, but economic principles cannot be dodged forever. A recent Kansas City Star newspaper editorial holds out a rural Kansas county as an example of people who complain about high taxes and too much government spending, yet receive more in benefits than they pay in taxes. They conclude that “we are all takers” and suggest we reduce “waste” and close tax loopholes, all risible conclusions. First, yes, most of us are ‘takers” in a nation of trillion dollar deficits. We are “taking” from ourselves with impoverishingly low interest rates for fixed income citizens, from foreign investors who someday may flee an unsound financial investment, and in the end robbing future generations of the vanished legacy deeded us by our parents and grandparents. Second, while vexing, billions of dollars of government waste are a drop in the ocean of trillion dollar deficits, a growing proportion of which are merely an unsustainable transfer of wealth from workers to non-workers via Social welfare programs. Finally, a simpler tax code is certainly the Holy Grail, but they really mean increased taxes as a proportion of our economy. The Kansas City Star newspaper has never found a single tax increase not worth stumping for.

Federal spending has outstripped GDP growth since 1951 by 1.6 times and state and local spending by 2.2 times, yet you’ll find much of our media excoriating any suggestions or legislation to slow, freeze or reduce spending anywhere, anytime.

Every program seems to be eternally invaluable and grow like kudzu. Pro-growth policies, not temporary government deficit stimulus spending combined with gentle long-term reigning in of unsustainable spending is the only real solution.

We have the enviable mission in our new “golden age” of advising clients as to the benefits of personal financial probity, self-preparation, sacrificing today for tomorrow’s needs, guarantees versus risk.  Thankfully, the unique mortality gains in life insurance and annuity products we distribute are much needed by a longer living populace with uncertainty as to the viability of government programs. Innovations particularly in our wheelhouse, FIA’s and IUL, are increasing rapidly. Expect to see new inflation benefits, new indexes and methods, and new options for taking income in our products throughout this year. In addition you’ll see inroads of the indexing and income propositions into distribution which has previously shunned our products. Exciting times we will look back on with nostalgia some day, but I plan to enjoy them now.



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