Will the Biden economy make, break, or transform you? I’m going to talk about the potential impact of a new presidential administration, how they are planning to influence the economy, and how that might impact you. We’ve had a lot of volatility, a lot of swinging when it comes to the markets, the economy over the last couple of months. January, the short squeeze on GameStop, the potential short squeeze that was initiated on silver.
You have an almost $2 trillion stimulus package. You have Elon Musk investing $1.5 billion into Bitcoin. I can keep going. There’s a lot of volatility. News information spreads quickly. Unless it’s controlled, it’s a very volatile, emotional rollercoaster, anywhere from wanting to get in, the fear of missing out, also some fear, anxiety, and worry about taxes and change. I’m here to tell you that there is an aggressive agenda that is hopefully evident to you. This isn’t new. I’m going to talk about some of the details but the actual agenda, the purpose, the reasons, the results that this administration wants have been clear for a while.
Here are some of the bullet points. Raising a minimum wage to $15 an hour, forgiving student loan debt, making college free for people making up to $125,000 per year, increasing top marginal tax’s brackets to 40%, capital gains tax for high-income earners, at the actual ordinary income tax rates. Corporate taxes going up for real estate investors. I know many of you, I am myself, this has a huge impact but removing the step-up in basis for real estate gains as a potential, as that passes along to the next generation. Biden‘s administration also wants to spend $1.3 trillion on infrastructure, $2 trillion on clean energy. The list goes on.
I think the word free is interesting because it’s one of the first things you learn in economics. There’s no such thing as free. Money may not be coming out of the pocket of the person that’s going to college but it’s coming out of somebody else’s pocket. That brings me to something very simple that illustrates how the administration is going to pay for this and the potential impact it’s going to have. We have a $28 trillion deficit, which means there’s debt and there’s interest on debt of $28 trillion, which is a lot of money. I don’t need to go into that. There are only two ways to pay for these initiatives. The initiatives it’s to save the middle class. It’s to continue some of the aid and support for those negatively impacted by COVID. There are only two ways to pay for it, taxes and deficit spending.
Taxes, we are currently spending double what we collect. I’m speaking as a country. We are spending double what we collect in taxes. Raising taxes by double, I would say, is stifling, most likely negatively disruptive to the economy. The easy way to do it, which has been used for quite some time, several decades, is deficit spending, which basically means that the government issues new debt, essentially IOUs, and the central bank gives them money created out of thin air in exchange for that debt. That’s where we’re at. I’m not going to stop there. I can keep going through other bullet points of some of the agenda items. A fascinating read, it’s short, but if you are interested in all that detail, go to TaxFoundation.org. They did a whole analysis of how this is going to impact things. There are some variables in there that could potentially change. It doesn’t mean that all of these things are going to get passed and included in some of the tax changes. We don’t know. This is proposed but TaxFoundation.org is always on top of it.
Their initial analysis is interesting, where we lose about 500,000 jobs because of it. We also have a decline in GDP and GNP, Gross National Product. Everything is going down. If you look at the distribution of wealth and income in the United States, everyone essentially loses because of this agenda. There’s essentially the population that is making $125,000 and below that benefits but the benefit is slight. It’s not that much at all. It’s interesting where you’re able to look at, “What is the impact that this is going to have?” From a narrative standpoint, it’s easy to say, “We want to save the middle class. We want to create jobs. We want to bring jobs back domestically. We wanted X, Y, Z as end results and motivation to do certain things.” When you get into the numbers, it’s interesting where you have a much more objective point of view.
Take that for what it’s worth but here is what I’m going to say. This is deviating, hopefully not reigning too much on your sentiments. The idea here was to paint a picture that the volatility of life is here to stay. I believe it’s always been here. It always will be here. I think my initial reaction to this is whether it’s my kids having to pay taxes and pay back debt or my grandkids, that narrative is used oftentimes by conservatives. I get emotionally stirred up because I know the data behind it. This isn’t going to make much of a difference. It’s going to dig our hole even deeper.
Opportunities Everywhere
I’m focusing on it because my reaction was short-lived. The punchline of it all is that there is opportunity everywhere. It’s always been there. As much as we want life to be programmed, robotic, predictable, and easy, it’s not how it works. There’s never been a perfect presidential administration, a perfect tax code, a perfect economy, a perfect profession, a perfect spouse, perfect kids, perfect neighbors, perfect colleagues, perfect business. The only constant is that things will change. Things will be volatile today, tomorrow, the next day. I believe that this is the spice of life. It’s the amazing adventure, the amazing ride that we’re on.
I read something from a study by Cornell. It was done in 2005, 2006, that shows that the majority of what we fear and are anxious about has to do with the future but here’s the catch. In this study, 85% of the things that people worried and were afraid of never happened. Participants in the study, they usually will use a good sample size, so it’s not skewed or biased. The participant said that up to 15% of the events that did happen in the future, that they were anxious and afraid of, they either learn something or they handled it better than they thought they would when they were afraid and anxious about it.
My question to you is, what if your entire life, all your experiences, your thoughts, your parents, your neighbors, people have influenced you, was to prepare you for a life-changing experience? What’s on the other side of that experience if you showed up with that belief? I’m not saying that you need to believe it but I want you to consider that it might be true. What if everything in your life prepared you for something that was supposed to happen and experience? Based on how you showed up on the other side of it could have been an amazing emotional experience, a meaningful conversation, a business opportunity, an investment opportunity, a relationship, an inspiration or motivation, a breakthrough. What if that was on the other side?
One of the first things you learn in economics is that there’s no such thing as “free”.
As I’ve looked at my reaction to life’s events, typically what’s going on around me, what’s in business, the markets, news, social media, I connected with something. These are things that are always going to happen. The degree, the scope is greater than it’s ever before but I believe that leads to amazing opportunity because on the other side of how you show up is where wealth truly is. It’s where growth is. It’s where the uncertainty and the beauty, the excitement of life is. That’s where I’ll bring to the next point. What if wealth wasn’t a dollar amount in the bank? What if it wasn’t cashflow?
What if it was bringing your best self to life? Meaning, you bring your game every day, every experience. To life is you wake it up. What if that was wealth? Through that vehicle, your being who you are, you’re able to experience what you want. Growth, enjoyment, relationship. It wasn’t next week. It wasn’t when you’re 65. It’s today. It’s tomorrow and the next day. I’m not saying that this is possible every day but what if it was something that you became aware of, something new? Do you allow yourself to be in a routine where it woke you up to life? What would be different?
I look at my experience and the dollars I’ve spent on personal development trying to understand myself, understand what I want, understand why I say, do, believe, or feel certain ways. My discovery has been I have so much to be grateful for. I have so much that is valuable. When I start to focus on those items when I start to focus on what I can bring as opposed to what I can get, life completely changes. I believe that a lot of the events that will continue to unfold is for people, the human being inside of us. Not the human doing but the human being wakes up. It allows us to exercise what we’re capable of. Human beings are not meant to sit back, get a stimulus check, spend it on Netflix and movies. It’s not meant to scroll through social media. It’s not meant to be isolated in an apartment, in a house, even if you’re living with people.
I believe the circumstances that we’re in are allowing people to live a lax life and I think that’s anti-life. I think that’s anti-human. I think that’s one of the greatest tragedies of 2020 is that the solution wasn’t the human being. The solution to the challenges that were faced, and there were macro challenges on a big scale, I think there were some cool things that happened that allowed companies more leeway to innovate, to solve problems. I think on the micro-level, on the individual level, there was a huge tragedy with the loss of opportunity to adapt, to change, to think, to solve problems. I’m not saying that this is absolute but I was hoping that the exception wouldn’t have been this. The rule became bailout, supplement, aid, help so that people don’t have to help themselves rather than it being the rule and the exception being those that are in dire circumstances.
The scary part is that there are some habits that have been formed and that is going to lead whether it’s student loan bailouts, whether it’s prolonged unemployment, whether it’s free education. There are going to be some unintended consequences from that but that leads to more volatility. The ability for you to ride that volatility and take advantage of tremendous opportunities because there’s a lot of cool things happening in our world. Whether it’s advances in transportation, advances in medicine, advances in entertainment, advances in energy, advances in food, it’s incredible what’s going on if you open your eyes to it. When you approach life and you’re trying to find the opportunities, you are trying to find the lessons. You’re showing up as your best self and realizing that your one smile, one conversation, one acknowledgment, one text, “How are you doing”? One written thank you note, “I appreciate you for showing up in my life,” one step away from a completely new experience of life, a completely new business, a completely new profession.
Hopefully, this is a mentality that you feel you want to embrace. It’s not easy. The first step is being aware. The second step is doing what it takes to ground yourself. It could be a morning routine. It could be a new habit of simply writing down what you’re grateful for. If you embrace this, I challenge you to do something, commit to something, put something on your calendar, because if you don’t, the human spirit in all of us will go right back to the way that it was and you’ll forget the conversation. You’ll forget the inspiration. You won’t embrace it.
Embracing requires you do something because it makes it real. It turns it into something. That’s an idea floating around. “I should.” Do something right now. It could be as simple as, “I’m going to write down the ten things I’m grateful for every single morning. I’m going to write a thank you note every single day to somebody.” Maybe three times a week, but something. That is showing up as your best self. You’re able to take advantage of these extreme volatilities of life.
There was once a solution to your problem, whether it’s higher taxes, whether it’s a provision like the removal of the step-up in basis. There are always solutions and there’s a big one. The point is with everything that’s going to be volatile, everything’s going to change. All of these new initiatives, instead of looking at glass half full, I’m looking at it as a loss or a cost. Find the opportunity.
My point on all of this is there are going to be some extremes going on. We’re going to respond to them, react to them, it’s going to be frustrating, it’s going to be mind-numbing to an extent, but I want you to be aware of that reaction and shift gears to where the opportunity is. I look at wealth and the achievement of more money, of more investment, of more cashflow, that is a small portion of wealth. It isn’t the foundation of wealth. Foundation of wealth is to experience life and to experience it at the highest level. It’s to take your best self that I know is in you. God knows that it’s in you. Your spouse knows it’s in you. Your husband, your wife, your kids, your neighbors know it’s in you, bringing that as often as possible, showing up, creating value, making a difference, experiencing the little things at a whole new level. That’s wealth. Money magnifies that.
If you don’t have that foundational piece, it’s going to be a frustrating journey accumulating more and more money. It makes the experience worse in my opinion. Consider that as a possibility. Consider that the volatility gives you the opportunity to make new decisions about how you show up, to find opportunities, to bring out that human being inside of you that’s there. These are the opportunities that allow it to rise. Without these opportunities, you’re going to sit on the couch, go to the beach, and not contribute much to life. That’s, in my opinion, not the life that I want and I’m hoping it’s not the life that you want.
Volatility gives you the opportunity to make new decisions about how you show up to find opportunities and bring out that human being inside of you.
Life is incredible. We don’t have to worry about going and hunting for food or chopping wood to feed the fire. We don’t have to worry that our kids are going to contract some gnarly disease and die when they’re young. We have access to medicine. We have access to health. We have access to information, entertainment, relationship, more so than ever in the history of mankind, yet there’s a lot of evidence out there that points to people still complaining about life. They are complaining about their circumstances, complaining about Biden, complaining about Trump, complaining about this, complaining about that.
Life doesn’t have to be that way. I think if you realize that number one, life is always going to be volatile. This utopian view of things, that doesn’t exist. It’s a mirage. The beauty of life can be experienced by those simple choices that we make, those simple decisions that we make. I truly believe that you’re one decision away from a completely new life. Thanks for joining me. Go out there and make someone happy. Love is what we’re all after in the end. Go love somebody. Go create some value and make a difference.
Patrick Donohoe
The Wealth Standard
Your Source of Inspiration on Finance, Economics, & Building True Wealth
