Nancy Bush

NAB Research, LLC, is a Georgia-based consulting firm specializing in providing strategic advice and market intelligence to financial industry participants. NAB is not a registered investment advisor and is not affiliated with any brokerage firm or hedge fund.
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Remembrance of Things Past

Is it time for a Brexit post-mortem yet? Perhaps too soon? Whatever the proper timing may be, there will be a need to look closely at the causes behind the political and social earthquake that has just taken place on the other side of the Atlantic. As one smart friend of mine said, it was a vote by the British people “against economic self-interest” as well as a vote “against the administrative state”, and I think that we fool ourselves if we believe that the same thing—with perhaps even more dramatic and far-reaching impacts—cannot take place here in the U.S. While there is not an exact parallel—there is no EU that we can “un-join”—the mood of a sizable part of the American populace is for a revolution of some type, and we all need to be careful that these understandable forces for change do not become forces of destruction, as well.

One of the factors behind the Brexit vote is an inescapable reality for many countries around the globe, not just Great Britain—the aging of the population and the different political and social outlooks between the Baby Boomers (and their elders) and the Millennials. I watched a documentary on Netflix a few days ago (how did I ever live without it?) on the subject of the life of Winston Churchill, and it began with a scene of the streets of London, circa 1965, as Churchill’s hearse passed by on the way to his funeral at Westminster Abbey. The people stood five deep on the streets and wept as his body passed by, and it was a strong reminder of the way that that monumental historical figure had steered his small country and its tough people through the darkest days of the 20th century.

Many people in the U.K. still remember those days of unity and shared sacrifice in WWII and the hard years that followed, and I see their reaction to EU rules—especially those on immigration—as a natural repudiation of enforced changes which many of them do not welcome. Does racism underlie some of these feelings? Perhaps partly, but I would also point out that Britain has long been the recipient of immigrants of many colors and languages as a by-product of their Empire, and newcomers were able to find a place in society there. (If you don’t believe me, just go to London and look around for an Indian or Pakistani restaurant. You can’t swing a cat without hitting one.) But it is today a place where social services—particularly the already-creaking National Health Service—are being overwhelmed by demand from new entrants and rents are soaring due to insufficient supply. In short, the place is bursting at the seams, and immigration from the EU is one reason.

The population of Great Britain who voted in the Brexit referendum split sharply by age, and that is a lesson for us here in the U.S. as we approach the Presidential election. In the U.K., roughly 59% of the pensioner population voted for Leave, while only 19% of those aged 18-24 did so. In addition, the reluctance of that younger population to actually go to the polls—there seem to be no concrete estimates of how many registered younger voters actually voted, but the anecdotal evidence points to a much smaller turnout among that group—is just not rational, given the reality that those legions of younger folks will have to live with the outcome of the Brexit vote for decades. (It remains to be seen if the efforts of Bernie Sanders here in the U.S. to motivate his legions of young followers to vote will actually bear fruit in the absence of Mr. Sanders at the top of the ticket.) In any case, in the developed world, it remains a fact that older voters are simply more motivated to vote in their own interests than are their younger compatriots.

Here in the U.S., there has been building for a number of years a growing divide between the Boomers and the Millennials, and I wonder if the presidential election will tip these growing resentments and disagreements into a open rift. The overarching issue is, of course, the cost of the entitlement programs for the nation’s 65-and-over residents—Medicare and Social Security chief among them—and the fact that the costs of continuing to fund these massive programs increasingly are falling upon a dwindling number of younger workers. (No, Social Security is not wholly funded by contributions—it’s increasingly a wealth transfer, just like welfare.) These young folks are burdened by high levels of student debt and an inability to purchase homes as a result, and their relegation to second-class economic status is a real issue for future national prosperity.

Unfortunately, the presidential campaign of Bernie Sanders did not advance any solutions for our younger citizens, but instead only served to make promises of “free stuff” that will raise expectations and will most likely go unfulfilled, potentially creating more frustration and resentment. Mrs. Clinton seems to be adopting these unrealistic ideas rather than putting forth more workable solutions, and as for Donald Trump—well, who knows? I do know that Mr. Trump’s ideas for ending global trading pacts and rolling back the tide of globalization (as if that were possible) are both unrealistic and dangerous, and are especially troublesome for the future earnings prospects of our younger workers.

So what should we as a nation be doing to bridge this growing divide? Speaker Paul Ryan—a guy whose age (47) places him squarely between these two demographic groups—seems to be trying hard to advance an economic program that would encourage economic growth and job creation, which is after all what is really needed to alleviate these yawning gaps in wealth and income. In addition, Speaker Ryan has been one of the few politicians to even begin to approach the “third rail” of American politics and propose incremental changes to Social Security and Medicare in order to ensure the longevity of these programs. Unfortunately, Mr. Ryan’s efforts have been subsumed to his disagreements with Donald Trump and to the whole circus of the GOP nomination, and we can all only hope that he is able to continue to pursue his agenda (still with a Republican majority in the House) on November 9.

My parents were both children of the Great Depression and absorbed the lessons of that time. While neither of them grew up with privation—there was always food on the table and clothes on their backs—their experience of the struggles of others stayed with them nonetheless. My paternal aunt told me stories of how my grandmother would cook extra dried pinto beans (a Southern staple) and would take them to families in the neighborhood who were hungry, with the explanation that she had cooked too much and that they would do her a favor to take the extra food. My maternal grandfather, who was a farmer and owned a sawmill, would take the slabs (pieces of wood not suitable for lumber) to families who needed them for heating and cooking in their wood stoves. There was no thought of not doing for your neighbor in their world—it occurred as naturally as breathing—and that same ethic of caring for neighbors and being satisfied with “just enough” is sadly lacking in today’s America.

My beloved country has historically been one where the pendulum swings too far in one direction before it swings back to the center. We may be approaching that point—where our divisions are becoming so profound and so worrisome to the great center of the country that the “silent majority” becomes not-so-silent and begins to stake out positions of moderation and rational action and demand that our leaders do the same. I certainly hope so—because the alternative is just too horrible to contemplate.