How Hillary Clinton’s Financial Plan Will Affect Your Wallet

Democratic Presidential Candidates Attend Iowa Jefferson-Jackson DinnerAbout seven months after Hillary Clinton announced that she’d run for president in the 2016 election — and years after the press began predicting that she’d win the Democratic nomination — the former secretary of state has begun to formally lay out her proposed economic policy for the country.

As her lead in the Democratic polls diminished in the past few months while rival Bernie Sanders gained steam, she recently announced a plan that focuses on jobs, the middle class and small business. Here’s a look at where Clinton stands on the key issues and how those positions could affect the U.S. economy and your wallet if she is elected president.

1. Tax cuts for the middle class. While she hasn’t released too many details on how she’ll do it, Clinton has promised to cut taxes for the middle class so people can increase their take-home pay. She also advocates closing tax loopholes and enacting the “Buffett Rule,” which would require millionaires and billionaires to pay at least 30 percent of their income in taxes. Additionally, she wants to incentivize businesses to share their profits with workers by providing a 15 percent tax credit to companies that do so.

Where she has gotten more specific is her plan to raise the capital gains tax, which is paid on the profits made by individuals when they sell property, stocks, businesses or other assets after holding them for a short period of time. Under Clinton’s plan, investors would be taxed 39.6 percent on their gain on assets held for less than two years, with that rate phasing out to the current 20 percent after the six-year mark, according to CNBC. This change, which is meant to encourage longer-term investing and economic growth, would apply to those in the highest tax bracket, which is nearly $465,000 for married joint filers and $411,500 for single filers. “For most Americans, an increase in the capital gains tax won’t affect them at all,” said Tom Wheelwright, certified public accountant and author of “Tax-Free Wealth.” “For the average investor who has their money in an IRA or a 401(k), there is no impact by all of this.”

2. Protection for the CFPB. Clinton has publicly urged Democrats in Congress to fight a Republican proposal that would limit the Consumer Financial Protection Bureau, a federal agency created in the wake of the financial crisis to supervise financial institutions’ dealings with the public. The agency is responsible for supervising and enforcing the laws that cover consumer financial products and services, and it aims to provide better transparency for the consumers who use them.

“The [CFPB] has only one mission: protecting Americans from unfair and deceptive financial practices — and it’s succeeding,” she wrote in an open letter to Congress.

3. Increased wages for the 99 percent. Reducing income inequality is one of the central tenets of Clinton’s campaign. The gap between the richest and poorest Americans is wider than the gap in any other democracy in the developed world, according to U.S. News & World Report.

“Corporate profits are at near record highs, and Americans are working as hard as ever, but paychecks have barely budged in real terms,” Clinton said in a July 2015 speech. “Families today are stretched in so many directions, and so are their budgets.”

Clinton supports raising the federal minimum wage to $12 an hour. Despite minimum wage hikes by many state and local governments, and by high-profile employers like Walmart and Target, the federal minimum wage remains stuck at $7.25 an hour, the same rate it has been at since 2009. Many advocates of a higher minimum wage, including Clinton competitor Bernie Sanders, want a federal minimum wage of $15 an hour nationwide.

Even moving the minimum wage to $12 would raise wages for one in four U.S. workers, according to Amy Traub, a senior policy analyst with public policy organization Demos. “That’s a big segment of the workforce, and it would make a big difference for a lot of people,” she said. “It would be really good for consumers’ wallets.” Clinton has also backed President Obama’s expansion of overtime rules to more workers. Starting in 2016, that plan extends overtime protection to nearly 5 million workers, covering salaried workers who make up to $50,400.

4. Options to avoid or refinance student debt. Student loan borrowers carry a mean balance of $26,700, and nearly 17 percent of all borrowers are late or in default on their loans, according to a 2015 report published by the Federal Reserve Bank of New York. Furthermore, a study by the Federal Reserve Bank of Boston shows that student loan borrowers appear to be less likely to own a home and have more difficulty accumulating wealth. Clinton addresses the student debt crisis with her “New College Compact.”

Advocating for “debt-free” college, her proposal would allow students to go to in-state public colleges without borrowing any money for education. She also supports a plan to allow Americans with existing student loans to refinance at more favorable rates, which her campaign claims would save the typical borrower about $2,000 over the life of the loan.

5. No cuts to Social Security. The 2015 annual report on Social Security projected that retirement and disability trust funds would be depleted in 2034 and then would “pay about three-fourths of scheduled benefits for 50 years,”according to The New York Times. The future of Social Security, however, has long been a big point of contention between the parties. Republicans, in particular, have been calling for cuts and privatization to address the situation.

In April 2015, Clinton called Republicans who want to cut back Social Security “just wrong” and said she’d preserve the retirement benefit. “We do not mess with it, and we do not pretend that it is a luxury — because it is not a luxury,” she said at a New Hampshire campaign event. “It is a necessity for the majority of people who draw from Social Security.”

Clinton also has stated that she believes women especially need better access to Social Security and has promised to work to “enhance” the program.

6. Paid family leave and affordable child care policies. It’s been more than 20 years since Bill Clinton signed the Family and Medical Leave Act, which allows families to take up to 12 weeks of unpaid leave to care for a new child and deal with their own or a family member’s health needs. That provision puts America behind most other developed countries which offer paid leave for women — and often men.

I believe that what’s good for women is good for America.

 As part of her goal of getting more women in the workforce at higher wages, Hillary Clinton supports family-friendly policies such as paid family leave and affordable child-care policies.

“I believe that what’s good for women is good for America,” she wrote in a 2015 op-ed for women’s lifestyle media platform SheKnows. “Take child care. It’s a women’s issue. It’s also an economic issue. You can’t go to work every day if you can’t afford a safe place to leave your kids.”

This issue has gained more visibility in recent months as several Silicon Valley companies have announced changes to their parental leave policies that extend more generous benefits to both men and women, according to Wired. Currently, California, New Jersey, Rhode Island, Washington and the District of Columbia offer paid family leave.

7. Pursuit of a new foreign trade agreement. Clinton broke with President Obama and with previous statements recently in opposing the Trans-Pacific Partnership deal, which would put in place one of the largest free trade areas in the world.

“I still believe in the goal of a strong and fair trade agreement in the Pacific as part of a broader strategy both at home and abroad, just as I did when I was secretary of state,” Clinton said in a statement in October. “I appreciate the hard work that President Obama and his team put into this process and recognize the strides they have made. But the bar here is very high and, based on what I have seen, I don’t believe this agreement has met it.”

8. Help for small businesses. Clinton wants to “jump-start small businesses” by reducing the time it takes to start a business, expanding access to capital, simplifying and cutting the taxes paid by small businesses, and using technology to allow small businesses to access new markets both domestically and globally.

“Despite generations of progress on so many other fronts, it’s still too hard to get a business started today,” Clinton wrote on LinkedIn in May. “Credit is too tough to come by. Too many regulatory and licensing requirements are uneven and uncertain.”

9. Repeal of the Obamacare ‘Cadillac tax.’ While she has supported the Affordable Care Act and its goal of reducing the number of uninsured Americans, Clinton announced in September that she is opposed to the so-called “Cadillac tax,” which imposes a tax on employers with the most expensive health plans. The goal of the tax is to reduce overall health care costs, but critics say it’s encouraging employers to simply reduce the quality of their insurance and push costs onto consumers.

If she were to succeed in repealing the tax, the Congressional Budget Office has said that, without such a tax, the Affordable Care Act might not actually reduce health care costs.

Why Financial Crises Aren’t Such a Bad Thing for Your Wallet

Businessman talking on a mobile phone.In the seven years since Lehman Brothers failed, tipping the world into a financial crisis, the U.S. government has enacted a plethora of regulations to prevent another one.

But trauma aside, there are some tangible benefits to such a crisis, from a Darwinian winnowing of weak businesses to curbing extreme risk-taking. Here are some:

1. They often provide investors willing to take a gamble with tremendous bargains. Just look at the deals available on stocks in March and April of 2009. Without the meltdown, when would you expect to buy at such reduced prices?

If you invested in the SPDR S&P 500 (SPY) exchange-traded fund, which tracks the Standard & Poor’s 500 index (^GSPC), at the beginning of March 2009, you’d have done well. It would now be worth three times as much, not including dividends. Not bad for 6.5 years. Of course, you needed the nerve to invest when the investing world seemed finished forever.

2. Financial crises often cull the weakest firms, forcing them out of business. OK, so that didn’t quite happen in 2008 and 2009 because the government decided to bail out some large financial firms and others to prevent further damage to the economy.

But a cleansing of companies that aren’t succeeding isn’t all bad. As has been said many times, the reason that Silicon Valley is so successful is that the investors there embrace the idea that many companies will fail. If an idea works, then they run with it.

If the new firm fails, then the funding is pulled and the people involved go find a more productive project on which to work. For every Facebook (FB) or Twitter (TWTR) that becomes a pop culture touchstone, there are hundreds or maybe thousands of startups on the scrap heap.

3. Meltdowns often highlight weaknesses in the system. Think about a 3-year-old child trying to destroy a piece of your furniture. All small children are budding engineers, and their antics often seem aimed at testing objects to the point of destruction. So if they succeed in breaking a chair, you know it wasn’t particularly robust.

Likewise, in a financial crisis, you can see where the weakness is because weak companies simply can’t hide.

One example is my former employer, General Motors (GM) , which went through a reorganization (aka bankruptcy) in 2009. I think it was clear to many that something needed to change at the automaker, and the financial crisis merely sped up the process. Ultimately, the Obama administration stepped in rather than allow the giant automaker to collapse.

4. Crises remind others to be prudent. Taking risks is important in capitalism, but it’s important to weight the potential danger to your company: Is the risk something that will simply curb next quarter’s earnings or one that might sink the company altogether?

Financial giant New York Life Insurance Co. uses the tag line, “The company you keep,” seemingly as a reminder that many others before it haven’t survived.

5. The alternative to crises can be worse. Financial meltdowns have a high cost in both money and social upheaval. I have friends who were at Lehman, and I know the hardship its collapse caused.

But avoiding the inevitable isn’t necessarily a better alternative over the long term.

Look at Japan, where the economy has stagnated for decades now. There are many reasons for that, but a significant part of the problem in Japan was the presence of so-called zombie companies, firms neither alive enough to do business nor dead enough to get liquidated. They simply take up space and resources.

It’s far better to take a company through the bankruptcy courts and let its resources be used more efficiently by new owners, than to be haunted by zombies. Countries that let firms fail tend to do better economically than those that don’t.

The United States is still by far the richest country in the world, and companies are frequently being either created or liquidated. Where the failure rate is high, the wealth created often is also — see my comments above about Silicon Valley.

Why Dinner’s About to Start Eating More of Your Wallet

Best Of The MonthNew York — If food prices start taking a bigger bite out of your wallet in the near future, you can blame it on Mother Nature.

A confluence of events including strange weather from El Nino, activity on the solar surface and the effects of a U.S. drought years ago are reducing agricultural output, which may drive up grocery store prices for individual consumers and supply costs for dining chains such as Chipotle Mexican Grill (CMG) and coffee shops like Starbucks (SBUX).

The current El Nino weather system, which periodically forms off the Pacific coast of South America and alters weather patterns throughout the world, is projected to be the strongest in decades, according to AccuWeather.

Already, El Nino is causing drought in Asia, most notably in Vietnam, which is the second-biggest coffee producer in the world behind Brazil. Vietnam grows robusta beans and while their taste isn’t typically as appealing as that of arabica beans, what happens in the robusta market matters.

“If robusta production is down, then it will drive up the price of arabica as well,” says Nicholas Gentile, managing partner at New York-based commodity trading adviser Nick Jen Capital Management. It’s possible that any production shortfall from drought in Asia could be made up by more output in South America, he added.

If all goes well, the rains will come to Asia in time, but if they don’t, then expect coffee prices to rise.
If you want milk with your coffee, then things look even bleaker because that’s likely to be more expensive as well.

Milk prices have already jumped in New Zealand and in the first six months of 2016, U.S. prices will catch up, Shawn Hackett wrote in a recent edition of The Hackett Money Flow Commodity Report. The problem is that due to a drought years ago, the price of milking cows is high while current American milk prices are low, which gives diary farmers little incentive to add cows to their herd.

Finally, the number of spots on the sun has started its periodic cycle of decline this year, which will likely lead to lower crop yields and hence higher prices for grains such as wheat and corn. The phenomenon is discussed in detail in a 1976 USDA report from the U.S. Department of Agriculture that examined data from 1866 to 1973.

The number of sunspots fluctuates in a fairly predictable cycle that tends to last around 10 to 11 years. NASA actually counts the spots and makes projections about how many there will be in future years. While the mechanism isn’t understood, there does appear to be a high correlation between spot count and global temperatures, with fewer spots being associated with cooler weather.

NASA projects that the sunspot count is entering its cyclical decline and doing so from a fairly low peak. That doesn’t augur well for crop yields next year.

“Lower-than-average yields are associated with low sunspot activity,” according to the Agriculture Department paper, “Do Sunspot Cycles Affect Crop Yields?” by Virden L. Harrison. The report singles out corn, wheat and rice as particular examples of the phenomenon.

The effect, however it occurs, can be large, although it does vary by crop and the location within the U.S. Declines in average yield of 10 percent during low sunspot years were not uncommon in the study period.

“The bottom line is that the great U.S. crop production miracle of the last two years will not repeat in 2016,” Hackett wrote in a recent report.