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Meet the Millennials

Courtesy of Doug Short.

In a country riddled with divisions, there is one which may come to dominate all of the others. Ironically, it is the schism most neglected by the chattering classes; one which receives scant attention from business pundits and political savants, right and left. It is the new generation gap. There is a growing wedge between the concerns of the electorate’s youngest members and the interests of its oldest. While there are many points upon which the two groups agree, there are a number on which their interests diverge. And, counted among these are solutions to the fiscal problems of the hallowed Social Security and Medicare programs.




We will hazard a guess and predict the Millennials — the generation of Americans born between 1981 and 1993 — will help the Democrats retain the White House in 2012. If current trends continue, these young voters will be one of the few demographic slices the Obama campaign can take for granted. True, disenchantment with politics as usual in Washington and apathy of youth may depress their turnout on Election Day; but the margin presently favoring President Obama over Mitt Romney (or Gingrich, or Perry, or Paul, or any other conceivable Republican contender) is twenty percent according to the latest survey by the Pew Research Center.

While the Obama campaign can count on the Millennials’s support, this backing will come at a price. No, this generation does not endorse doing away with Social Security and Medicare; support for both entitlements is high among Millennials. The difference is they are more likely to contemplate thorough overhauls to keep both programs going. In contrast, the 65 plus generation is the guardians of the status quo in this debate. No change is their starting point in any negotiations to salvage the two programs. Though exceptions may be made for more generous benefits.

Although 53 percent of Millennials favor maintaining current Social Security and Medicare benefits, 86 percent also favor allowing younger workers to put Social Security taxes into private accounts, and 74 percent are willing to allow future retirees to buy private health care insurance in lieu of participating in Medicare. As for the band aid fixes used repeatedly in the past to buy a few years grace, Millennials prefer to consider other options. Only 40 percent support gradually raising the Social Security retirement age; and just 35 percent approve of a similar fix for Medicare.

Curiously, these are Republican-type reforms endorsed by a segment of the electorate which overwhelmingly supports a Democratic incumbent President. Now, imagine if you will the morning after Election Day. President Obama remains in the White House but the Republicans control Capitol Hill. A fantasy? No. The arithmetic suggests this is the most likely scenario. If so, President Obama may be encouraged to tack to the center, leaving the extreme liberal wing of his party to fend for itself. There is recent precedent. Bill Clinton in his final four years in office worked with Republican majorities in the House and Senate. Perhaps we expect change after all.


Notes:

Turnout differential is difference between voter turnout in the 65+ year cohort and the 18 to 24 year cohort. Turnout data is from the US Census Department, Voting and Registration Statistics.

Voting preference data is based on exit polls compiled by the Pew Research Center. Election Year 2012 figures is based on a current survey conducted by the Pew Research Center, from Sep 22 to Oct 4, 2011. Chart assumes Mitt Romney will be the Republican Presidential Candidate in the November 2012 election.

(Sources: US Census Department; Pew Research Center; and, AIFS Estimates.)


About American Independence Financial Services, LLC

American Independence Financial Services, LLC (“AIFS”) is the investment adviser and administrator for the American Independence Funds and the NestEgg Target Date Funds. The firm is a limited liability company founded in 2004.

Important Disclosures

(c) 2011, American Independence Financial Services (AIFS). All rights reserved. Redistribution and quotation permitted with attribution to the author and source.

The views expressed in this document are based on political, market, economic and other conditions subject to change at any time. Data are acquired from sources believed to be reliable. But no warranties are made to the accuracy, completeness or timeliness of the data and information presented. Opinions expressed are those of the author unless indicated to the contrary. Nothing in this document should be construed or taken as financial or investment advice. Please consult with your financial advisor to discuss how the subject of this research report may impact your unique, individual circumstances.

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