Democratic Platform: 5 Things Advisors Should Know

The proposals that Hillary Clinton has announced are 'fairly modest from a macroeconomic point of view,' a UBS report says

Hillary Clinton (Photo: AP) Hillary Clinton (Photo: AP)

The Democratic Party officially approved its platform at the Democratic National Convention on Monday in Philadelphia.

The Washington Post has called it “the most progressive Democratic platform ever.

According to a UBS report, the proposals that Democratic presidential nominee Hillary Clinton has announced are "fairly modest from a macroeconomic point of view."

"They would mostly maintain or extend changes implemented under President Barack Obama,” according to UBS.

Jeff Bush, of The Washington Update, again reminded not to “mistake platform for policy.”

“Obviously there’s a tremendous amount of red meat [in the platform],” he told ThinkAdvisor.

(Read how the Republican platform could affect financial advisors.)

ThinkAdvisor examined what the Democratic platform says about Social Security, the Department of Labor’s fiduciary rule, taxes and other issues that affect financial advisors. Here are five takeaways from the platform, and what experts in the industry are saying.

(Read the entire platform here.)

Social Security 

Social Security

The Democrats’ platform aims to protect and expand Social Security – and do so largely by raising wealthier Americans’ taxes.

“We will fight every effort to cut, privatize or weaken Social Security, including attempts to raise the retirement age, diminish benefits by cutting cost-of-living adjustments, or reducing earned benefits.

The Democrats vowed no changes in age or benefits, but what Bush found interesting was where the Democrats would expand Social Security.

The platform states, “Democrats will expand Social Security so that every American can retire with dignity and respect, including women who are widowed or took time out of the workforce to care for their children, aging parents or ailing family members.”

As Bush explained to ThinkAdvisor, the Democrats are getting rid of the gap years in a person’s Social Security work history.

“That’s certainly what it implies,” he added.

He also found it noteworthy that the democrats are basically saying “Social Security should be tied in with health care spending.

“The Democratic Party recognizes that the way Social Security cost-of-living adjustments are calculated may not always reflect the spending patterns of seniors, particularly the disproportionate amount they spend on health care expenses.”

Bush said many democrats were in favor of continuing to use the Consumer Price Index to calculate benefits, which is “not consistent with what they’re saying here” in the platform.

The platform is not ambiguous as to how it plans to fund Social Security.

“We will make sure Social Security’s guaranteed benefits continue for generations to come by asking those at the top to pay more, and will achieve this goal by taxing some of the income of people above $250,000,” the platform states. As Bush pointed out again, Social Security is a math formula with many variables.

“Democrats seem to be focused on only one of those variables,” he told ThinkAdvisor. “And that’s taxes.”

Labor Secretary Tom Perez. (Photo: AP)

DOL Fiduciary Rule

In the Democratic platform, there is what Bush called an “obscure reference” to the Department of Labor’s fiduciary rule.

The platform states that “We will fight against any attempt by Republicans in Congress or on Wall Street to roll back the Conflict of Interest Rule, which requires that retirement advisors put the best interests of their clients above their own financial gain."

There’s another nod to the fiduciary policy in the platform’s section on restoring economic security for the middle class.

“The Democratic Party believes consumers, workers, students, retirees and investors who have been mistreated should never be denied their right to fight for fair treatment under the law,” the platform states. “That is why we will support efforts to limit the use of forced arbitration clauses in employment and service contracts, which unfairly strip consumers, workers, students, retirees and investors of their right to their day in court.”

Taxes

Taxes

There is a consistent theme throughout the platform that the wealthy should pay their fair share, Bush said. In fact, there is a line item in the platform that specifically says: “Making the Wealthy Pay Their Fair Share of Taxes.”

The platform brings up the idea of the Buffett tax – inspired by Warren Buffett famously saying he pays lower taxes than his secretary.

“We will ensure those at the top contribute to our country’s future by establishing a multimillionaire surtax to ensure millionaires and billionaires pay their fair share,” the platform states. “In addition, we will shut down the “private tax system” for those at the top, immediately close egregious loopholes like those enjoyed by hedge fund managers, restore fair taxation on multimillion-dollar estates, and ensure millionaires can no longer pay a lower rate than their secretaries.”

According to UBS’ analysis, Hillary Clinton’s tax policy would raise income taxes on the wealthiest households by enacting a 4% surcharge on income above $5 million, imposing a “Buffett rule” minimum tax of 30% on filers with income above $1 million, and limiting the tax benefit from specified deductions and exclusions to 28%. Estate tax, gift tax and capital gains tax rules would be made less generous, according to UBS.

UBS points to an analysis by the Urban Brookings Tax Policy Center that concludes that these changes would raise new revenue of around $1 trillion over the next decade, three-fourths of which would come from the top 1% of filers. Meanwhile, changes on the corporate tax side would raise about another $100 billion.

College tution

College Tuition

To Bush’s knowledge, there has not been a focus on college debt to this degree in prior platforms.

“Nothing this tangible,” Bush told ThinkAdvisor. “That is thanks to Bernie Sanders.”

The platform discusses both making debt-free college a reality and providing relief from “crushing student debt.”

“Bold new investments by the federal government, coupled with states reinvesting in higher education and colleges holding the line on costs, will ensure that Americans of all backgrounds will be prepared for the jobs and economy of the future. Democrats are unified in their strong belief that every student should be able to go to college debt-free, and working families should not have to pay any tuition to go to public colleges and universities.”

According to Bush, this likely means that working families, those that earn $125,000 or less, would be able to have “debt-free college.”

“My understanding of debt-free college does not mean room and board, just tuition,” Bush told ThinkAdvisor. “That’s a significant step forward.”

The platform also suggests that community college should be free.  

Regarding what the platform calls “unsustainable levels of student debt,” Democrats would allow those who currently have student debt to refinance their loans at the lowest rates possible.

Democrats would also allow student loans to be dischargeable.

“Democrats will restore the prior standard in bankruptcy law to allow borrowers with student loans to be able to discharge their debts in bankruptcy as a measure of last resort,” the platform states.

Bush said this is a “huge change.”

“Now you have a young person who’s wildly in debt [and] now very easily can go through bankruptcy,” Bush said. “That’s a significant game changer there. That’s a significant change.”

Wall Street

Wall Street

The platform focuses on reining in Wall Street and fixing the U.S. financial system. One way Democrats would do this is by boosting regulatory agencies' enforcement budgets.

“We also support extending the statute of limitations for prosecuting major financial fraud, and providing the Department of Justice, the Securities and Exchange Commission, and the Commodity Futures Trading Commission more resources to prosecute wrongdoing,” the platform states.

The platform also calls out Dodd-Frank, saying “we will also vigorously implement, enforce, and build on President Obama’s landmark Dodd-Frank financial reform law.”

To do this, Democrats would stop budget cuts and would ensure regulators “have the resources and independence to fully enforce the law and hold both individuals and corporations accountable when they break the rules.”

According to the platform, Democrats support an “updated and modernized version of Glass-Steagall as well as breaking up too-big-to-fail financial institutions that pose a systemic risk to the stability of our economy.”

However, Greg Valliere, chief strategist at Horizon Investments, isn’t so sure Clinton supports this.

“I just don’t think she’s that comfortable with going back to Glass-Steagall,” he told CNBC.

--- Read how the Republican platform could affect financial advisors.

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