The Case for a Third Party Now
America’s Economic Future Depends on Breaking the Two-Party Deadlock
America’s core economic problems—student debt, health care costs, retirement insecurity, and Social Security’s looming shortfall—remain unsolved because neither political party is capable of addressing them. Compounding this failure are broader issues: political extremism, institutional erosion, and a Congress unable to govern. This essay explains why the center of the electorate is now politically homeless—and why a viable third party is becoming a necessity.
The past decade has made one thing painfully clear, at least to me. America’s two-party system is no longer capable of addressing the domestic economic and financial issues that matter most to ordinary citizens.
This appraisal of the performance of the two-party system starts with my area of expertise – issues like student debt, health care, retirement savings and Social Security – impacting the solvency of American households. This political assessment also considers other failures in economic policy, America’s retreat from the world and the growing dysfunction in Washington.
Lack of progress in four policy areas central to my economic research – student debt, health care, retirement savings, and Social Security solvency -- directly threaten the financial resilience of American households.
Biden, pushed by progressive demands for free college, pursued legally fragile mass discharges rather than structural reform. Trump’s proposed changes to repayment rules would make it harder for borrowers to build retirement savings.
Biden extended the Affordable Care Act premium tax credits but made them temporary, while progressives continue to push for Medicare for All. Trump’s agenda—cutting Medicaid and allowing ACA subsidies to lapse—would significantly increase the number of uninsured. In hindsight, making the ACA tax credit expansion permanent should have been a higher priority than other spending initiatives.
The bipartisan SECURE 2.0 Act does little for the roughly 57 million Americans without access to an employer-sponsored retirement plan.
Neither party is willing to accept the basic arithmetic of reform. Republicans refuse new taxes; Democrats oppose benefit adjustments. Every year of delay increases the fiscal cost and ensures harsher, more abrupt fixes in the future.
A third-policy proposal outlined in the paper, How to Make Americans Financially Secure Again, could actually do what it says – Make Americans Financially Secure.
Neither party is willing to confront the federal deficit or long-run fiscal imbalance. Both parties now routinely campaign on permanent tax cuts, unrealistic spending promises, and the fiction that economic growth alone is a viable long term solution, a conclusion not supported by basic arithmetic.
We now have a bipartisan commitment to short-term politics over long-term solvency—an approach that threatens household financial stability through higher borrowing costs, weaker investment, and growing vulnerability during economic downturns.
These policy failures would be troubling in any era, but they are now compounded by a deeper political breakdown. Both parties are increasingly dominated by their most ideological factions—MAGA activists on the right and progressive activists on the left leaving a substantial portion of voters politically homeless.
Primaries are producing nominees out of alignment with the country’s broad center; Congress is gridlocked even on basic governance; and neither party shows the capacity or the will to solve long-term structural problems.
We now have, as demonstrated by the recent pointless government closure, complete paralysis. It is useful to ask how will Congress deal with the pending automatic cuts to Social Security Benefits (projected to happen in 2033), while simultaneously debating a government closure? How long will that closure last? Will one side blink and sign off on either a large tax increase or a benefit cut or is the eventual outcome finance the current benefit and incur more debt.
The issues in the headlines foreign policy, immigration, tariffs, spending proposals and a general lack of civility have made it very difficult for many voters to identify with either political party.
Both parties now contain vocal isolationist factions; both have elements that undermine essential institutions such as Federal Reserve independence; and both tolerate forms of political extremism even racism or blatant antisemitism.
The cumulative result is a political landscape in which voters who value pragmatism, liberal democracy, international engagement, and institutional stability increasingly find themselves without a political home.
Based on the choices both parties are making—and failing to make—I have zero confidence that our existing political system, as currently dominated by Democrats and Republicans, can meaningfully solve foundational economic problems. And given the accelerating political dysfunction, the need for an alternative has shifted from theoretical to urgent. This creates a rare and important opportunity: the emergence of a viable third party.
Authors Note: This essay is the first installment of a series of memos outlining both the case for the emergence of a third party and the political strategy which will lead to the realization of this goal. The next essay will outline the path towards the emergence of a viable third party. SPOILER ALERT: It involves winning control of the House of Representatives. You can learn about and support this effort by becoming a paid subscriber to this blog. Use this coupon.
https://bernsteinbook1958.substack.com/subscribe?coupon=4d9daaf9
The blog has a lot of material on various economic topics designed to both inform readers about their personal finances and policy makers and voters on how best to improve the world. Here is a recent example with implications for both personal finance and public policy.
The Life-Cycle Inconsistency at the Center of U.S. Saving Policy