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Presidential Candidates And Personal Finance

by The Happy Rock on October 16, 2008

When I look at both Obama and McCain and compare them to common sense personal finance, I realize that both candidates are the same.  Neither of them get it.  Both candidates have plans that are so far away from fiscal responsibility that it scares me.

Let’s take a glance at how the candidates stack up against some basic tenants of personal financial success : personal responsibility, spend less than you earn, get out of debt, have an emergency fund, and make your money work for you.

Personal Responsibility – I think the ridiculously huge pork laden bailout bill says about all we need to know on this one.  Neither candidate is willing to let people(both businesses and consumers) be responsible for fixing their own mistakes and finding their own solutions.  Both Obama and McCain pushed for the bill, both want to give ‘free’ money to people who don’t deserve it while the responsible Americans foot the bill.  Neither candidate seemed to care about the extra 100 billion dollars that was added in order to get the bill passed.

Not once did Obama or McCain or anyone in government mention that they did anything to cause the problems.  No mention of a ludicrously complex and shifting tax code, no mention of the Federal Reserve’s tinkering with rates and printing money from air, no mention of their own egregious spending, no mention of their lack of oversight in places they had promised to oversee and too much regulation in other places, no mention of any personal behavior change and no mention of encouraging change in our own citizens.

Spend Less Than You Earn – Both candidates want to cut taxes(decrease income) and significantly increase net(added in edit) spending.  The plans of both candidates are set to add trillions to the national debt.  Even in the debates both candidates refused to supply any hard answers to how they would pay for the bailout bill and the rest of their spending and income reductions(added in edit) through reduced spending elsewhere.

Let’s bring both candidates plans down to the trenches where Joe the Plumber lives.  Imagine a dual income family in $100,000 of consumer debt.  The husband decides that he is going to quit his plumbing job so that he can spend more time spending money on his personal hobbies.  How long do you think it will be before their house of cards comes crashing down and the debtors that they are enslaved to come to exert their power?

The concept is simple, but it takes real behavior changes and dedication to make it actually happen.  You also can’t cut your income until you stop your spending.  People must control their spending before they have the luxury of willingly reducing their income.  That is part of the burden that debt shackles you with.

US-debt-graphGet Out Of Debt – Just the bailout bill alone was a thumbs up for probably a trillion or more of new debt.  This means borrowing money from our ‘friends’ who we willingly give more and more control too or printing more money out of thin air which destroys the value of the dollar.   The US gross debt has not gone down since 1961.  The interest on the US debt was $239 billion in 2007 and 2008 which is 10% of the budget and the fourth biggest overall expense.  I haven’t heard anything from either candidate that has attacked this serious issue in a meaningful way.  Even balancing the budget just means you are treading water not actually reducing debt and neither candidate has given serious time to pledging to balance the budget.

Have An Emergency Fund – Nope nothing.  Both candidates are content to fund their spending through debt and to use debt to solve problems.  Personally, having a fully funded emergency fund was the single most gratifying and freeing financial accomplishment of my life so far.  Both candidates seem content to decide to spend trillions of dollars with a only a few days of planning when a crisis arises.  Not much thought is given to avoiding financial disasters and certainly not to a nest egg to fall back on.

Make Your Money Work For you – Unfortunately when you are spending 10% of your yearly budget on interest from debt your money has a lot of inertia to overcome.  What happens when the spending doesn’t produce the desired results?  Spend more?  What kind of returns on investments are the candidates talking about with their massive spending plans?  Social security, is that working? What thoughts are being given to the future and where will be financially in 20 or 30 or 40 years?  I haven’t seen anything in the either plan that gives me any confidence that they are planning for anything other than the next 2-5 years.

Ok, so neither candidate could pass a basic personal finance test, what can we do about it?  Take responsibility for your own behaviors that is the only thing you can do.  Complaining, whining, or hiding your head in the sand will not get us anywhere.  First, continue to live by these principles.  Fight to get and stay out of debt, free yourself for bigger things, and prepare for the future.  Help those in your sphere of influence.  Shop at stores and businesses that support these goals.  Talk about these things with each other and help spur one another onto bigger dreams.  Finally, realize that our government system was designed to try and keep power as close to the people as possible.  The bigger the federal government gets the more power you lose, so start writing your representatives.  Speak up and speak out.  Don’t stand for business as usual or you will get the same results.  Let your parties know what you want and get others to join with you.  When enough people make waves government officials notice, after all they need to get elected.  Businesses notice because they want profits.  There isn’t any other empowering choices other than taking personal responsibility for the situation.

*Source note – Wikipedia has a nice living document that compares the two major and four less publicized candidates on a broad range of issues – Click Here to view

{ 6 comments… read them below or add one }

Thecpa October 16, 2008 at 7:51 pm

Happy Rock,

Well said! Wouldn’t it be wonderful if we could amend our constitution to forbid anyone who has held office inside the beltway from being allowed to run for president of this wonderful United States. They go to Washington and end up corrupted and out of touch with the basics that you have so clearly outlined in this post. There should be term limits set for both houses of congress. Career politicians are bad for our country and the citizens.

That said, I think you may have lumped the two senators running for president together much too hastily. From what I have gleaned from the debates and information I have read, Senator Obama is definitely going to raise taxes especially on the small businesses and corporations that provide the jobs to our citizens. Senator McCain will not raise taxes on anyone, be it individuals or corporations especially in a recessionary economy. That is a big difference in my book. If an employer has to pay higher taxes it means that the employees are not going to get better pay and benefits. In addition, the goods and services will cost more to the consumers since that cost will have to be passed on. It’s a double whammy on the employee/consumer. The United States of America has the highest corporate tax rate in the world. Is it any wonder that the corporations have fled overseas and taken American jobs with them?

This election cycle has left me with a bad taste in my mouth. At this point, the thing I’m looking forward to is November 5th. And a pox on both their houses.

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Decleor October 17, 2008 at 6:38 am

Being out of touch with the basics seems to be a qualification that all presidential candidates must have – sadly. I think that each should undergo a simple test to find out if they could balance the budget of many low-income households. If they can’t do it they should stand down.

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Ed October 17, 2008 at 10:04 am

The American people need to stand up and demand reform on these earmarks and Lobbist. The earmarks are like pick pocketing the taxpayer. While, JM is not my most ideal candidate, he is much better than BO.

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Ed October 17, 2008 at 12:41 pm

Another thing. As far as financial stewardship of the country is concerned, we just need a prez who is willing to veto spending bills. BO’s answer to every problem is spend more.

It doesn’t matter how much money is in the budget (whether taxes are cut or raised). Congress spends money we don’t have, then they borrow to pay for their spending habits and stupid pork projects.

What I’m trying to say, is that this problem is bigger than just JM or BO. All of the bums in Washington need to detox from the spending binges.

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The Debt Defier October 17, 2008 at 9:19 pm

I don’t know about the rest of you, but I’d love to ONLY pay 10% of my budget on interest. Hopefully soon I’ll be able to say that.

Anyway…

The Wikipedia page was interesting. Here are the candidate’s pages on this topic:

McCain
http://www.johnmccain.com/Issues/JobsforAmerica/reform.htm

Obama
http://www.barackobama.com/issues/fisc

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The Happy Rock October 18, 2008 at 10:42 am

@Thecpa – Part of the point is that cutting taxes in the short term just creates more debt. Until we elect people into office who are willing to spend less than the government takes in, cutting taxes exacerbates the problem in the short term. I want smaller government and less taxes as much as anyone, but in real life you don’t cut your income until you you get your spending under control and change your behavior or else you will end up in worse shape. Republicans love to cut taxes, but the debt also skyrockets because they spend like crazy. The whole point is that we can’t settle for either, because they are both bringing us to the same place.

@Ed – Obama wants to through money at problems, but isn’t that we McCain has done on the major issues? Iraq, cost us how much? How about the bailout? McCain had a great chance to assert great leadership there, but instead he was a weak follower that threw a trillion dollars of debt at the problem and kept his ‘veto’ in his pocket. Wouldn’t it be better to come down strong on the major problems, rather than say you would veto ‘pork barrel’ spending which is minuscule compared to a trillion dollars? It might have cost him the election.

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