What Obama-nomics Means for Your Wallet
That we are in the midst of crisis is now well understood. Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some but also our collective failure to make hard choices and prepare the nation for a new age.... Starting today, we must pick ourselves up, dust ourselves off, and begin again the work of remaking America.
- from President Barack Obama's inaugural address
To combat the current financial crisis, President Obama and his team are pushing forth an aggressive economic agenda. How will President Obama's short-term attempts to jumpstart the economy and his longer-term attempts to put our nation back on a path of secular growth affect YOUR personal finances?
In the short-run, you will likely see pennies from heaven. The House Ways and Means Committee has released the details for the portion of the $825 billion Economic Stimulus package it is responsible for (i.e. the tax - as opposed to the spending - components). In the coming weeks, as this proposal works its way through the legislative process, we will hear much about tax cuts for the middle class, tax credits for higher education, and help for first time homeowners. But what does all this really mean for YOU? Simply put, it means you will have more money to spend in the near term. Your challenge will be to spend it wisely. To brush up on your financial skills, check out the government's financial literacy website, MyMoney.gov. The President's Council on Financial Literacy is working hard to make this a nationwide clearinghouse for basic financial information.
Over the longer-run, we will all be required to make sacrifices. President Obama has repeatedly commented how the financial dreams he has heard from Americans are remarkably similar across economic, ethnic, gender, geographic, and even political lines. People want: (1) to earn fair pay for fair work, (2) to have access to affordable education & health care, and (3) to be able to retire with their dignity intact. These are his ultimate economic end goals. The fact that this administration is able to so clearly articulate their broad vision of financial nirvana right out of the gate dramatically increases the odds we will get there. What this means for YOU is that you will have to be patient and flexible as these initiatives work themselves through the legislative process and into our economy. We've gotten very used to instant fixes in America, and this isn't going to be one.
Most pundits agree that the "housing crisis" is one of the first items that must be addressed to get our economy back on stable footing. We concur. See our previous post entitled "Help For Homeowners? Try Financial Fishing Lessons" for further details. To round out our discussion on Obama-nomics and your wallet, we'll wrap up with our three favorite (longer-term) proposals mentioned by the Obama team during the campaign.
1. UNIVERSAL MORTGAGE CREDIT that will broaden the financial benefits of homeownership - People often say home ownership is so wonderful because of the "tax benefits." Yet at present the mortgage interest deduction only kicks in if you ITEMIZE your tax return. Alas, 2/3rds of Americans take the standard deduction and thus miss out on this benefit. Team Obama supports a universal mortgage credit available homeowners who do not itemize. If you buy a home you can afford, this means YOU'LL participate in the American Dream not the American Scream.
2. CREDIT CARD BILL OF RIGHTS that will protect consumers - Team Obama supports such steps as eliminating the universal default clauses (which allow lenders to increase your interest rate if you are late on any of your bills), prohibiting interest charges on late fees, and requiring the prompt crediting of cardholder payments. This means if you use your credit card responsibly, by paying off the balance each month on time and in full - it can once again be YOUR friend and not your foe.
3. SIMPLIFYNG THE TAX FILING PROCESS so there are fewer headaches in April - Team Obama has also stated an intention to simplify the tax filing process, so that millions of Americans can do their taxes in less than five minutes. By enabling the IRS to use the same information it is already getting from banks and employers, taxpayers would have the option of accessing pre-filled tax forms that they can verify, sign and return. Experts estimate that this proposal will save Americans up to 200 million total hours of work and mental angst. And YOU can use that extra time to set a realistic budget & reassess YOUR asset allocation.
Manisha Thakor & Sharon Kedar are the co-authors of ON MY OWN TWO FEET: a modern girl's guide to personal finance.
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My 8 year old nephew and all his friends use the term "Free Marketed" when someone steals their video games or hoards food.
Classic!!
Hilarious!
The trolls here have a common theme - to reject any help given to Americans citing "moral" issue. This is after they were *dead-silent* while $1.4 trillion was *given* to the wealthiest banks ($375 billion paid out in dividends to date to a handful of investors = money *won't come back*)
Love the bankers, love Asia, but hate Americans. That's the consistent "Conservative" message during all of this.
Most the money was given to the banks that required the most capital. I guess by "wealthiest banks" you meant the biggest financial institutions because many of the most trouble institutions are not banks (but investment banks, insurance companies, and Fannie Mae) and are now far from being wealthy (many are practically insolvent and worthless). Dividends are paid to all shareholders (if they're paid at all). A cut in the dividend results in a lower shareprice and takes away each companies ability to raise private capital by selling more stock. I don't understand why the word "conservative" is being used here as there is nothing conservative about not allowing our financial system to collapse.
--"Most the money was given to the banks that required the most capital" Most capital for what? You're argument is the financial equivalent of:
"We gave most of the money to the fat kid because he's a 'growing boy'"
These Straussian talking points are lame, old and Limbaugh needs to get some new material.
Substitute "money" for "pizza"
None of the money spent in the Stock Market goes to the companies. It only goes to investors. Dividends will be cut back.
I know who Chavez08 refers to when he says "conservatives:" it's all those Republicans who have decided they never saw an unregulated payment -- bailout -- to the wealthy they did not like, and act like helping the rest of us is "mornally" wrong.
1. There aren't any real tax benefits to a homeowner: even if you take the interest deduction/taxes on your return. You end up spending (ie) $8,000 in interest/taxes to get a couple of hundred dollar tax break. Same went for the energy deduction: spend $7,500 for windows and get $200 back. Just trying to maintain a home wipes out any tax benefit. We buy a home for "peace of mind," that's about it. And if you own your home outright? No help at all....
2. Some ideas are good, but common sense and watching any personal finance infommercial and they'll tell you to pay off your credit card every month.
3. Yep, some people have been fighting for a flat tax or some other type of alternative and all it's gotten is worse. Millions of people now can do their taxes in under five minutes because they have nothing left!
The bankers are sooo desperate to keep Americans poor and enslaved, they are actually paying MORE trolls to spew their Reagan-era "Free Market" fairy tales.
Ironic, - these trolls are paid by the same bankers that blackmailed Americans for $1.4 trillion with NO STRINGS ATTACHED (through their henchmen Republican politicians)
That's right! - Tax payers are paying for these trolls, folks. Better enjoy the entertainment.
There are over 8.1 million people who currently work in the financial sector. Are they all "trolls" and do they really just want to keep Americans "poor and enslaved"?
You protect your own interests. Just like those in the insurance industry loved Bush. Your personal bread-buttering in your 1% world is more important than the rest of the world.
While your industry was cleaning-up on predatory loans possible due to monopoly control, - you were all Free Market bible thumpers. But when the laws of Free Market threatened your monopolies, you ran to Karl Marx for "Selective Socialism"
Your industry is run by leeches, organized criminals without the flare.
Its a silly article. There are lots of injustices in the business world. Lots of regulations need to be fined tuned. However, they will not affect the current economic situation.
Consumer friendly credit cards is a good idea. I pay 0% for my credit loans so I assume that someone else is getting shafted with 30% interest. That needs to stop.
The home mortgage interest deduction is there to promote home ownership. I'm in Real Estate and I don't like it. Its not fair to renters. Its one of the biggest tax loopholes for middle and upper income people. Get rid of it. Don't add to it for short term political points.
Finally the IRS. 60% of the questions asked on the IRS hot line are answered incorrectly. Now you want them to file your return for you?
How complicated are the IRS rules?. Go to IRS.gov. and click on forms and instructions.
Look at the number of forms they have. Each one is due to a tax law.
Need a tax break ? Try finding a form that entitles you to the break. Good Luck.
Excellent points. This is definitely a subject that has significant impact on wealth which hasn't seen too much light.
"Over the longer-run, we will all be required to make sacrifices"
The takers of government services will not make any sacrifices. If they did, the democrat party would be doomed.
"UNIVERSAL MORTGAGE CREDIT"
This would be a tax cut for middle and upper wage earners. Ain't gonna happen in this administration.
"if you use your credit card responsibly, by paying off the balance each month on time and in full - it can once again be YOUR friend and not your foe"
That would already be the case wouldn't it? Key word is responsibly.
"SIMPLIFYNG THE TAX FILING PROCESS"
Have no idea how this would stimulate the economy but I do like it. Would prefer a national sales tax and no income tax more though.
I read your talking points and I'm reminded of all the Friedmanite bantor of the 80s that proved to be a scam. The kind of system proposed by economists (world-wide, eh-hem) is close to the same system we had from the late 30s until the 80s when Reagan replaced it, under cover of fog and rhetoric, claiming it didn't work but both scientific and anecdotal analysis showed it worked well for most Americans for longer than any economic system in history.
What you are pushing is the same, failed neo-classic economics engineered in the 1700s (brought the Gilded Age and the Great Depression - few literally "burned" money and the rest died of the flu or went to prison for stealing food) and has no relevance for modern civilizations. Look around you at the collapse of our country under the ignorance of believers of Friedman, Mises, Rand, - even Greenspan is admitting Supply-Side/"Free Market" failed (and he was a FRIEND of Ayn Rand)
If you still (honestly) believe in Free Market Capitalism, I have big fish to show you in Scotland.
mauibob makes some very good points. Since when do those on the govt dole make sacrifices? Why would they? Most workers and companies that receive govt funding simple become a key political constituency of ever greater govt spending, and that constituency forces the hand of politicians - if they want to be reelected that is. The point about the mortgage credit is also good as the higher the mortgage, the greater the tax benefit. Regarding credit cards, they don't increase rates (at least not that I have knowledge of) on folks who miss one payment. They increase them on folks who are chronically late in making their payments. Why are credit card companies the bad guys and not the folks that can't make their credit card payments? And how is this "Friedmanite bantor"? I don't see what Friedman has to do with any of the issues talked about above.
"In the short-run, you will likely see pennies from heaven"
Only if you are in the bottom 40%, Do not smoke and do not drive a car. Congress will be raising dramatically taxes on cigarettes and gas.
"(1) to earn fair pay for fair work"
This is determined by the free market. Unios are proof that anything else ends up costing jobs by sending them oversees or through bankruptcy.
"to have access to affordable education & health care"
We already have access to affordabl education. The big problem is many have no desire to be educated and the those teaching, too many times, should be at the other end of the classroom. Health care is expensive as a direct result of governemnt intervention. The governemnt does not pay fair market prices for those under government care, thus leaving the uninsured and insured to pay the balance. If the government paid the same rates as insurance companies, there would be an immediate drop in costs to both insured and non insured.
"to be able to retire with their dignity intact"
Does anyone really believe governemnt can do this? With the inevitable failure of the grandest ponzi scheme of all time, social security and the inabilty of government officials to honestly face this crisis, many will retire with nothing when it does finally fall.
Sounds good.....w
Since none of the above seems to apply to me, I have a strong feeling I won't be feeling a thing. That's what you get for being in the middle...
You certainly have the right bearing on the financial and economic crisis: "Most pundits agree that the "housing crisis" is one of the first items that must be addressed to get our economy back on stable footing. We concur." After looking hard for months, I haven't found anybody who has proposed a fair, effective, practical plan to quickly stop the multi-faceted crises.
Some 25% of homeowners now have zero or negative home equity. They can't refinance out of a bad loan or sell the property without a short sale. The problems with their lenders and all mortgage investors are symptoms of the borrowers' problems. It can't be fixed by bailing out only the lenders' losses a la TARP. There's a long list of reasons why the crisis will intensify.
Unless an effective plan specifically designed to reduce existing bad mortgage debt is implemented soon, the financial disaster ahead will be monumental, as if it isn't already. We've designed a fair, simple plan to rescue residential real estate borrowers that relies primarily on long-term, low-interest loans from the government to borrowers and their lenders to relieve excess mortgage debt, with equal access to loans for other purposes for adult citizens who do not have a mortgage or own a property. The plan will require about $2.5 trillion of loans (not handouts) to individuals and mortgage holders of which $350 billion could come from TARP funds. Please support The AllStreets Bailout Plan at http://www
So wait... do I see this right, we got into this because of bad loans, and now, to get out of it, we should give out another $2.5 trillion in unsecured loans?
How does that work, logically? We put another $8,000 of debt on every man, woman and child, to be paid off by some future miracle?
You must remember that our mortgage lending system has the premise that home values will be stable and very rarely will they fall. Thats a premise that lenders base their loans on. When values fell, the entire paradigm collapsed.
By stabilizing the values, the banks balance sheets will improve, economic activity will improve, and we will get back to normal. Once that is done, we can fine tune the system to prevent this from happening again.
Ask your friends at Citgroup.
government intervention got us in this mess as the free market would have never allowed these loans to be made in the first place. government will not get us out of this. Why reward those that didnt or couldn't make the payment because they acted irresponsibly and penalize the rest of us by forcing us to pay the bill?
Funny, I don't remember seeing your name pop-up all over the blog when Dubya and the Toyota Republicans were giving $1.4 trillion to the banks with no strings attached.
Were you posting by another name?
I don't think the 25% number you quoted is accurate. I know about 30 to40% of all home owners own their homes free and clear.
That would mean that close to 40 to 50% of people with a mortgage are in trouble.
In my neighborhood, I don't think anyone is in trouble. To be upside down you would have had to borrow money against your house during the past 5 years. And it would have had to be a non conventional loan ( less than 20% down).
Foreclosures have gone from about 1% to 2 or 3% in the past year. Thats a 200% increase but its still only 3%. It will fall because no new loans are being made that will be bad loans.
A pretty shallow explanation. Actually, in the long term it will mean we'll be paying more taxes because we'll be tackling the debt incurred by the immediate, much needed stimulus packages. That's okay with me. I'm willing to pay if President Obama can get us back on a solid, responsible track.
All of this is premised on the idea that the Treasury can issue trillions of dollars worth of bonds at record-low yields before the Treasury bubble collapses and we discover the enormity of the inflation that has been perpetrated by the Fed under the cover of an busted asset bubble intentionally misreported as deflation.
Governments don't rule the world. Bond markets do. Voters may not be capable of telling their government when they've had enough, but fund managers will. Once they realize that reserve currency (M0) inflation has soared to 98.9% and rising as of December, suddenly a fixed income of 0.14% won't seem so appealing.
President Obama has the best political instincts of anyone to serve the office in a long time, but if there's anything that we learned from the Bush administration, it's that the president can't overcome indomitable force of reality. Reality is going be a bitch for Obama, and he knows it. This isn't going to turn out anywhere in the general vicinity of how he envisioned it would be. He signed up to be leader of the free world. Instead he'll preside over global economic chaos and financial revolution.
What does Obamanomics mean for your wallet? By the end of the year, nobody will accept dollars as payment.
No worries, mate. They're just copying/pasting from Obama's press releases. The core assumption here is that people will spend those "stimulus" checks as fast as they get them to keep the consumer economy going. This is, of course, a bogus assumption. Most people took the last check they got and either (a) stuck it in a CD, (b) paid off past due bills, or (c) bought a gun.
A gun AND ammo thanks!
So true..no one talks about the follow up report from the last stimulus check and where it went for individuals. Pretty much your list and it did what again???? But it will diffferently this time because it has Obama in the name.
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