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.
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.