Your Candidate Cannot Solve Your Financial Problems

November 3, 2008 by  
Filed under Debt and Credit, Spending

Change is Coming but Not in the Way You Might Expect

Election campaigns are all about calls for “change we can believe in,” a “new direction for America”, and “spreading wealth and prosperity to all Americans”  When I see or hear campaign slogans such as these, my reaction is essentially “blah blah blah.”  Other voters have different reactions.  Their thought processes go something like this:  “This candidate will get my vote because he will make changes to solve my financial problems.  More money is coming my way.  I will have less debt.  The government under this candidate will find me a better job and lessen my financial burdens.”  These voters are deluding themselves.  They have the same mindset as those who are mesmerized by preachers of the prosperity gospel.  So, they offer up votes to the candidate and money to the preacher.  In return they get ….. more of the same financial problems.

Yes, Mr. ToughMoneyLove is a cynic.  But as to this issue, I suggest that my cynicism is based in reality.  The reality and hard truth is that only we can solve our financial problems.  Oh – you disagree?  Let’s examine some of the money problems owned by these wishful thinkers.  

Your Consumer Debt

Maybe you have an oppressive amount of consumer debt in the form of car loans, credit cards, and the like.  Most of you have this consumer debt because you bought too much stuff.  Among the various lame excuses I have heard for overspending, “the government made me do it” is not one of them.  If you can’t blame the government for your spending, it’s hard to expect your candidate to cancel the results of that spending. 

Yes, the candidates are promising money to the middle class, including a $1000 “emergency energy rebate” from Obama.  You’re thinking that will help you wipe out your consumer debt.  First, if you have only $1000 in consumer debt, you don’t really have a problem.  More important, having excessive consumer debt is not an income problem, it’s a spending problem.  Unless you want your candidate to confiscate your credit cards or forcibly downsize the vehicles you own (I’m actually good with that if you are), your candidate is helpless to solve your spending problem.  Spenders need an attitude adjustment, not a new government. 

Your Mortgage Debt

Perhaps you have a mortgage that you cannot afford.  This is another spending problem but of a different magnitude.  There are lots of government solutions being floated around to help folks who are threatened with foreclosure.  If you are one of them, you might actually get some help so that you can stay in your house.  However, in a lot of cases, this will only mitigate rather than completely solve your problem.  And it may require you to go through a bankruptcy-type procedure to get that help.  If that’s what you consider to a “solution” (and I don’t) then I will concede the point.  But, what’s to prevent you from a having a repeat performance and once again entering the realm of being “house poor”?  Only you can prevent that, not your candidate. 

Your Job

Do you yearn for a higher paying job?  Or maybe a job at all?  Some voters have been enamored with the candidates’ calls for government creation of millions of new “green collar jobs” as a means to boost employment.  Sounds great.  You want one of those.  Now please ask yourself this question:  What the heck is a “green collar job”?  The candidates haven’t told us.  Why don’t you make a list of those “green jobs.”  I’m betting you can’t think of any. 

The only green collars I see in the workplace are in the military and on people who work in federal and state parks.  Maybe the candidates are thinking that “green jobs” are related to alternative energy technologies.  Fair enough.  Wind turbine designer?  Designer of alternative fuel vehicles?  Solar panel developer?  Those sound interesting.  But do you have an engineering degree?  No?  Then you aren’t qualified for those “green jobs.”   

Maybe “green jobs” are those that don’t require a lot of extra resources to perform.  That sounds like pure and simple manual labor to me.  If I am right, you have lots of competition from our neighbors south of the border for those “green jobs. ”  Those jobs don’t pay much anyway.  Indeed, the politicians have said that Americans won’t take those “green jobs.”  

The point is that the government does not have a supply of high wage jobs in storage- green, blue or purple – just waiting for the next President to come in and say “release those green jobs and start hiring all of my underemployed voters.”  It can’t happen and it won’t happen.  If you need a better job, find yourself some skills that are in demand.  Again, that’s on you, not your candidate. 

Your Taxes

Lots of promises have been made and expectations generated by the candidates in the area of tax cuts.  It just won’t work out the way you might think.  The government budget deficits are massive now and are expected to grow exponentially.  The projected fiscal gap between existing entitlement programs and current government revenues is huge.  The candidates have proposed adding to those entitlement programs.  Tax increases are inevitable.   Don’t take my word for it.  Ask any responsible economist. 

Don’t expect the “wealthy” to pay all those tax increases and make it easier on you.  There aren’t enough wealthy people to go around.  Moreover, a lot of the so-called “wealthy” taxpayers are folks that own the small businesses you work for.  If all of the new tax burdens fall on them, you might be out of a job.  No, folks, whether to pay for existing spending or new health care initiatives, taxes are going up for most of us. 

I could go on but I hope that won’t be necessary to persuade you that your candidate cannot solve your financial problems.  It’s all on you.  So please vote for someone.  But don’t choose a candidate based on expectations of seeing your money problems disappear.  You will most assuredly be disappointed.

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6 Responses to “Your Candidate Cannot Solve Your Financial Problems”
  1. My Journey says:

    Don’t forget that the President doesn’t affect much of the other “hot” issues.

    I always have to correct people when they think McCain is going to ride into office and make sure no woman anywhere has another abortion. He doesn’t have the power (by himself) to overturn the Supreme Court. Can he eventually? Maybe but very unlikely.

  2. Nicely said, but I just don’t think the message will soak in to the majority of voters. American politics is nothing but a sales game, and most people are dumb enough to buy into the hype.

    As for taxes, I anticipate the amount of tax conscious investing to reach astronomical popularity in the next few years. Muni bonds, or more specifically, muni bond ETFs will be very popular in the next few weeks.

  3. Matt – thanks. I haver been getting a lot of inquiries about muni funds. I will be interested in reading your views on tax conscious investing over the next few months.

  4. Trader Vic says:

    Great post, I love how you spelled this out so clearly. I’ve definitely gotten the sense from my Obama leaning friends that they expect the economy, by which they mean their personal financial situation, to get better if he wins. In contrast, my friends that own a small business expect to labor under a crushing burden of taxes if McCain loses. Unfortunately, I found this post too late to point everyone to it.

    Matt – taxes aren’t the only thing to think about regarding munis. While rare in the past, municipalities have been known to go bankrupt and Vallejo California did recently. Down here in the Dirty South, Jefferson County in Alabama came close (I’m not sure if they did) after losing a ton of money on interest rate swaps sold by J.P. Morgan. Who knows how many other jurisdictions got suckered into derivatives? I would do plenty of due diligence before getting into munis.

  5. Trader Vic – Well it’s official now. The good news is that it does not appear that the Dems gained a super-majority in the Senate so maybe there will be some limits on what they can do to us.

  6. @ Trader Vic

    Excellent point. I recall the CA municipality filing for bankruptcy several months ago, and that has certainly stayed with me because I’m still doing research to avoid such a loss.

    I’ll probably go with a Vanguard fund (VWAHX) because it’s so well diversified. I’ve been searching for a safety net for my cash reserves, so this might be it. I like a few of the Muni bond ETFs as well, but I VWAHX admiral shares have a very low expense ratio.

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