The Obama Administration is following the poor example set by the Bush Administration’s massive deficit spending. To me, the only good politician is a fiscally responsible politician and they are hard to find. It should not be asking too much for a government to treat my tax dollars the way I treat my income. Weather you agree with the Iraq War or not, I feel the Bush Administration was wrong to fight the war and not cut expenditures in other areas, such as the space program. Just when I thought deficit spending could not get any worse the Obama Administration has been spending money at an alarming pace and could have our national deficit triple under his watch. This would crush the irresponsible deficit that Bush ran up. Here are some critical financial mistakes the Obama Administration is making:
1. The Obama Administration thinks their spending is equivalent to investing. They feel every dollar they spend will return more than one dollar into the economy. This is ridiculous! If spending really yielded gains then why not spend more? Simple, it does not work that way. Government spending in most cases is wasteful. The government is no different than a charity. Even a good charity only invests about 50 cents per dollar they receive for their charitable cause. The government is no different because they have a tremendous amount of overhead expenditures that limits the effectiveness of their spending.
2. The Obama Administration only feels this initial spending spree will double the national deficit. To come up with this number the Obama Administration is taking the rosiest numbers for economic growth. Most savvy financial people will use modest gains to calculate their financial situation. For example, when I am forecasting my future 401K sums, I use modest market gains of 6%. If I do better great, but I want to make sure I have a realistic plan in place to meet my financial goals. To show how deceiving projecting financial gains can be, an account that earns an average gain of 8% will double every 9 years, however an account that averages 6% will take 12 years to double. The Obama Administration should be reporting their budget numbers using more conservative estimates instead of deceiving the public.
3. The Obama Administration, just like the Bush Administration, has failed to take into account emergency funding when calculating deficit numbers. This was something that killed the Bush Administration’s ability to be financially responsible. During the Bush-era the United States spent more dollars for both global and domestic catastrophes as well as other emergencies than any other presidential administration in history. This included many hurricanes including Katrina, floods, forest fires, and many other natural disasters. This also included many global disasters such as the huge tsunami that hit Indonesia and the AIDS epidemic in Africa. Once again, a savvy financial person would have cash reserves of 3 to 6 months in case of an emergency. Not our government, we continue to spend money we do not have and operate without cash reserves in our budget to account for emergencies that will happen. For example, the current swine flu epidemic may cost us millions and possibly billions to treat and contain and it is not accounted for in the budget.
Can we please have a president and Congress that has some financial savvy instead of financial ineptitude?
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