Today is Election Day, and I encourage you to get out and vote. It is important to think about who you are voting for, both in the national offices and in the local offices. Actually, who you put into your local offices may affect you more overall than who wins the presidency.

But this election is one of the most important we’ve had (and the most important in my lifetime), since it really could affect us on a personal level. Indeed, worries about how policies of John McCain or Barack Obama could affect the economy and our personal finances is why the economy is the #1 issue for most people in this election. A great many people are voting with their wallets. If you plan to vote with your wallet, you need to decide whose policies are likely to benefit you most

My most important issue in this election is health care. Of course, health care is a very big wallet-type issue. We have serious problems that need to be fixed with health care. But education, the economy and energy are all important to me as well.

What’s the most important issue for you in this election?

We all knew that we would have to borrow more money to fund the $700 billion bailout (that will really cost around $2 trillion or $3 trillion). But it’s not pleasant to see the numbers out there in black and white. (Or red. Blood red. As the case may be.)

$550 billion

That’s how much the government says it is borrowing in this quarter in order to meet the gargantuan obligations it has given itself. The first quarter of next year, reports CNN Money, is expected to see another $368 billion in borrowing.

It doesn’t matter who wins tomorrow’s election: Higher taxes are inevitable

With all of this, it does not matter who wins the election tomorrow. Neither Barack Obama nor John McCain is likely to be able to keep pledges of lower taxes for the long term. Although the winner may wait until term #2 (if it happens) to raise taxes. At the very least, I’m not sure that tax cuts for anybody are feasible — even if taxes aren’t raised in the next 8 years.

It is also quite apparent that a number of campaign promises just aren’t going to happen.  Programs that both John McCain and Barack Obama want are not very realistic right now. There’s just no money. And the money that the government keeps borrowing is being funneled to companies.

Yesterday, Barack Obama unveiled six proposals that he claims will help the economy (especially ordinary Americans affected by the current situation. This morning, John McCain revealed a couple of his ideas regarding the economy at a campaign stop in Pennsylvania. While plans offered this morning from the current administration focused on helping banks get through the credit crisis intact, Obama and McCain are bent on wooing voters with promises of policies that will help the struggling middle class with their personal finances.

Tax proposals

For the most part, both of the plans hinge on taxes:

• John McCain wants to reduce the tax rate on early withdrawals from IRAs and 401(k)s while temporarily waiving the 10% early withdrawal penalty. (Obama wants to waive the penalty, but has not expressed a plan for lowering the income tax on such withdrawals.)
• Barack Obama wants to give companies a $3,000 tax credit for each person hired. His reasoning is that it will encourage employment at a time when the jobless rate is on the rise.
• John McCain wants to slash the long-term capital gains tax for 2009 and 2010. That way, he insists, more people will want to invest and save. Plus, in theory, more people and businesses will sell their shares in order to take advantage of the tax treatment, and that will result in a chunk of capital that can be used for other things.
• A tax write-off acceleration for those forced to sell in the current market is also being encouraged by McCain.

The rest of Barack Obama’s propsals

While John McCain’s new details pretty much stop on new tax breaks, Obama outlined a few more points:

• The Federal Reserve should be able to lend to state and local governments in order to increase liquidity on a local level.
• Unemployment benefits should be extended by 13 weeks. (Benefits would be exempted from income tax.)
• In addition to removing the early withdrawal penalty on up to $10,000 from retirement accounts, Obama proposes that seniors, on a temporary basis, not be forced into taking the minimum disbursement at age 70.5 to give accounts time to recover from the ravages of the stock market.
• A 90-day moratorium on foreclosures from institutions that take advantage of government bank rescue programs.

While I think that many of the measures proposed by both candidates would help ease things for regular people, I am a little wary of the idea of waiving early withdrawal penaties from retirement accounts. After all, now is not a good time to draw down what capital remains in the account. I am also wary of extending unemployment benefits, as well as skeptical about how much slashing the long-term capital gains tax would actually benefit ordinary folk.

What do you think of the proposals offered by the presidential candidates?

Most of the questions during last night’s presidential debate dealt with the economy. One of the issues that I find a major part of the economy is health care. Personally, I think that we should have universal health care. But that’s just me.

Anyway, the plan laid out by Barack Obama offers the closest thing to universal health care that we are going to get. Contrary to popular belief, Obama does not propose that the government completely take over health care. He does propose that ordinary Americans have access to *gasp* the plan that our elected representatives have access to — effectively lowering premium prices since private insurance companies would have to compete with the rates offered by this other plan.

Obama also proposes that small businesses of a certain size provide health care coverage. If they don’t, a fee would be charged to help cover the cost of health care. However, a very generous tax credit would be offered to small businesses to offset these costs. Besides, most small businesses would not, in fact, be affected by Obama’s proposed changes.

Obama also thinks that it’s a good idea to make sure, if nothing else, that all children get health care.

John McCain’s health care plan

For the most part, John McCain’s health care plan would be pretty much status quo. He would allow shopping across state lines, and he does say that he would offer a tax credit. However, he would tax employer-provided health benefits as income. While Obama exaggerated this effect by calling it a tax increase, the truth is that (initially) it would result in — at worst — effectively maintaining costs. The problem with John McCain’s plan is that if (and it’s likely) health care premiums rise, the benefit values increase, and so does the income tax on the benefit. Then the law would have to be changed to increase the tax credit. Or it really would be like increasing taxes.

John McCain would freeze (or maybe even cut) Medicare spending as part of his health care. Barack Obama just sort of sidestepped the question and tried to avoid entitlement spending altogether. Of course, if we had universal health care, Medicare would be a non-issue and the whole health care system could be overhauled to be more cost efficient.

I also agree with Obama on his plan to use an energy economy makeover to help fuel the economy.

One of the more interesting things I read this morning was a piece over at BloggingStocks about investment vehicles known as credit default swaps (CDSs). These little investments, along with CDOs, are among the reasons that we are having a major meltdown on the stock market this morning.

Here’s why: CDOs and CDSs are major reasons that mortgage lenders started going crazy with approving borrowers. These investment vehicles made it very easy for banks to package their loans into securities and transfer the risk elsewhere. Loan officers get the commission, investors get the risk.

Nice.

And one of the architects of the CDS craze is Phil Gramm, who helped draft legislation as a member of the Senate that allowed these vehicles  (which Warren Buffett calls “weapons of financial destruction”) to take widespread root and avoid serious scrutiny. For those of you political junkies who think that the name Phil Gramm sounds vaguely familiar, here’s why: He’s John McCain’s former top economic advisor. (He resigned after calling the economic troubles a “mental recession” and saying the U.S. is a nation of “whiners.”)

Obviously, Phil Gramm is not solely responsible for the current conditions. There is plenty of blame to go around. But he clearly thought that CDSs were good economic policy. BloggingStocks pretty much summed up my feelings perfectly with this particular observation:

One thing is clear. If you think America is a nation of whiners and this is a mental recession, I strongly urge you to vote for McCain. But if you take a look at how much you are paying at the gas pump, how much of your retirement will be wiped out in the months ahead, and how you will pay all those bills as the unemployment rate climbs higher, it might be worth considering whether you can afford to elect a man who relies on Phil Gramm for economic advice.

Right now, with the economy struggling and household budgets slowly imploding, many people are concerned with what the presidential candidates will do for their personal bottom lines. Indeed, the flap over who is a “financial elitist“, and who is more likely to understand “ordinary” Americans on a personal finances level is becoming one of the issues of the presidential race.

I’m interested in your thoughts on this: Who will better for your personal finances: John McCain or Barack Obama?

Vote below (or in the sidebar), and even leave a comment if you would like to elaborate.

One of the big flaps of the John McCain campaign was his recent ignorance regarding how many homes he owns. After doing his best to paint Barack Obama as an elitist (for some reason, we as Americans really, really hate it when people are “elite”), it turns out that John McCain is pretty elitist himself.

The Washington Post has this quote from the Obama campaign regarding John McCain and his homes:

“The fact that John McCain can’t keep track of how many houses he owns is a telling moment that helps explain why he thinks ‘the fundamentals of our economy are strong’ and why he’s just offering more of the same economic policies that we’ve gotten from President Bush for the last eight years,” said Sen. Barack Obama spokesman’s, Hari Sevugan.

Really, his wife technically owns the bulk of the property, but the fact remains that he is certainly reaping the benefits of the good life. Americans care about that sort of thing.

After all, part of the reason that George W. Bush got elected was because he presented himself as someone that “you could have a beer with.” It didn’t matter that he was filthy rich, a Yale man or that he had been living it up — because of the image he presented. So, with the economy front and center, and with people looking at their personal finances, the elitist image raises it’s head again. Only this time it’s not about preferred alcoholic beverages, perceived intellectualism or being a down home kind of guy.

It’s all about who can better sympathize with the financial plight of the ordinary American.

But what makes one a financial elitist? Is there a number that you pass in terms of dollars that makes you “rich”? (There’s an interesting discussion about this at AllFinancialMatters.) Or is being rich merely a state of being, in which you have enough for your needs, many of your wants and some left over to provide for the future?

The other question you have to ask yourself, in terms of your individual financial situation, is this: Who will better understand your personal finances? Both of the presumptive presidential candidates are probably wealthier than you in terms of net worth. It goes without saying that neither can probably really relate to your financial situation.

But, do you think that one of them has a better grasp of the situation and what can be done to help the economy?

image credit: U.S. government

Right now, there is a lot of focus on the economy, and on how the economy affects personal finances. This is a Big Deal in this year’s election. The major presidential candidates, Barack Obama and John McCain, are bending over backward to convince us that each of them has the right idea when it comes to the economy — thus affecting your personal finances as well.

While taxes have been getting a lot of play (John McCain has decided that the Bush tax cuts for the wealthy — which he opposed — should be made permanent), there is another proposal that hasn’t been getting as much press: Barack Obama’s idea to boost the infrastructure.

Could improving our infrastructure improve the economy?

In a rather practical burst of insight, Barack Obama points out that creating new jobs for people would help the economy. But what would be the point of new jobs that are just, in effect, busy work? What if *gasp* new jobs were created to benefit the country overall?

Read more

I got this great question recently from a reader:

I really don’t use my health insurance that much, beyond preventative care visits and a couple of regular prescriptions. What is it that is causing my health insurance premiums to go up?

This is a common question that many people are asking right now. After all, the cost of health care has become expensive — prohibitively so in some cases. Indeed, I just received notice that my health insurance premium is being increased by $70 per month, starting in July.

But why is this happening? Lucky for me (and my questioning readers) there are answers. Several of them. My health insurance company was kind enough to provide a list of reasons why health insurance premiums go up. Let’s have a look:

As you can see, the insurance company highlights rising claims costs. Not just yours, but people in your “group.” I have individual insurance through a group plan. This means that if costs go up for most of those in my group, so do my costs. This is similar to employer health plans. If a few people in your company have a lot of claims, your insurance premium goes up as well. (As one of my friends says, “Who says we don’t already have socialized health care?”)

Of course, the kind of coverage you have matters as well. I have maternity coverage on my health insurance plan, which means that the base premium is a little higher. But it kind of annoying that my health status doesn’t qualify me for a lower premium. After all, I take preventative measures and live a relatively healthy lifestyle.

Wouldn’t it be nice if health insurance premiums truly factored healthy lifestyle into account? Maybe premiums could be incentivized so that you get a lower premium if your blood pressure is lower, or if you exercise regularly, or if you keep your cholesterol under control.

Age matters as well to health insurance premiums. As you age, regardless of how healthy you remain, premiums go up. After all, something is more likely to happen to you when you get older. In 2009, I find from this handy guide, I can expect two premium increases, one at the regular annual adjustment (the insurance rep assured me that, technically, my premium could go down — of course she did confide to me, in a lowered voice, that it was highly unlikely) and one when I turn 30. Happy Birthday to me, in December of 2009.

The insurance company was kind enough to offer some suggestions to help lower health insurance premiums: Switch to a different plan (based on eligibility, of course), or increase the deductible.

What I really want to know, though, is where “executive compensation” is on the list of factors. I mean, there are insurance company CEOs that make in excess of $150 million per year. And don’t forget that there are other corporate officers that enjoy large salaries and generous bonuses. Don’t tell me that supporting executive perks don’t figure into the cost of health insurance premiums. We are in an economic slowdown. Why should CEO compensation go up again (which it continues to do, in general, for most CEOs across a variety of industries). We’re to tighten our belts, but CEOs are protected from inflation by their compensation?

It’s true that this election should have some major impact on health care in this country. John McCain and Barack Obama have two very different solutions to health care in this country. (And neither of them — even Obama’s — is completely universal health care.) If health insurance premiums continue to rise, soon there will be very few people who can afford health care at all.

image credits: my scanned letter from my health insurance company

Just thought I’d give a little link love to a couple of personal finance posts that I though were especially interesting today.

First of all, at Blueprint for Financial Prosperity offers a handy comparative chart of John McCain v. Barack Obama in terms of who pays taxes (shown here in part):

Bottom line? Most of us, from a strictly how-much-money-is-in-my-wallet standpoint, benefit from Obama’s plan. Also, Blueprint notes that McCain’s proposal increases the deficit by $4.5 trillion over the next 10 years, while Obama’s increases it by $3.3 trillion.

Quicken 2009 Beta

The other cool personal finance link is from Consumerism Commentary. The fact that Quicken 2009 is looking for Beta testers (Windows only) is pretty cool. Quicken is my personal finance software of choice, so I almost wish that I had Windows so that I could test drive the new version of Quicken.