4 Expectations from President Obama’s Second Term

Americans have re-elected President Obama and he was inaugurated for a second term.   The president won the Popular and Electoral College vote.  President Obama has promised to bring our country together during a time when after he first term, our country has never been so divided. If you look at the map of who won the popular vote by county you might have thought it was a Red State massacre.   The largest populated counties (big city) have become very populated with democratic voters and President Obama dominated in these areas.  This was enough to overcome the vote of the many more less populated counties. The campaign promises that excited many of these voters leads us to expect several things during President Obama’s next term. Four items are listed below:

1. Giant changes in the cost, availability and insurance coverage for healthcare.

Central to ObamaCare are requirements that health insurers (1) accept everyone who applies (guaranteed issue), (2) cannot charge more based on serious medical conditions (modified community rating), and (3) include numerous coverage mandates that force insurance to pay for many often uncovered medical conditions.

Guaranteed issue incentivizes people to forgo buying a policy until they get sick and need coverage (and then drop the policy after they get well). While ObamaCare imposes a financial penalty—or is it a tax?—to discourage people from gaming the system, it is too low to be a real disincentive. The result will be insurance pools that are smaller and sicker, and therefore more expensive.  Hopefully, more people will see doctors for preventative care which should be a good thing.  I recently spoke to a friend that is an ER doctor at Central DuPage Hospital and he tells me stories about how he sees many of the same families every month to treat non-emergency coughs and ear aches.  Maybe this kind of behavior will go away with the new plan (this new entitlement program will subsidize insurance premiums for the poor).  I hope there are enough general practitioners to meet the potential boom in patients.  There are other issues as smaller companies  (under 50 employees) may not offer group insurance for their employees knowing they can all get coverage on their own, through the state or federal insurance exchange. Larger companies may do the same and pay a penalty ("tax" according to Supreme Court) as that is less costly than paying their employee insurance premiums.  If you find yourself needing health insurance for yourself or family on a temporary basis (between jobs) or permanently, you can click:

Blue Cross Blue Shield Application.

WSJ - ObamaCare's Health-Insurance Sticker Shock  More

Each American's Share of Publicly Held Debt Is Skyrocketing

As Washington continues to spend dramatically more than it can afford, every American will be on the hook for increasing levels of debt. Without reining in spending, the amount of debt per citizen will skyrocket.  INFLATION-ADJUSTED DOLLARS (2012)

Sources: U.S. Census Bureau and Congressional Budget Office (Alternative Fiscal Scenario).

2.  Growing trillion-dollar annual deficits.

The government has redistributed our tax money with Stimulus packages and many other great plans to stimulate the economy. The national debt has risen more than $5.8 trillion from its level of $10.6 trillion when President Obama took office on Jan. 20, 2009. The cost per person with a population estimated by the U.S. Census Bureau at roughly 314.4 million, the average share works out to about $50,900. This is an interesting fact to share with your young children.  Ask them if they knew how much in debt they were and listen to their response.

As of now, the federal government expects to collect approximately $2.3 trillion in taxes this year and plans on spending about $3.6 trillion.  That means they will add $1.3 trillion to the $16.4 trillion they currently have borrowed.  

There has been no indication the growth in government spending will slow down as Entitlement Programs and other spending programs are expected to continue to expand during his second term in office.

3. The federal government will take financial care of more people than ever.

The number of people on welfare, food stamps, and extended unemployment benefits continue to grow. More people are now collecting money from the government than are paying income tax. Welfare At All-Time High Under Obama.  It is shocking that one out of seven people is now on food stamps and this has grown by 70% since President Obama took office.  Based on what I heard during his Inauguration speech, the president will continue with this growth of government policies as he (business tax & regulations) spoke of policies that tend to make it harder for businesses to grow and employ more people as evidenced by the slow growth in GDP and the number of non-working (unemployed, under-employes and those that quit looking for work) people at the end of his first term.

4.  Easy money policy by Federal Reserve.

The goal of this easy monetary policy program is to make assets attractive, which entices people into the markets and raises prices.  Generally, the higher prices go, the more wealthy people feel. This has helped prop up the value of real estate and the stock market . It has also been great for those that have taken advantage of getting a mortgage at historically low rates, but the opposite is true for seniors living on the interest from fixed income investments.  Imagine a conscientious retirement saver having saved one million dollars for retirement and wanting to live off the interest of that investment.  The problem is that today a 5-year CD pays about 1.5% meaning there million dollars would only produce $15,000 in income per year. Clearly, we’ve seen several markets have significant increases in price since 2009, including gas prices ($1.81/gallon on day he was sworn in), commodities like gold(up 88% during Obama's first term), and the stock market (up 78%). Ultimately I believe the problem is that everyone is looking for a shortcut to fix serious structural issues. Many politicians on both sides of the aisle in Washington are so paranoid about getting reelected that they are unwilling to make the hard choices necessary to build a solid foundation for the economy. The Federal Reserve can only do so much through monetary policy. In fact, its attempts to do what lawmakers in Washington should be doing could create negative unintended consequences in the long run (Huge National Debt). It’s unfortunate that our leaders in Washington are more interested in winning votes than building a strong nation.

Our president has clearly changed the course of America and will continue to do so for the next four years and beyond.We cannot be sure how all of this will affect our financial future, our retirement plans and the lives of our children and grandchildren.

I am curious if you like the direction we are heading, what you like about it and what you would like to see changed. Is the glass half-full or half-empty?  It probably depends on what is important to you.

Please comment goo to my blog site and comment.  www.lifeplanningtoday.com