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MAKING CENTS OUT OF THE NEWS
Blog #28
(July 23th, 2009)
CHANGE I CAN'T BELIEVE IN
By Tom McAllister, CFP®
President Obama has been in office six months. Until now, I have refrained from criticizing him in these blogs, believing every new administration deserves allowances for stumbling until they "get their feet on the ground". But, as a clear picture emerges of our new leader's mindset, it seems he views our government as his own personal instrument of change.
This attitude, I believe, is hurting our country badly. Granted, Obama inherited a severely impaired economy. Investors and business people, in the first weeks of the new administration, showed their fear by driving the stock market to new lows. Then, as value in the market made itself apparent to professional investors, they bought so heavily into stocks in March and April, the market recouped its losses for the year!
Now the market is waiting for signs things are on track to get better. In fact, leading indicators show the worst is over. Still, the market needs a "kick start", and the Obama $800 billion stimulus plan is obviously not enough to give it that start. What is going on?
Successful business owners are hesitant to create new jobs or to start new enterprises amidst uncertainty about the conditions under which these new businesses will be functioning. Business owners are uncertain about changes they will need to make in their employee health care programs. They're uncertain what their tax burden is going to be, fairly sure that burden will be greater. They're uncertain as to what their costs of doing business will be, and about what new regulations they will face. (We last saw this attitude of uncertainty in the late 1970's; and the economy suffered tremendously because of it.)
Always remember this: private business is the engine that creates new jobs in this country (not, as some would have you believe, government or large publicly owned businesses). The business climate Obama has fostered is favorable neither for business expansion nor for the creation of new businesses. In fact, private businesses are largely "hunkered down", cutting jobs where possible. No doubt there will be further job cuts if "Obama healthcare" is enacted.
Private business owners are understandably unwilling to begin new projects or new businesses when it is likely their profits will be taxed at more than 50% (federal, state, and local taxes combined).
After forty seven years as a student of the economy and of the markets, I am getting a clear picture, and it is not pretty. We have been here before, during the Carter years, with a stalled economy, higher taxes, and rampant inflation. Why, I must ask, is our new leader ignoring history? Do Obama and his advisors simply not believe in the capitalistic system?
Obama promised us change. From what I have seen so far of his changes, they are moving us in the wrong direction!
Managing retirement finances with grace and cash means staying aware of the risks presented by inflation, while taking advantage of the unusual profit opportunities presented by the investment markets.
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