Hope and Fail

Warning college grads against living on credit, while quadrupling the deficit

President Obama told Arizona State grads to live responsibly and avoid living on credit — while quadrupling the national deficit and doubling the national debt.

Speaking to graduating students at Arizona State University today, President Obama cautioned them against living on credit, especially in today’s down economic times.

Here’s what he said:

We’ve become accustomed to our economic dominance in the world, forgetting that it wasn’t reckless deals and get-rich-quick schemes that got us there; but hard work and smart ideas -quality products and wise investments. So we started taking shortcuts. We started living on credit, instead of building up savings. We saw businesses focus more on rebranding and repackaging than innovating and developing new ideas and products that improve our lives.

The president’s right to encourage recent grads to live responsibly — it would be even better if he practiced what he preached.

Obama’s budget proposal will quadruple the national deficit. The deficit for 2008 was $459 billion. The projection for 2009 is more than $1.7 trillion.

The national debt will double during the first year of the Obama presidency alone. DOUBLE!

What’s more, the president hasn’t followed his advice in his own life. The New York Daily News reports that the first family lived on credit from 1999 to 2004:

A close examination of their finances shows that the Obamas were living off lines of credit along with other income for several years until 2005, when Obama’s book royalties came through and Michelle received her 260% pay raise at the University of Chicago. This was also the year Obama started serving in the U.S. Senate.

… Let’s examine how tough things were for this couple using various public records.

In April 1999, they purchased a Chicago condo and obtained a mortgage for $159,250. In May 1999, they took out a line of credit for $20,750. Then, in 2002, they refinanced the condo with a $210,000 mortgage, which means they took out about $50,000 in equity. Finally, in 2004, they took out another line of credit for $100,000 on top of the mortgage.

Tax returns for 2004 reveal $14,395 in mortgage deductions. If we assume an effective interest rate of 6%, then they owed about $240,000 on a home they purchased for about $159,250.

This means they spent perhaps $80,000 beyond their income from 1999 to 2004.

Perhaps ASU was right to deny the president an honorary degree based on the lack of accomplishments in his body of work.

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