Obama Knows Overspending

President Obama knows overspending. He pushed the nation into overspending by such drastic amounts - quadrupling the national deficit in one fell swoop and now claims that the nation has to start saving money (to push his health care plans, which will neither save money nor improve health care delivery).

More to the point, he is simply repeating what he did in his personal life. He overspent, and then hoped for a bailout, which he got once his book deal came through, his wife got a major raise, and he won his US Senate seat.

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.

During the presidential primary campaign, Michelle Obama complained how tough it was to make ends meet. During a stop in Ohio, she said, "I know we're spending - I added it up for the first time - we spend between the two kids, on extracurriculars outside the classroom, we're spending about $10,000 a year on piano and dance and sports supplements and so on and so forth."

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.

The Obamas' adjusted gross income averaged $257,000 from 2000 to 2004. This is above the threshold of $250,000 which Obama initially used as the definition of being "rich" for taxation purposes during last year's election campaign.

The Obama family apparently had little or no savings during this period since there was virtually no taxable interest shown on their tax returns.

I can commiserate with the President on the low savings, as I've got student loans and a new mortgage to pay down that put a crimp on my own savings for a rainy day, but I expect to be done with my loans next year, and the mortgage is within the realm of affordability at my current salary level.

However, Obama seems to have lived beyond his means and did so on the expectation that someone else would come and pick up his tab - namely that he would win his Senate seat (which was a huge salary boost), he'd sign the book deal, and his wife would receive a huge salary increase. Without the boost to his income, he'd be so thoroughly in debt that he'd be one of those bailout cases we hear about (although not one with which I'd provide any sympathy).

If only I could be so lucky.

Not everyone can be so lucky, and the United States isn't going to sign a book deal anytime soon. There's no one who will play the rich uncle to Uncle Sam, and that bodes poorly for the United States going forward.