Obama Gets Personal With Finance
No President has mastered the art of energizing voters on the Web as well as Barack Obama. Arianna Huffington, editor of the Huffington Post, told The New York Times after the 2008 election that “were it not for the Internet, Barack Obama would not be President.”
Is it any wonder, then, that with the economy threatening to slide into a double-dip recession and his approval ratings dropping below 50% again, the President would look to cyberspace to try to reboot the conversation? On June 8, the White House invited 23 journalists from leading personal-finance sites for a first-of-its-kind summit. The goal: translate important issues for the economy out of Washington-speak and into practical, pocketbook terms that everyday Americans who get their financial information online can understand.
“We want to make sure that we’ve got a good line of communication with all of you,” Obama said. “I think the public is going to be more sophisticated about … their own personal economic situation because of their ability to access information from your sites in a much more personalized way.”
Music to our ears. A parade of senior officials, from outgoing chief economist Austan Goolsbee and National Economic Council director Gene Sperling to U.S. Chief Technology Officer Aneesh Chopra and Consumer Financial Protection watchdog Elizabeth Warren, shared forecasts for slower-than-wished-for, but sustained and steady, job growth and economic expansion. They championed innovation and entrepreneurship, including the development of alternative fuels. And they averred, as Warren put it, that “we’re here for regular folks on the other end of all these financial transactions who aren’t players in the system.” (You can read on-the-fly Twitter commentary live from the summit at #pfos.)
But Obama owned this stage. Kiplinger.com asked him to reveal the one piece of personal financial advice that he had found most useful in his own life. “Don’t spend all your money,” he joked, eliciting scattered laughter. It was a throwaway line. But then he seemed to dig deeper for an answer to a question rarely, if ever, asked of presidents. Turns out he has four pieces of advice that we at Kiplinger espouse all the time:
1. “Save a little bit out of whatever you earn, and the magic of compounding interest applies.” This one came from his grandmother, who worked her way up from secretary to a bank vice-president, Obama said. (See our own take on The Magic of Compounding.) He quipped that he and First Lady Michelle had tried to apply this rule to their own personal finances, but “not always successfully.”
2. Beware of debt. Student loans dogged the Obamas “because we’re part of a generation that ended up going to college taking out huge amounts of debt.” (See The Dark Side of Student Debt.) Combined, they had $120,000 worth of debt upon graduation, “and it took us ten years to pay it off. And we were lucky, because we had gone to good law schools [and] we knew that we could earn it [back].” He lamented the “quadruple whammy” that “a lot of young people are going through with college debt, and then to try to get your first home started, and then you immediately have to start saving for your kids’ college education, and you may have to also be helping out your parents in their retirement.” (See The Basics of Credit and Debt.)
3. “Spending discipline is important.” What Obama termed the “deleveraging” wrought by the 2008 financial meltdown “has been very painful. I think it woke everybody up, and our economy as a whole has to get back to producing more and not just spending more. And what applies to the nation as a whole I think could serve as good advice for individuals.” (See Knight Kiplinger's classic column, The Invisible Rich on the biggest barrier to becoming rich -- spending like you're rich before you really are. )
4. “Spend on things that are going to increase your productivity and your income over the long term.” Investing in your future is the first tenet of Knight Kiplinger’s Eight Keys to Financial Security. “Our first starter home was a condo that cost $180,000, and we were able to comfortably make payments; that was still a good investment,” the President said. So was law school, he added. (See Five Advanced Degrees Still Worth The Debt.)
Here, he couldn’t resist a dig at “the other side,” those who say “investment is just another word for spending. Well, no, actually, there is a distinction … between spending on things that are going to make you more competitive and over the long term increase your wealth, and spending on things that you’d like to have but aren’t really improving your life over the long term. And that’s an important distinction that we as a country have to make.”
Obama entered the room apologetic. “I hope that this (summit) has not been too stodgy.” No issue there when he left. “Stay in touch,” he said.
Doug Harbrecht is new media director for Kiplinger and was former White House correspondent for BusinessWeek during the administrations of Presidents George H.W. Bush and Bill Clinton.