Promises Made?
By Kate Kinkade, CLU, ChFC

We have an incoming president who has been elected with the promise of change and we are waiting with baited breath for that to occur. We need some. The market is still in free fall, the federal bail out has accomplished little, and the American auto industry is on the brink of collapse. A little change would be nice.

The question is, what promises made will be kept? The federal bail out was passed with the promise that it would encourage banks to start lending, restore faith in the market, and include relief for mortgage holders. Guess what? These promises were broken before the ink was dry on the legislation. Of course, these weren’t president-elect Obama’s promises, but can his promises be kept even with the best intentions?

 The Obama plan includes (or included) healthcare reform, tax cuts, and estate tax exclusions, which would cost a lot of money. He also promised to get troops out of Iraq, which would save money, and focus on Afghanistan, which might take, that savings right back. He made these promises before he had an $800 billion bill to pay to rescue financial institutions and whatever other economic stimulus package he can get in place quickly when he gets into office.

 Will he be able to make good on healthcare reform and increasing the estate tax exclusion in the light of this? His healthcare reform package is tagged with a net federal cost of $1.17 trillion. You can find the details in this month’s News, page 14. There are certainly good arguments for it. It’s hard to spend 80% of this number to rescue financial corporations and refuse to spend this to insure an additional 30 -million people. The plan would also provide some relief to businesses. The automakers are claiming that they need healthcare reform in order to stay in business, along with their own bail out package. The cost of healthcare is part of the burden they are looking to relieve. Still, $1.17 trillion is a tidy sum. Whether he can still pull it off and when is a big question.

 The tax cuts proposed are (were) focused on lower income and middle-class taxpayers, with an increase in tax rates for households earning more than $250,000 annually. Neither would be effective until after 2010, so they can have little immediate impact. Capital gains rates, also set through 2010, would go up for high-income families.

His plan sets the estate tax exclusion at $3.5 million per person. Current law brings the exclusion back to $1 million in 2011. Considering the recent decline in wealth, changing the exclusion at this point represents a significant loss in tax revenue when we need it the most. It is also clearly an advantage for the wealthy. On top of the focus of recent bail out, this may be less than palatable when the time comes.

 As with many incoming presidents, Obama’s ability to make good on promises may be limited. While that has been the norm, it would have been refreshing to be able to trust again.

The American people have good cause to mistrust their leaders. The regulators didn’t do their job in scrutinizing the mortgage-backed securities, which have caused much of the meltdown we are experiencing. The legislators can’t seem to keep their promises regarding how our $800 billion is used or whom it helps. Nobody seems to be able to do their essential job of keeping the American people safe from harm – safe from job losses, safe from foreclosures, safe from losing most of our savings. And now, it’s- -unlikely the incoming president can keep some of his basic promises either. Hopefully, he can restore faith that we have intelligent people in positions of power who care about the effects of their actions even if they can’t perform miracles. That would be a start.