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.
In 2003, they reported almost $24,000 in child care expenses and, in 2004, about $23,000. They also paid about $3,400 in household employment taxes each year. And as Michelle stated, they spent $10,000 a year on "extracurriculars" for the children.
These numbers clearly show the Obamas were living beyond their means and they might have suffered financially during the decline in housing prices had they relied on taking ever larger amounts of equity from their home to pay the bills.
But in 2005, Obama's book sales soared and the royalties poured in. Michelle explained, "It was like Jack and his magic beans."
Without those magic beans, the Obama family would have eventually suffered the consequences of too much debt.
The reality is that most boomers and most Americans who lived and continue to live like the Obamas have no magic beans, no silver bullet, no possibility of having something come along and save them from the trajectory of their financial choices. The Obamas did and clearly their mentality for solving it for much of their generation is to charge it to the kids while hoping for a silver bullet in medical records efficiency or green technology to save them and our economy from themselves.
Isn't it sad when we have to tell almost 50 to almost retirement age adults that there are no such things as fairy tales? They should know better by now.
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