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Thursday, July 07, 2011

President Does not Understand Money

Last week I heard Harry Reid speaking, and he was complaining about the tax breaks that go to "millionaires and billionaires." President Obama also has frequently made the same complaints about "millionaires and billionaires."

I have to laugh when I hear politicians lumping millionaires and billionaires in the same bucket, because it simply means that they don't have a clue about money. And if Sarah Palin were to say it, people would surely report how ridiculous it is.

Let me explain the difference as I see it: say you graduate high school, and then work as a janitor for the next 50 years of your life. Let's say you make $40,000 per year. Now if you save your money every year and don't overspend, you will have accumulated $2 million in earnings over your lifetime. Of course you have expenses and taxes to pay, but then again, if you save wisely, your money will have grown compounded as well. You could easily be a millionaire by retirement age.

Now to become a billionaire: same thing, except instead of making $40,000 per year you would need to find a job paying $40 million per year over 50 years. See the difference?

One could also lump those who have a $1000 in the bank with those who have accumulated $1 million - it's the same difference. So next time you hear someone complaining about millionaires and billionaires, you need to ask yourself: does this person get it?