Children Deserve More Than A Legacy Of Crushing Debt
Posted on December 8, 2009
“The national budget must be balanced, the treasury must be refilled, public debt must be reduced, the arrogance of the authorities must be moderated and controlled, and payments to foreign governments must be reduced if the nation doesn’t want to go bankrupt. People must again learn to work, instead of living on public assistance.” This quote is attributed to Cicero who lived 106 BC – 43 BC as a warning to the Roman Empire. Whether he actually said it or not is debatable, but there’s no doubt the advice is applicable to the United States government today.I’m appalled by the way government is throwing $ trillions of additional borrowed money at a problem many feel has been caused by too much debt. Over the past month, I’ve talked with dozens of people ranging from corporate executives and bankers to factory workers and sales people. Not one person I’ve spoken with feels government should be bailing out companies that have allowed greed to put them in financial trouble. However, everyone agrees that failing to do so would cause a great deal of suffering by people who had nothing to do with the cause of the problem.
This situation has produced a great outpouring of sentiment to do whatever is necessary to save jobs and protect our way of life. The problem is the only solution being offered is to borrow more and spend more. As G. Gordon Liddy once said, “a liberal is someone who feels a great debt to his fellow man, which debt he proposes to pay off with your money.” I don’t mean to sound hard hearted, but the problem of too much debt will never be solved with more debt.
In his novel David Copperfield, Charles Dickens wrote, “Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.” The misery comes when lifestyles must be reduced because today’s earnings are needed to pay for yesterday’s excesses. This is a lesson Americans have forgotten. For generations people have delayed the inevitable by borrowing more to make up the shortfall. Now, with credit markets drying up, credit card limits being reduced, and home equities no longer able to be used as ATM machines, people are beginning to feel the misery. With the second and biggest wave of foreclosures yet to come, the misery index is likely to grow significantly.
There’s no doubt we are facing an economic correction of a magnitude not seen since the Great Depression. My concern, and that of many others, is that government throwing $ trillions more debt at the problem will, at best, delay the inevitable and make the ultimate day of reckoning even worse. As I’ve frequently said, we can’t borrow our way to prosperity.
We demand higher and higher levels of service from government even though it can’t pay for current levels without raising taxes or borrowing money. Just look at the additional areas of our lives government has become involved in since WWII. It seems that each day produces another crisis that can only be handled by a government bureaucracy. The way out of this dilemma is to demand less from government, reduce consumption, downsize our standard of living, pay off debt and return to reality. In other words, go back to living within our means. The question is, will we do it voluntarily or wait until we are forced to do so by the rest of the world.
Borrowed money comes from those who produce more than they consume. We have reached the point in this country where consumption exceeds production so we have to borrow from the rest of the world. According to the US Treasury, the total debt held by foreign countries as of October 2008 was $3.0427 trillion, of which mainland China alone held $652.9 billion. That’s an increase of $65.9 billion over what China held the previous month and $175.3 billion more than they held at the beginning of the year. See the trend? Imagine what would happen to our economy if this one country decided to dump its US securities and stop financing our consumption.
A recession is generally defined as an economic downturn where real Gross Domestic Product (GDP) declines by less than 10 percent and is not considered a depression until the decline exceeds 10 percent. All the elements are in place for this downturn to become a depression, which is probably why government is pouring $ trillions into economic recovery efforts trying to avert it. The problem is more debt will only buy time; it won’t prevent the economic correction this country needs to regain economic health.
Here’s a tip! Individually we can’t stop what government does collectively, but we can prepare ourselves to weather the storm. Be honest! Have you been living above your means? Do you have credit card debt, home equity loans, department store account, etc.? If so, you’re part of the problem and in danger of experiencing the misery. However, it may not be too late to significantly reduce the misery if you start paying off your debts and building your savings now.
The inconvenience of giving up a few modern amenities to get your economic house in order will be small compared with the disastrous consequences of burying yourself deeper in debt. Even if the government’s economic stimulus efforts succeed in deferring a deep depression, this should be a wake up call for everyone. We all want the best for our children, but is there anything good about leaving them a legacy of crushing debt?
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This article says things the right way & points people in the right direction. Regarding peoples’ Debt(s); – I recall, shortly after the end of WW11, when the economy was – very gradually – showing signs of recovery – BUT – the “business men” did’nt like waiting, they wanted the recovery, (ie; – their personal Profits) to sudden;y bounce right up! At that time, in Winnipeg, where I resided and still do, one was required to put “Thirty Percent Down” when purchasing something “On Time”. The “Business Men” persuaded the Government to Change the Rule so they could sell merchandise with only “TEN” Percent Down. What happened then was that the sellers said – “Just bring in an old broken Record or something similar and we’ll accept that as the “Ten Percent Deposit”. After that, sales inceased, generally, but everyone, everywhere, was in debt (not for 70% of the product cost but for 90% – AND Paying Interest on top of that. That caused almost everyone to Pay Much More Than the Original Price, in order to purchse any item. The sales people nver “reduced the price” they just left it the same [Or secretly increased it] and then we had to pay the total(sometimes inflated)Price of the article PLUS the Interest. That, in turn, meant most people could not afford “to buy other items” because their money was tied up in paying for the first article. THAT’S WHENIT ALL BEGAN! I may not have expressed it in the best manner but I lived through it and – I’m dead bloomin’ right in what I say. Cheers!