Philosophical musings of Chic Hollis
The unsustainable debt of the Federal Government, as well as the debts of states like New York and California frighten older citizens like me because we have learned during our lifetimes that sooner or later someone has to pay the creditors. Perhaps it’s time to declare a “War on the common practice of spending money that you don’t have!”
World War II was a lesson in unifying the population to win a war. Sacrifices were expected of everyone during those years. Men and women went overseas to fight and die. Factories turned out arms, planes, and ships instead of automobiles, appliances, and toy trains. Food and gasoline were rationed. Recreational travel was curtailed. The prevailing attitude was supportive of the war effort. People saved their unspent money by loaning it to Uncle Sam.
Such was the spirit of the times in America. There was a shared sense that everyone should “pitch in” and do what was required to win the war as soon as possible. Complaining was uncommon because men and women were fighting against a tenacious and well-trained enemy. Many U.S. soldiers and sailors were not coming home alive, and those who did return quickly were usually casualties.
Today we are facing another insidious enemy, and as Pogo recognized, it is ourselves this time: creditors that hold state and country debt. Most people have become used to prosperity and full employment; they borrowed via credit cards to buy those things everyone felt were essential. It’s become commonplace to finance big acquisitions with loans from friendly banks and to assist children in obtaining student loans for their higher education – loans that they, not their parents, have to pay back sometime.
However, the attitude of the people is beginning to shift. Industrial jobs have been exported. Thousands of workers are unemployed. Wages have not kept up with inflation. Gasoline prices have taken off as have medical and dental expenses. Insurance for cars, homes, and healthcare have crept up, also. The increases in tuition for higher education in California are creating student demonstrations. The one family breadwinner has become two, and the kids are not peddling papers, mowing lawns, and packing groceries. Minority adults are doing those jobs.
Interest rates are the lowest in many years because the government is dictating those low rates so that the cost of financing our huge government debt may seem tolerable for awhile. Many creditors are foreign nations who hopefully believe that the dollar won’t be devalued. However, the only way the cost of products made in the U.S. will be competitive overseas is via devaluation. Jobs won’t be brought home until the cost of labor (wages and fringes) in the U.S. is less as a result of devaluation or increased productivity. Are workers here ready to work harder and smarter?
It’s a serious dilemma that the man and woman in the street don’t fully understand. Common folks want the entitlements the government has offered them, but they refuse in every election to raise taxes to pay for government services and entitlements. The only two solutions for a government to quit spending the revenue they don’t have is to reduce services and entitlements or increase taxes and fees. That two-headed solution is not palatable, but there is no other solution if government debt is to become manageable.
Ask any honest loan advisor or banker. A reliable income stream better be available before applying for a loan! Or the debtor pays loan insurance. Why are politicians so reluctant to rein in deficit spending? First of all, they have no idea how to end the Great Recession and reduce unemployment without borrowing to stimulate consumption. Then they don’t want to renege on the promises made by former governments to provide for the poor, the sick, the addicted, the elderly, and the criminals.
The former requirement for individuals to take care of the members of their families is obsolete. Modern folks don’t ask God for help, either. God as provider is not a serious option, because the government had replaced the various deities in their role of taking care of sinful mortals.
Sadly, the politicians have postponed doing anything that might restrain government borrowing to finance annual deficits. The budget process is a sham, and the media goes along and publishes the scanty press releases about how the government spends its revenue. State governments that are required to balance their budget annually fudge the numbers with gimmicks and accounting shenanigans that any bookkeeper would laugh at. But year after year, the same game of “kick the deficit into the future” is undertaken. For the right amount of interest or discount, someone somewhere will buy the bonds sold by states “that can’t possibly go bankrupt.”
Individuals with poor credit don’t have a market for their IOUs. The U.S. does because the Chinese and the oil merchants have been generous so far, but the concern of their finance ministers about the future prosperity of America is growing. Regardless of the unrealistic optimism of the liberal politicians that is published, there are articles appearing in responsible magazines lamenting the lack of realistic financial planning. As a former financial analyst, I can honestly say the writing has been on the wall for years – always ignored by the politicians.
Now that some bipartisan study team has alarmed our leadership in Washington, D.C. with the need to rein in our federal government’s profligacy, the beneficiaries of the entitlement programs are saying: “Don’t touch my entitlements!” The overburdened taxpayers are saying: “Don’t increase our taxes!” And the big creditors are saying: “Better do something quickly, because your credit line isn’t some infinite amount!”
It’s time for everyone in America to tighten his or her belt and figure out how each one can do without some things. Taxes will be increased sooner or later. Government lay-offs are coming next year. Services will be reduced or eliminated. School classes will be larger. Lines at the DMV will increase. And hopefully more of our soldiers will be coming home alive. The longer the politicians resist biting the bullet and charging into the fray of managing the unsustainable debt, the more will be the agony and sacrifice for our children and grandchildren.
Fighting the inevitable is futile, and must not be postponed any further. “If we can just get through this month,” the debtor will promise, “maybe we can start paying back something then.” If you have been a creditor as I have been in six countries, you have heard that nonsense expressed by debtors before.