During this Christmas season of cheer and good tidings, a universal message is going forth. They are all united from Barack Obama to Martha Stewart to Wall Street Banks, the Federal Reserve and even your local mall agrees: Please borrow to spend more this Christmas.
Americans since 2008 have been tightening their belts, and they have paid down over $150 billion in consumer debt. This is a remarkable feat and a testimony to the diligence, hard work and frugality of the American citizen. In contrast to the people, we are embarrassed that our government is encouraging irresponsible and spendthrift behavior.
Little wonder the finances of the U.S. government and the Federal Reserve are in a shambles. When times are tight, overspending and excessive debt is never the answer. Americans intuitively understand this and they are making tough choices to avoid bankruptcy.
Obama would be smart to follow their example. But governments never really tighten the budget. We all learned years ago the idiocy of government accounting when they proclaimed they were making “budget cuts” when spending and borrowing was going up every year. This would be akin to us saying “we want a Porsche, so we will cut the budget and get a Corvette,” when our salary could only cover payments on a Toyota Corolla.
This upside down idea was in the news again recently with the bailout of Ireland. Ireland had a housing bust, and this put their banks on the brink of insolvency. The Irish government, emulating the Americans, bailed out the banks. Problem is the government doesn’t have the money to both backstop the bankers and pay their bills. The solution devised by the “wise men” in the European Union: lend more money to the already nearly bankrupt Irish government.
Now everyone in Ireland will be paying the lenders for the rest of their lives to keep the Irish government afloat. Conditions on these new loans included budget cuts and tax increases. If Ireland had told the bankers to seek a solution in bankruptcy court, instead of at the Treasury Department, the average Irish citizen wouldn’t be getting poorer at the hands of the EU.
Same is true in the United States; we have a history of 200 years of bankruptcy law that should have been utilized in the financial crisis ahead of the government treasury. But the powerful bankers paid the powerful lobbyists to twist the arm of the U.S. Congress to pass TARP to protect them.
GM declared bankruptcy, but because the government stepped in the “new GM” didn’t have to make as many tough choices as they would have without the bailout. In the case of GM, the powerful United Auto Workers Union twisted Obama’s arm to borrow money to bail them out.
More debt is never the solution for a firm, individual or government that has over-feasted on debt. If you cannot restructure privately, the government should never be paying the bills of politically connected constituencies, and then turn around and raise taxes on all of us.
This Christmas, remember the season isn’t about the products the government wants you to buy, it is about friendship, people, experiences and our Savior.
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The Browns are bestselling authors and columnists, and can be reached at browns@caglecartoons.com. Floyd is also president of the Western Center for Journalism.
wdgnas posted at 6:55 am on Thu, Dec 2, 2010.
where were you two while a republican president and a republican congress were piling up debt?
Rich posted at 6:44 pm on Thu, Dec 2, 2010.
Heck, let them borrow and give me the money. The total collapse of the government is all to the good. In about a year we'll realize that we didn't need them all that much to begin with.
Dale Whiting posted at 11:03 am on Sun, Dec 5, 2010.
Rich,
I surrender! I conceed to you the title of most cynical [libreal-conservative-what ever]. And I admire your cynacism. Perhaps it will wake some of the less well informed and move them to action. The Debt Commission could not raise quite enough support to send a single unified message to Congress. But thanks to the Cable News Press, messages still got delivered.
One message agrees with the Browns. We cannot go on spending our way out of this mess. Keynsian Economics does not apply when one gets one's country in this deep. Another message says that we all must suffer. Taxes must rise, at least on those who benefited the most from lower tax rates under Bush 43, those earning over $250,000. And I heard no Debt Commissioners spousing "trickle down" Reaganomics.
Rome was not built in a day. And it did not fall in a single cycle of governors. But it did fall. Debt matters. Trade deficits matter. And Donald Stockman, Reagan's budget officer, now agrees with Bush 41 that Reaganomics was Voodoo Economics based upon an economy emerging from WW 2. Post Vietnam/Water Gate and post Bush/Cheney making the world safe for democracy, we now are perched on that same great precipice Rome once occupied.
On second thought, I take back my consession to your being the cynical champion. When I get wound up on Reaganomics, I assend to new heights. I learned economics at the feet of Reagan's chief economic advisor. We argued in class just about every day. He resigned after about two years [just like Romer has] and now he is retired. Both he and Stockman came to comprehend the folly of their reasoning. When will Reagan's party wake up and smell the roses. This is the one message given by the Tea Party that I agree with.
LewisA posted at 6:46 am on Fri, Dec 17, 2010.
Debt problem became really urgent today, especially before Christmas as consumers are afraid of getting into deaper debt due to a number of presents they have to buy. Well, it doesn't mean that we shouldn't make gifts at all. The main thing is to save some money by means of purchasing some small inexpensive presents, besides, you can make presents with your own hands. However, if you really experience difficulties with your personal finance management and you already have some debt, you should plan your further budget using debt calculator which can help you avoid mismanagement and unnecessary troubles.