Posts tagged with: debt

Blog author: johnteevan
Monday, October 7, 2013
By

Photo Credit: Alan Cleaver via Compfight cc

Photo Credit: Alan Cleaver via Compfight cc

This first appeared in my newsletter, Economic Prospect, in late 2008. Looking back after five years I still like it.

The American failure to save is matched by our insistence on spending to have it all. One part of the problem is the consumer’s love of debt. The other part is the government’s love of debt. Both love debt to enjoy things now and to put off the day of reckoning. How did we get so far from the idea of being content with having enough food, clothing, and shelter?

  1. This is a complex issue based at first in ‘scarcity’ which leads people to create products to fill real needs. When these products are produced people have jobs and can afford more products. Say’s Law says that production creates its own demand.
  2. There comes a point where we move beyond some invisible line and marketing takes over to create imagined needs in people. These needs are filled by more products creating more jobs. This happened after WW2 and made us very prosperous.
  3. Then there is a third stage when the credit industry takes over and tries to convince people to borrow not just for houses or cars (durables) but for anything to enhance their way of life. This started in the 1970s. Consumer debt is $2 trillion but this kind of borrowing creates still more jobs at least for as long as the party lasts.

But the day of reckoning has arrived. Will we get the point and change our behavior? Apparently not. First, the government sold bonds, then raided the trust funds (Social Security), then we borrow to stimulate the economy…then we just borrow without limit.

If Americans are not saving, who will loan us all this money? The answer is the Chinese and Asians who are amazing savers. They will loan us the money. China already owns nearly $2 trillion in U.S. government bonds. This is not a small issue.

Economics in One Lesson : The Shortest and Surest Way to Understand Basic Economics

Economics in One Lesson : The Shortest and Surest Way to Understand Basic Economics

This classic work provides the layman with a clear understanding of the economic way of thinking. A must-read for the beginner!

molechWe are now witnessing how some make the tie between human tragedy and federal spending. Just yesterday, Senate Majority Leader Harry Reid shamelessly implied that the accident that killed seven Marines in Nevada is tied to spending cuts from sequester. Hollywood actor Harrison Ford lamented that “accidents are going to happen” in aviation because of sequester. It’s almost if more government spending is needed to appease the wrath of the Divine State. If not appeased, wrath will reign down on humanity and nature if not given due alms. We know from Exodus that the Lord our God is a jealous God, but is the federal government a jealous god too? Slowing the rate of growth of this god stirs up anger.

We are being told by lawmakers and citizens that we can’t afford to cut federal spending. Never mind that almost every single American has noticed no change from a paltry and temporary slowing growth rate from sequester. But we are told it’s far too dangerous for our safety and humanity’s future. Never mind that we read absurd stories daily about federal spending initiatives that study why lesbians are fat or why they drink more than the general population.

Washington now has the inability to come together to at least make any responsible strides to curtail our spending crisis. Even throughout American history it has generally been understood by both parties that the federal government can’t or shouldn’t solve all of our problems. Instead, we see lawmakers almost ritualistically dancing on the dead bodies of innocent victims in their call for more spending and government involvement in our lives. It’s becoming a gruesome cult like practice.

In Ideas Have Consequences, Richard Weaver declares, “It is likely that human society cannot exist without some source of sacredness. Those states which have sought openly to remove it have tended in the end to assume divinity themselves.”

This summer I am teaching a class at Acton University titled “Religion and Presidential Politics in the Modern Era.” I’ll touch more upon the the topic of divinization of government in that lecture.

We’re witnessing increases in attacks on religious liberty, sin taxes, and massive centralization and debt. We need to ask ourselves going forward if a jealous government god is going to want to continue to compete with the Church?

In this week’s Acton Commentary, “A Passion for Government Leads to Neglect of Our Neighbor,” I examine how the disconnect between desires and deeds with reference to helping the needy among us perpetuates unbalanced budgets and spending on debt to the detriment of future generations. I highlight how St. John the Baptist came to “turn the hearts of fathers to their children” (Luke 1:17) by exhorting people to look to their neighbors and the small but practical ways they can serve them in love:

During his ministry, John’s message to everyday people, according to Luke, was remarkably simple: “He who has two tunics, let him give to him who has none; and he who has food, let him do likewise.” To the tax collector, he warns not to take more than is due, and to the soldier his counsel is “be content with your wages” (cf. Luke 3:10-14). This was “the way of the Lord”?

I conclude by recommending the same for us today. The problem is not that people do not care, it is that we have forgotten with whom responsibility for the work of caring for the needy among us lies first of all. (more…)

800px-Livingood_Obama_State_of_the_Union_2011It was William F. Buckley who said “conservatism takes into account reality.” Reality has become the giant political obstacle for conservatives when it comes to governing, campaigning, and political messaging. It seems too many Americans still love their freedoms but eschew many of the responsibilities that come with it. That’s the crisis we face, the lack of responsibility and our collective grasp on reality.

In last night’s State of the Union Address, President Obama predictably fatigued those looking for real cuts, a limiting of the federal government, and the courage to tackle the federal debt and spending crisis. The president set the agenda on the sequester issue by calling decreases in the rate of growth, “cuts.” It’s not even close to the reality we face as a nation when it comes to the need for real cuts to address our federal debt.

Obama even offered new government spending initiatives such as pre-kindergarten, climate change legislation, and more federal “jobs” programs. Obama called for tax reform too, embracing further tax increases for the productive sector and the savers and investors. It’s a far cry from the president’s promise to cut the deficit in half by the end of his first term in office. Instead, it has increased by $6 trillion under his watch.

Our federal spending is increasing poverty and government dependence. It is making us poorer and crippling future economic opportunities for Americans. The president missed the grand opportunity to address the reality of the crisis we face. He intoned that, “deficit reduction alone is not a spending plan.” True enough, but increased government spending and the inability to deal with spending is the grand failure of Washington and both political parties.

In the GOP response, it may be that Marco Rubio struck a much too partisan tone and appeared just to be reacting out of opposition to the president. I thought Rand Paul, with his tea party response, struck the right chord and spoke the truth about the monumental crisis we face. He cut through the spending problem directly stating, “Every debate in Washington is about how much to increase spending – a little or a lot.” He directly addressed the deeper obligations of government within the constitution and should receive credit for laying out the problem, even if you don’t agree with how he wants to address it.

Bobby Jindal, Louisiana’s Governor, made a powerful point too after the president’s remarks about the shifting of greed to the government sector. The larger point is that the private sector is dwindling in significance, and being swallowed by government growth and strangulation. Unfortunately, as a nation, right now, there is not enough collective courage and responsibility to deal with the reality in Washington.

Samuel Gregg, Acton’s Director of Research and author of the book “Becoming Europe“, says one of America’s real debt dangers is our increasing sense of entitlement from the government. In today’s Investor’s Business Daily editorial, Gregg states our “insatiable appetites” are getting us into the very deep economic trouble that no one, least of all politicians, seems to want to face:

…Luxembourg’s Prime Minister Jean-Claude Juncker famously lamented in 2007: “We all know what to do, but we don’t know how to get re-elected once we have done it.”

It’s tempting to see this as a peculiarly Western European problem. This is after all a continent in which even many nominally center-right governments’ default positions are essentially social democratic: i.e., extensive government intervention is simply considered normal.

But can anyone seriously deny that many American politicians — including some conservatives — play this game? Or that millions of Americans from all backgrounds have developed absurd expectations of what government “owes” them in economic terms?

And I’m not just talking about those who apparently regard any streamlining of social security as tantamount to homicide. I’m also referring to those businesses who think they’re entitled to receive corporate welfare instead of competing in the marketplace.

Gregg’s recommended remedy? “To put it bluntly, we need to accept that our participation in democracy cannot degenerate into voting for whoever promises us the most stuff.”

In today’s culture, there is always an abundance of news stories about the “War on Christmas.” In my commentary this week, I address that concern and the lack of understanding of the deeper meaning of Christmas. Here’s a highlight:

Every December cultural warriors mourn the incessant attacks on Christmas and secularism’s rise in society. News headlines carry stories of modern day Herods banning nativity scenes, religious performances, and even the word “Christmas.” Just as a majority of young people profess they will have less prosperity and opportunity than their parents, many people now expect less out of Christmas. Continual bickering over holiday messaging in corporate advertising itself points to a shrinking and limited Christmas.

Yet these problems are signs on the way to important truths, if we have the eyes to see. Record spending and debt, whether in Washington or the home, allude to a society trying to fill an emptiness of the heart. Even our disappointment in poor leadership in America reminds us that we crave a true King and are expectant of a greater day.

In 2010, I penned a related essay “Why the Nativity?” That post delves even deeper into the theology of the incarnation and the celebration of the birth of Christ.

Christmas is a hard time for many people because expectations for joy and changes in their life are so high. In my own life, I count myself among those that have had a difficult time at Christmas because I’m so reflective and I realize life isn’t always how I want it.

There is a sign in front of the church that I attend that reads, “Jesus is all you want, if Jesus is all you have.” I find that the more I deeply ponder the incarnation of Christ, the more I am amazed and my heart is transformed.

I quoted Charles Wesley in my commentary in where he called Christ the “desire of every nation,” and “joy of every longing heart.” The hymn is of course, “Come Thou Long Expected Jesus.” The words are beautiful and I’ve always loved Wesley’s hymns because they deal with the deepest hopes of the heart and he personalizes the person of Christ for all.

Pin not actual size.

I commented last week on the “textbook bubble” (here) and have commented in the past on the “higher-ed bubble” and the character of American education more generally (see here, here, and here). To briefly summarize, over the last few decades the quality of higher education has diminished while the cost and the number of people receiving college degrees has increased. The cost is being paid for, in large part, through government subsidized loans. But with the drop in quality and increase in quantity, a college degree is not as impressive as it used to be; in many cases it no longer signals to employers what it used to. When a critical mass of those loans goes into default, we will have another housing-bubble-esque crisis on our hands. At the same time, government loans, which are largely indiscriminate with regard to the risk of the applicant and guaranteed on the backs of taxpayers, have incentivized colleges and universities to raise the costs to students for the sake of increased expenditures, inflating the bubble even more. Now, Alex Williams of The New Times reports last Friday,

The idea that a college diploma is an all-but-mandatory ticket to a successful career is showing fissures. Feeling squeezed by a sagging job market and mounting student debt, a groundswell of university-age heretics are pledging allegiance to new groups like UnCollege, dedicated to “hacking” higher education. Inspired by billionaire role models, and empowered by online college courses, they consider themselves a D.I.Y. vanguard, committed to changing the perception of dropping out from a personal failure to a sensible option, at least for a certain breed of risk-embracing maverick.

An increasing number of students are realizing that they, to quote Good Will Hunting, do not want to be $150,000 in debt for an education that they could have gotten “for a $1.50 in late charges at the public library.” (more…)

Over at Think Christian I take a look at the looming fiscal “cliff,” which we are being told from every conceivable quarter represents a significant danger to America’s fragile economic recovery:

But apart from the numbers themselves, the framing of the issue by politicians and pundits ought to give us pause. The idea that returning deficit spending to 2008 levels represents a “cliff” is not just political hyperbole. It reveals something deeply broken about not only our political system, but even more of our cultural expectations. As long as we continue to expect politicians to deliver programs and policies that are not sustainable, they will continue to promise them, and what is perhaps even worse, they will continue to try to make good on them, no matter the cost to current and future generations.

Today over at CNN Money, Paul R. La Monica tries to rein in some of the hype (HT: The Transom):

Yes, we all have the fiscal cliff on the brain. Wall Street is anxious. CEOs and labor leaders have headed to Washington to try and convince President Obama that the consequences of falling over the fiscal cliff would be dire. But is the fiscal cliff panic just a wee bit overdone?

La Monica’s answer isn’t an unqualified “yes,” but his piece does give some insights as to some of the political reasons for exaggerating the potential impact of sequestration.

The first presidential election I remember was the Ronald Reagan – Walter Mondale race in 1984. My kindergarten class in the Philadelphia suburbs held a mock vote that Reagan overwhelmingly won. It of course reflected the way our parents were voting. I can remember at the age of five, John Glenn was one of the Democrat candidates seeking the nomination and I knew he was a famous astronaut. The truth is, I’ve always been fascinated by presidential elections and Bare Knuckles and Back Rooms by Ed Rollins and Bad Boy: The Life and Politics of Lee Atwater by John Brady are two political books that deeply influenced my thought. Both books remain relevant and offer valuable lessons today.

Frank Hill, who directs The Institute for the Public Trust, has a solid post discussing Robert Kennedy, self-government, and tomorrow’s election. Hill quotes Lord Acton in his essay as well. He cites Kennedy’s “Day of Affirmation Address” in South Africa in 1966. It was a striking address, touching on the universal truths recognized by the West. Below is a great line from Kennedy’s speech that day:

At the heart of that Western freedom and democracy is the belief that the individual man, the child of God, is the touchstone of value, and all society, groups, the state, exist for his benefit. Therefore the enlargement of liberty for individual human beings must be the supreme goal and the abiding practice of any Western society.

Kennedy’s 1968 presidential campaign and Ronald Reagan’s 1976 campaign are probably the two campaigns that offer the most mystique and magic for liberals and conservatives. One campaign ended with a tragic assassination and the other left conservative activists heartbroken by a narrow defeat. Both candidates were treated to adoring fans and followers and shook up the political landscape. While they represented different ends of the political spectrum, they were both visionary presidential campaigns. Those two campaigns caused a lot of young people to get excited not just about politics or power but deeper ideas about government and the human person.

Tomorrow is a big election. We’ve rightfully placed a heavy emphasis on the limits of politics here at the Acton Institute. Politics will not solve the deeper issues and problems facing this nation. The topic was the overarching theme of Rev. Robert Sirico’s 2012 Annual Dinner address. Jordan Ballor and I hosted an Acton on Tap addressing that very question in 2010. But elections and politics are important and serve a purpose. There are clear philosophical differences between the candidates and the peaceful transition of power reflects well on the foundations of our country.

At Acton we’ve always tried to raise the discourse and talk about higher truths. In a country that now faces crippling debt, moral chaos, and threats to religious freedom, we would be wise to draw upon some words James Madison used to close a letter he penned to a friend in 1774. Madison, concerned about persecuted Baptists in Virginia wrote, “So I leave you to pity me and pray for Liberty and Conscience to revive among us.” I would think most of our readers would agree and wish that much would be so.

From a purely political standpoint last night’s Vice Presidential Debate was probably a victory for both candidates. Vice President Joe Biden fired up his base with his aggressive and somewhat dismissive behavior towards Congressman Paul Ryan. Ryan of course did nothing to hurt Romney and showed he is prepared to be president in an emergency.

Ultimately, the Vice Presidential Debate matters little to nothing in terms of outcome, and that’s why these two were probably in a better position to sit down together and have a candid and civil conversation about the economic and spending crisis this nation faces. It was not to be of course. And it’s probably too much to expect given the nature of the budgetary wars between the Republican Congress and the White House over the last two years. So much of the spending fight had already exhausted itself between these two behind the scenes in Washington.

Save for Ryan’s defense of a plan for cautious entitlement reform, much of the domestic argument came down to which team is better equipped to manage the bureaucracy. The federal government has now doubled in size from just over a decade ago. And it has funded that expansion all through borrowed money. We’ve spent $2 trillion on education at the federal level alone with no marked improvement, only educational decline. Greater urgency and details are needed from our leaders on how they are going to cut and limit federal spending. Everybody knows gutting subsidies to PBS won’t cut it.

Catholics can address the abortion question as it relates to Catholic Social Teaching and who is the serious thinker about their faith, but I also feel there was a real opportunity by both candidates last night to speak less politically about the debt and take moral leadership on an issue. Our spending problem is a visible sign of America’s holistic decline when it comes to our historic strong moral values, strong work ethic, and moral courage. Rev. Robert Sirico has said, “When one generation borrows what cannot be expected to be paid in the next generation, such a civilization is at a crossroads.” We need our leaders to embody those words or we need to replace them.