Posts tagged with: debt

250px-Bankruptcy_monopolyAaron M. Renn’s reflections on the implications of Detroit’s bankruptcy are worth reading, especially as relate to the DIA, a topic of some previous interest over the last year or so:

In the case of the DIA, the city owns the museum and the collection. Hence the question of whether or not art should be sold to satisfy debts. If it were typical separately chartered non-profit institution, this wouldn’t even be a question.

At this point, I’d suggest cities ought to be taking a hard look at whether they own assets like museums, zoos, etc. that should be spun off into a separate non-profit entity. Keep in mind, the tax dollars that support the institutions can continue flowing to it. But this does protect the assets in the event of a bankruptcy.

I think Renn’s advice is spot on, but I would also caution that Detroit’s experience might not be replicable elsewhere. As DIA director Graham Beal put it previously, the DIA’s dilemma is “singular and highly complicated.”

How many cities own art collections worth potentially billions of dollars? Not too many, I’d suspect. And just what would the motivation be for city governments to reduce assets that could be leveraged in bankruptcy negotiations? What is in the best interest of the institution may not be in the interests of the city government and pensioners.

The DIA might be something like Detroit’s “Get out of Bankruptcy Free” card. (Or if not “free,” then less scathed than otherwise. And that’s not counting the loss of cultural treasures, of course!) But even so it’s a card that can only be played once, and it’s a card that other cities might not have.

Blog author: jballor
Tuesday, December 10, 2013

Most commentators, apart from Virginia Postrel and the like, seem to think that it would be tragic for the city of Detroit to lose the art collection at the Detroit Institute of Arts (DIA) in the city’s bankruptcy proceedings. I agree that liquidating or “monetizing” the collection and shipping the works off to parts unknown like the spare pieces on a totaled car would be tragic.

Diego Rivera - Detroit Industry MuralsBut at the same time, there’s something about the relationship between the DIA collection and the city government (not to be confused with the people of the city itself) that would seem to warrant the city government’s loss of this asset. When you are a bad steward, even what little you have will be taken from you.

Now one could argue about the details of the DIA’s day-to-day operations, the compensation package for its director, and so on. But apart from these details of stewardship of the DIA itself, the real object lesson in bad stewardship has to do with the city government. Rife with structural corruption, cronyism, and incompetence, the city has been unable to provide the basic services and protection that it is responsible for, despite the best efforts of so many individuals working within the city government. So when the city cannot do the primary things it needs to do, it should lose the privilege of overseeing the secondary things, at the very least until it proves itself to be a responsible steward.

noun_project_19538As the US federal government sidled up to the debt ceiling earlier this week without quite running into it, one of the key arguments in favor of raising the debt ceiling was that it is immoral to breach a contract. The federal government has creditors, both from whom it has borrowed money and to whom it has promised transfer payments, and it has an obligation to fulfill those promises.

As Joe Carter argued here, “Member of Congress who are refusing to raise the debt ceiling (or raise taxes) until their ancillary demands are met are acting immorally, since they are refusing to pay the debts they themselves authorized.”

But as Connie Cass writes, the idea that the United States has never defaulted isn’t quite true. As she writes,

America has briefly stiffed some of its creditors on at least two occasions.

Once, the young nation had a dramatic excuse: The Treasury was empty, the White House and Capitol were charred ruins, even the troops fighting the War of 1812 weren’t getting paid.

A second time, in 1979, was a back-office glitch that ended up costing taxpayers billions of dollars. The Treasury Department blamed the mishap on a crush of paperwork partly caused by lawmakers who — this will sound familiar — bickered too long before raising the nation’s debt limit.

So if it is immoral to default, then America has done so at least twice.

Shutdown DealThe U.S. government shutdown ended last night with a budget agreement that raises the debt limit, funding the government until February.  Acton director of research, Samuel Gregg, addressed this in a new post at Aleteia. He says:

Once again, I’m afraid, the United States Congress and the Administration has opted to live in un-truth by denying the dire fiscal realities facing America. Since August 2012, the total public debt of the United States has increased from $16,015 trillion to $16,747 trillion. And in the meantime, the size of the federal government also continues to grow. How much more debt do our political masters think Americans want? How much bigger do some of them think the federal government should be? Is there any upper limit in their mind?

But it isn’t just a question of the failure of legislators and government officials. There are, it seems, a good number of American citizens who simply don’t care about fiscal responsibility, not to mention plenty of businesses that prefer corporate welfare rather than actually competing in the marketplace.

In Gregg’s newest book, Tea Party Catholic, he says that governments and individuals running up high levels of debt may be dealing with a “deeper moral disorder.” He quotes Benedict XVI who said that living off of debt is “living in untruth.” (more…)

636_debt_ceiling_0When it comes to political policy, Christians in America have a wide-range of opinions about what should be done. Even when we agree on a general principle, we tend to disagree about how that informs our policy choices. We recognize, for instance, that we have an obligation to care for the poor but differ on the type and degree of government involvement.

Such differences can lead us to believe that there is nothing we can agree on. But I don’t believe that is true. There are indeed some issues that all Bible-believing Christians should be able to agree on.

One such area of potential agreement is paying debts. The Bible is clear that believers are to pay what we owe. The Apostle Paul tells us, “Pay to all what is owed to them: taxes to whom taxes are owed . . .” (Romans 13:7). Similarly, the Psalmist warns that, “The wicked borrows but does not pay back . . .” (Psalm 37:21). And Proverbs tells us, “Do not withhold good from those to whom it is due, when it is in your power to do it. Do not say to your neighbor, “Go, and come again, tomorrow I will give it”—when you have it with you.” (Proverbs 3:27-28).

The Bible is clear that when an individual incurs a debt they are required, to the best of their ability, to pay what they owe. But does this same principle apply to governments?

Blog author: johnteevan
Monday, October 7, 2013

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?