Showing posts with label Safety Net. Show all posts
Showing posts with label Safety Net. Show all posts

April 11, 2014

We're Not Deadbeats

Good book review in the Wall Street Journal on America's Fiscal Constitution by Bill White.

The main idea is that we have gone from a nation where fiscal discipline and paying off ones debts was a valued tradition to one now where excess rules and profligate borrowing runs through our veins. 

Both personal and national debt were viewed as a means of last resort and not something to be proud of, but rather as something done out of necessity to get through tough times. 

On a personal level, we only borrowed what we needed and we payed it back on time or even early.  Poverty was just one step away or even akin to servitude.  

Similarly, on a national level, public debt was viewed as a safety net to preserve the union (i.e. war), territorial integrity (e.g. Louisiana Purchase), or in a severe recession (i.e. to maintain the government's ability to spend in the short term). 

The best option was seen as "pay as you go," with the alternative, under limited circumstances, to "pay as soon as you can."

However, the value placed on self and national discipline and sufficiency was replaced with elements of entitlement, greed, and waste. 

The problem is once you have inequity in the system, then people feel the unfairness of it all, and give up caring about the system itself and just want to get what they see as their fair share. 

Some politicians cater to these feelings of relative deprivation and are no longer viewed positively for fiscal constraint and ensuring our economic security, but rather "politicians gain favor by spending money without having to raise unpopular taxes."

In essence, the government can give people more now, and they don't have to pay for it until future generations--hence the ability to buy citizen's political consent and even win elections by increasing the treasure chest even temporarily. 

No, this is not China raising the fortunes of the middle class to keep the Communist Party in power, but rather this is us in the U.S. of A racking up tens of trillions of dollars in debt to keep people happy now (forget the future generations, let them fend for themselves). 

Shake hands, kiss babies, and hand out dollar bills--give me, give me give me! 

What has happened to us fighting hard and driving into the future on our own feet--together in strength and not as a debtor nation getting handouts from anyone that will lend us. 

Soon, the Fed will be raising interest rates, and with a greater and greater national deficit to pay on, interest payments have the real potential to spiral out of control and leave our economy in shambles. 

Like a credit card with interest payments that eclipse the principle borrowed, soon you are in over your head and there is nowhere to go but Chapter 11. 

We're not an inherently debtor nation, and we sure don't want to be a deadbeat nation--isn't it better to have what we really have financially and be who we really are and value?   

Let's leave our children and grandchildren economic and national security and not a towering pile of shameless debt, from mom and dad with love.

(Source Photo: Andy Blumenthal)
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January 4, 2013

Have It When You Need it


At an event that I attended recently, I heard a young woman explain her philosophy on life. 

She said, her grandmother taught her: "Better to have it and not need it, than need it and not have it."

Thinking about it at the time, it seemed pretty wise--because you never want to be without something you really need. 

And good planning and survival skills say to always be prepared--you never know what happens. 

But then with the fiscal cliff and all the talk about social entitlements, I started to think about this some more. 

In a sense, as a society, we have come to think of social entitlements as something that we better have in case we need it--Unemployment Insurance, Medicare, Social Security, Medicaid and more. 

You never know when it's your turn to get laid off, sick, old, or needy. 

And isn't that what's it for--it's a safety net--these are like personal insurance and you never want to need the coverage and not have it. 

But as we should know by now, having it--doesn't come for free. 

So the question is how much social entitlements or insurance do you need--and part of the answer is how much can you afford. 

So is it really better to have it and not need it, than need it and not have it--if you can't afford what you're buying?  

In this case, our grandparents and parents having it and not really needing all of it--may mean that we and our children will not be able to have it when we do need it. 

To have social entitlements, we need to be able to pay into the system for it or borrow to finance it. 

Unfortunately, as a nation we have been doing more borrowing, because we have spent beyond our national means--we have even raided our very own social entitlement programs that we hold so dear, to pay for other things--maybe that's why they call it a trust fund, because you really do have to trust, almost blindly, that there will be something there, when it's your time to need it. 

It's great to have it, but if we are gluttons and don't responsibly plan for genuine needs--then as a nation, we really will be left needing and not having it when the time comes.

In short, spend all your money to soon, and tragically, there won't be any candy later. ;-)

(Source Photo: Andy Blumenthal)

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