No More Credit for Congress by T. Edwin Perry
Allow me to tell you a story. In my mid-20’s, my wife & I were very much like other people in the country. We worked hard, we paid our bills, and we struggled. And then, we got credit cards. We started living above our means. We’d go out to dinner, and we’d pay with a credit card. We’d go to the movies, and we’d pay with a credit card. We’d get a couch, and we’d pay with a credit card. And, when we were out of credit, the credit card companies would give us…wait for it…MORE CREDIT!
Now, we made our payments…the minimum payments, just like so many other people in the country. We made our minimum payments and, month after month, we’d replace the principal that we paid off with MORE SPENDING! After all, in the short term, the credit is like FREE MONEY. We haven’t earned it…yet…but we would, right?
Over the years, our debts rose, oddly enough at rate relative to our growing income. The more money we earned, the higher our credit limits, and we continued to spend on credit, even though we were making more money. Does anyone else see a problem here?
It is kind of like the joke, “How can I be out of money? I still have checks left!”
We worked hard to pay off our debts. We stopped using credit cards entirely, and we made higher payments to some cards than others to pay off the debt and close the card. We engaged credit services to negotiate fees & interest to result in a lower payout, but, like so many, ended up spending thousands to the Negotiators and nothing to the Creditors! After years of trying to fix the problem, we hit a wall: Hurricane Wilma. The effect of this storm impacted on my income, increased our cost of living, and, with the damages to our home, added new expenses that we hadn’t accounted for in our budget.
In 2008, we filed for Bankruptcy. We paid our attorney $1,400 to do the filing. In January, we received a statement from the Bankruptcy Trustee, to which we make monthly payments for 5 years. Guess what? The Bankruptcy Attorney that we already paid $1,400 to will get another $2,500 from the Bankruptcy Court, paid before any of the other Creditors. But wait, there’s more! We only pay $103.50 each month towards discharging our Bankruptcy for a period of 5 years, or 60 payments. Total payments are $6,210. So, doing the BASIC MATH, the Bankruptcy Attorney will take just over 40% of what we are paying to discharge our debts, and our Creditors will have to split the remaining $3,710 to defray their losses. Disgusting, isn’t it?
I wish what I was telling you here were made up. I wish I could tell you that this example was an extreme, and not representative of the typical Bankruptcy filing, but it is. And I wish I could tell you that it only happens with individuals, but the unfortunate truth is that OUR GOVERNMENT is following this EXACT SAME practice, and it’s been going on for generations.
The Mantra of our government has been Tax and Spend. Let me translate that Mantra into terms that would apply to your personal life: Earn & Pay. Earn money, pay bills: OK, in this example, the Mantra makes sense. Now, so long as the Government only spends the amount of money received in tax revenue, we have no problems, right? Only, here’s the problem: The Government doesn’t just spend the money that they have. They don’t receive the money this year and then spend it next year, they spend it FIRST, based upon what they anticipate they’ll receive in taxes. OK, there’s a potential problem here: What happens when they don’t receive as much in taxes as they expect?
Now, we deal with Deficit, or, to keep the translation to a more PERSONAL level, we’ll call this CREDIT. They spend more than the amount of taxes that were received in the PREVIOUS year based upon anticipated increases in that tax revenue, either as a result of increasing tax rates or growth in the economy. So long as that Growth or increasing of tax revenue keeps up with spending, there’s no problem; however, if they spend MORE than the Growth or Increase of Taxes will accommodate, they now have an outstanding debt. This is called “Deficit Spending,” and, remember, they’ve already spent the money. The programs and projects that they’re supporting have already been paid, and have, likewise, spent those funds, so the Government cannot take it back.
Now is where things get interesting. Year after year, our Government keeps getting new “Credit Cards” from places like China, Russia, and other Foreign Governments, all based on the promise that they’ll receive that money, plus other benefits, like more money, or better trade deals, or lighter immigration restrictions, in exchange for that credit. They do this by selling BONDS. And, now that they have these new “Credit Cards,” they’ve got more “Free Money” to expand their programs.
NOW HOW MUCH WOULD YOU EXPECT TO PAY? But, wait, there’s even more. In addition to these new “Credit Cards,” let’s not forget that our Government PRINTS the MONEY!!!!! That’s right: in addition to getting more Credit from other Governments, they also have the ability to print more money to pay for their debts. This practice is called “Monetizing,” and, let me tell you, this practice has done wonders for the economies of other governments who have used this process historically. You see, Monetizing Debt causes the money to be worth less than it was worth before, as the same basis for the value of a single piece of that currency is now spread out among a larger number of pieces. This is called “Inflation,” and when it’s done to the extreme, it is called “Hyperinflation.” I’m not going to teach you the entire lesson here, but allow me to suggest a little research on your own: Take the time to Google 1) Zimbabwe; 2) Weimar Republic; 3) Hungary; 4) Greece. I think you’ll get the point.
Right now, I think we can all agree that we are in an Economic Recession. A Recession is period of time wherein Economic Growth is stagnant or negative, actually shrinking in size instead of growing. During Recessions, less money is earned, causing a reduction in Tax Revenue and an increase in the risk that the economy will not support “Deficit Spending.” Only two things can affect this: Increasing Taxes or Reducing Spending.
Based upon my own experiences, as I’ve described them to you, our Government is charging toward a very difficult situation. What happens when our “Creditors” come to collect our debts? Our Nation cannot file Bankruptcy, and cannot obtain the protections of the Court to reorganize those debts. In times such as these, there is only one prudent course of action, and that is to REDUCE SPENDING, not increase it. How can we Reduce Government Spending? Here are just a few small ideas.
1) Cut out the frivolous “pork” projects contained in the Congressional Budget. If it isn’t something of absolute importance, it doesn’t need to be there right now. Boat tours of Hawaii? Studies on Cow Farts? Road Signs telling people that Federal Money was used to print that Road Sign? These are PORK! Cut out the pork and get on with the business of running the nation!
2) Re-evaluate existing programs to eliminate fraud, waste and graft. Did you know that the Welfare system is defrauded DAILY by people who receive benefits intended for those who cannot find work that actually do go out and work, but don’t report any income to the government to avoid paying Taxes? (I know, I was shocked when I found this out myself!) Maybe it would be prudent to go after those people and stop the financial hemorrhaging, eh?
3) Stop Spending on New Projects. Stop creating NEW PROGRAMS until such time as you’ve fixed the existing projects, or are able to absorb those projects into more productive and efficient programs. When a company goes into Bankruptcy, they are encouraged to get rid of the parts that don’t work in favor of promoting those parts that do. Our Government, in my humble opinion, needs to do the exact same thing.
4) Take Personal Responsibility. This is my last point. Every administration and every Congress will BLAME this crisis on the Previous Administration or the Previous Congress. Guess what? CONGRESS controls the Spending, NOT the Presidential Administration! And, only 1/3 of Congress is replaced every two years, and there are Congressional Representatives who have been in their offices for more than 40 years!!! And these are same people who tell us that the PREVIOUS YEAR’S CONGRESS is to blame. THEY ARE THE PREVIOUS CONGRESS!!! And our President & Vice-President, right now, served in the Senate less than 1 year ago! That means THEY are responsible, too!
Look, this won’t solve all of the problems. This won’t fix all of the issues. There’s more to it than this, and the problem is bigger than we want to admit, but it is a start. I’m not giving the Republicans a pass on this any more than I am assigning all of the blame to the Democrats. We only have ONE CONGRESS, and both sides are represented. As such, both sides are responsible, but instead of assigning Blame, how about we work to FIX the problems?
By the way, to finish my personal story: We don’t have ANY credit cards anymore. If we don’t have the money in hand, we don’t spend it. If we don’t have it in the bank after paying our bills, we make do with what we have. It isn’t always pleasant, but I’ll tell you this for certain: it makes a hell of a lot more sense than what we were doing before. Maybe our Government should learn a lesson from us!
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