Economics – how did we get here?

The news coming from Washington, D.C. isn’t good.  To say there is a problem between the House and the Senate is to say that you’ve got a cold when you’ve really got walking pneumonia.  I find myself going numb, shaking my head, and saying I did not vote for this.  So what?  My world still hangs in the balance.

There is, by law, a schedule for drawing up the United States’ federal budget.   I’ve spent the past hour and a half trying to understand the last four years from a budget vote standpoint.  I am still lost.  I’ve written four paragraphs with links only to realize it won’t matter.  There has not been a U.S. Budget since 2010.  Here is a pretty good summation of what we’ve been spending.

When in doubt, I always come back to – well, how does the ordinary citizen pay his bills?  The idea is you have so much money coming in and so much money going out, right?  You’ve got big-ticket items, i.e., maybe you need a new car this year or it’s a special anniversary and you want to take an expensive vacation, or your children are off to college, or hollow laughter, how about just after school daycare?!  These take large bites out of the available money pot.  During my grandparents’ time, they didn’t have credit, they saved up for any item they wanted to buy.  Reportedly, there was quite a fight between my grandfather and grandmother – he abhorred the idea of credit and she wanted it NOW.  Family legend has it that my grandmother lost the argument, retreated to their bedroom and locked the door, or perhaps, she slammed it and then locked it.  According to family lore, my grandfather grew so incensed by my grandmother locking the bedroom door that he broke it down.  But then, I come from very tall tale story tellers.  The idea of saving up for something instead of having instant gratification by putting it on a credit card seems almost quaint.

So, I just lost another hour looking up just how many bankruptcies have been declared.  Well, you gotta pick your time period and whether it was before or after Chapter 7 (debt forgiveness)  was outlawed amended (2005) in favor of Chapter 13 (debt restructuring) and then, you’ve got to wade through a number of studies that all date prior to 2009.    Nice, but out of date.  Remember how much media attention was paid to housing mortgage debt?  How people were simply walking away from their home debt?  Foreclosure ratios, blah-blah, blah-blah and more blah-blah.  All this research time for a post that might be read?  Excuse me?  I believe in chasing rabbit holes, but this was not what I had in mind.

I keep coming back to:  if Congress, who is mandated to pass budgets, cannot or will not do so, and in so doing, passes debt onto younger generations, is anybody listening or understanding what that means?  President Obama won reelection, breaking every historical record for previous presidencies who had poor or failed economies and didn’t get reelected.  How did he do that?  I dunno.  I did learn the difference between the deficit and the national debt this past year.  The deficit is the difference annually between money coming in and money going out for this year.  The national debt is the total amount due and owing from all past years’ borrowing.  See the link above.

What’s wandering through my back brain is we are not allowed to go this route.  You cannot say to the IRS, for example, “Sorry, I don’t want to pay my taxes.  I just feel that you are taking too much, so I’m not going to pay my taxes.”  At best, you can make payment arrangements, but they still want their due and they have the power to take it from you.  How about credit card companies?  Ever missed a payment?  Ever been late?  BAMM!  KA-CHING!  Penalties applied.  Balance goes up.  How is it any different for the U.S. Government?  It isn’t.  Except…  Government, through Congress, has the power to tax, so we are the bank.  And some of us more than others.

We want it all.  We want it now.  And, the push is on to put the onus on successful people, because they are rich.  By whose definition?  Is rich someone making over $250,000 per year or maybe rich is anyone making over $500,000 or $1 million or ….  After all, they will feel it less than others.  Really?  So, my need trumps yours?  Really?  I am entitled to your efforts?  Really?  And, if you don’t give me your wallet, you aren’t patriotic?  Really?  Sigh.  And, at some point, they’re going to decide they are entitled to my wallet.  And, they are going to be very disappointed.  We have come full circle to 1776.  Taxation without representation.  It is wrong.

From the 1960s onwards, we have been pushed, pummeled, and told, “You can have it all.  You can do it all.”  And, sadly, we believed it.  That we could have and do it all without paying a cost for it.  It is just not true, kids.

 

UPDATE 2: I originally wrote that Chapter 7 was outlawed; it was not. It was amended in 2005 under the The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA).
UPDATE:  PowerLine has a similar post, but as always, more succinct.

4 thoughts on “Economics – how did we get here?

  1. I don’t know how old you are, but home mortgages have been available in the U.S. since the 1920s. At that time they were for 5 to 10 years, and you had to put 50% down. At the end of your term, you would re-negotiate for another 5-10 years, for as long as it took.

    After the Stock Market crash of 1929, credit rates were reduced and longer-term mortgages were made more available as part of FDR’s economic recovery plan. These mortgages were a key influence in reversing the effects of the worst depression in our history, even though it took nearly a decade.

    You are completely correct that over time it got way out of hand though. This current crisis since 2008 was mostly the fault of the five largest banks. They were the ones putting out the loans backed by junk bonds, with too-low a level for qualifying. Nobody in Congress asked them to do that. They did it out of greed. More loans = more profit. Unless they all default.

    Congress made it worse by bailing them out. The citizens of Iceland rejected the “too big to fail” concept. When their Parliament asked them to bail out the banks, they threw out the govt, nationalized the banks, and now they are re-writing their Constitution!

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    • Invisible Mikey, thanks for stopping by and taking the time to comment. I’ve got to quibble though with your assertion that “This current crisis since 2008 was mostly the fault of the five largest banks. They were the ones putting out the loans backed by junk bonds, with too-low a level for qualifying. Nobody in Congress asked them to do that. They did it out of greed.” It was the passage and revisions to the Community Reinvestment Act, as well as inept and reckless actions of Fannie Mae and Freddie Mac that insisted the banks make loans to people who could not afford it. If the banks would not cooperate they were subject to picketing, screams of racism and unfair practices which made headlines and then tanked the bank(s). This does not excuse the subprime mortgage debacle, but I would start with why it came about in the first place. If you can ignore the commentary, this has the history that led up to the crisis. Mind, I say “ignore the commentary,” because any criticism of President Obama sets off a firestorm.

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  2. Hunt, One of my favorite classes in college was economics, I did quite well in it too. But after taking semester after semester after semester and getting A’s all the way thru, I came to the conclusion it was a big friggin guessing game. I believe our congressmen were in that class with me, but they failed, and they continue to fail. And the sad truth is they don’t give a crap. Great post, the journey continues. Take care, Bill

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  3. Bill, I took macro and micro Economics and I was pretty bad at it. The professor had a weakness for people who tried hard though – lucky for me. I am getting much better at it as I get older and wiser… so I say. Grin.

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