Both Oars In Pay taxes; pay bills; spend locally and wisely

May 13, 2011

How can we help our nation’s economy continue to turn around? We can pay our taxes, pay our bills, especially our mortgages and credit card bills, and spend locally and wisely. We can do these things without inventing new political parties, staging demonstrations or pointing fingers— the latter of which serves only to give inappropriate support to fanatical positions on both sides of the aisle.

Why do I keep hitting on this topic? Well, it seems that the elephant in the room is still alive. We have yet to really admit that we, Uncle Sam, me and you, have spent too much! It is obvious that we took the supersize option on everything for twenty years and imploded. Yet, there is still resistance to the fact that every belt needs to be tightened—especially by those inside the Beltway.

I am positive that our collective example of personal frugality and fiduciary responsibility will send a clearer signal to Washington than all the political caterwauling. After all, do as I say, not as I do only goes so far. We need to vote with our dollars first and our suffrage second. The politicians will be a lot more afraid of us voting against government waste if we cut our own first.

I know a couple who recently sold the new car they were seduced into buying by the “Cash for Clunkers” program. Both the husband and wife work, but the new payment turned out to be one straw too many. It put their ability to pay their mortgage at risk. As they put it, “We downgraded to keep the house.” I applaud their responsible decision. I just wonder why the government can’t do the same.

On the other hand, if we take an honest look at our own spending, I am not sure we are doing much better than the government. There are several indications that we are bit loose with our own checkbooks—or credit cards. For one, Wal-Mart beat out Exxon for the top slot on the 2010 list of the US’s mega-corporations. How did that happen with a gallon of gasoline costing more than a latte at Starbucks?

There is no doubt that both Uncle Sam and most of us need to become more discerning consumers. The same is true about our borrowing habits. Last year, college loan debt surpassed credit card [revolving] debt. This historic event was partly due to the recent decline in credit card debt—a good thing—but it is also an indication that more people are signing on to debt with their fingers crossed and eyes closed. This did not work very well with mortgages.

I am not suggesting that we cannot ask the government to sharpen its pencil immediately. I like the general concept of the Corker-McCaskill proposal to cap the Federal budget as a percentage of GDP. A GDP based cap does not decide where the money goes, which is always going to cause an argument. It just determines how much there is to spend by how much the country is making. Isn’t that how we, the people, set our own budgets—by how much we earn?

It is just not smart to have legislators decide both the size of the pot and what to do with it. The current circumstance is tantamount to letting the kids decide the location and duration of the family vacation. There is reasonable spending and there is overindulgence. The sky is not the best limit when it comes to having a sustainable economy.

Having no objective budget limit has created the temptation on each side of the aisle to let the other side spend largely uninhibited if they will but return the favor. Capping the total amount available by an objective instrument would take away the possibility that the pot can be made to fit the soup. A GDP based cap would bring discipline to a situation that, due to willful constituents and career minded politicians, has gotten out of control.

It may be possible to go through detox together, but generally it takes a recovered addict to lead another to the light. That is why I think we are going to have to get off the junk first and hope Washington follows. If not, there is always a chance for tough love in 2012.