U.S. *Desperately* Needs Another Credit Card!
So, I’ve been listening to the news lately, and there’s been all this talk about a need to raise the “debt ceiling” later this summer in order for our country to avoid financial Armageddon.
People on both sides of the political aisle are talking about how if the debt ceiling isn’t raised then stars will fall from the sky, the moon will be turned to blood, the sun will darken, and America’s credit rating will go into the tank.
Perhaps so. Perhaps not. What do I know?
The idea of the “debt ceiling,” as I understand it, is that Congress has set a maximum amount of debt that the government is allowed to accumulate and, whenever we get near that limit, we need to raise it so that we can accumulate even more debt. It thus gives the public the fiction of their being a real ceiling, when in reality it’s like being in one of those giant warehouses with drop ceilings that can be raised whenever the stuff in the building gets stacked too high.
At least that’s how our political class seems to treat the idea of the debt ceiling. Has the thing ever been lowered? . . . Anybody? . . . Anybody? . . . Bueller?
Okay, it has, but not since 1963, and I didn’t exist then, so that doesn’t count.
It’s like the Kennedy Assassination locked the gears that work the debt ceiling in perpetual “raise” mode, and since that time whenever Congress has tried to work the garage door opener that runs the debt ceiling, it’s invariably gone up.
So anyway, our political class is now all atwitter about the debt ceiling needing to be raised yet again in order to stave off the four horsemen of the apocalypse.
I gather that this is the same story (with variations) they’ve been telling us each previous time that they’ve raised it, but let’s suppose that this time they’re actually right.
How can we understand this in practical terms?
After driving around listening to politicos of different persuasions hyperventilate and hand-wring about the subject, I think I’ve got a way to make the situation intelligible in a you-and-me fashion.
What the president and the political class are saying, in essence is this: The United States desperately needs to get another credit card.
It may be a colossalhuge, nation-size credit card, but that’s basically the message they’re all sweating about all over the airwaves. (Eeeew!)
It’s like if your neighbor came over one day and was all anxious about the fact that he and his family must get a new credit card or their family will financially implode. They’ve already maxed out bunches of other credit cards, and if their latest application is turned down then they’ll all end up on Skid Row. Things are that serious (or at least that’s how your neighbor makes it sound).
What would your reaction to this announcement be?
You’d know that better than I, but I can tell you my reaction would be, “Dude! You’ve got too much debt!”
Now, I’m sure there are many situations in which people end up with too much debt through no fault of their own: a major illness, job loss, underwater mortgage, inability to turn their finances around on a dime, etc. It totally understand that.
But it doesn’t matter how your neighbor got into this position, if it’s vitally important that he get another credit card or his family’s finances will be shot then he simply has too much debt at the present time.
He therefore needs to do two things, simultaneously: (1) Take a long hard look at whether he really needs that extra credit card so that, if possible, he can avoid taking on any more debt (he’s already got too much, remember?) and (2) start contingency planning by looking at what he could do to improve his family finances, either by earning more income or cutting spending or both.
“I don’t think there’s any question I need the extra credit card,” he says. “If I don’t get one I either won’t be able to pay Mr. Chen, my creditor who’s been lending me the money to get this far, or I won’t be able to send my elderly mother the check I promised to send her every month to help her in her retirement.”
“You mean you want to get a new credit card to pay off old debts?” you ask in horror. “Dude, that’s like kiting checks. You can’t run your family finances that way! And the interest will eat you alive!”
“And what’s this about your mom?” you ask. “How essential is that check you’re sending her?”
“Totally essential!” your neighbor cries, forlornly. “I’ve been sending them to her for so long, and I promised I always would send them, so that way back when she was working she didn’t save enough for retirement and is now dependent on me. If I try to stop her checks, she’ll fly into a rage and disown me.”
“Okay, not paying your creditors and not doing what you promised for your mom, who you’ve put in a position of dependency on you, are both bad options. But surely there are others. Can’t your family economize in some other way? How about not sending your daughter to those after-school art lessons at the NEA, or how about stopping your monthly contributions to NPR and Planned Parenthood? I know those are individually small expenses, but surely if you went down your entire monthly budget (and it’s a vast one, for your neighbor is a big spender), you could find a way to meet your more crucial obligations and still avoid getting that new credit card that will only put you deeper into the debt hole.”
“No, no!” your neighbor cries, almost in tears. “It’s got to be either cheating Mr. Chen or welshing on my elderly mother!”
The conversation goes on in this vein, with your neighbor repeatedly returning to these two as if they were the only options. After a while, you begin to suspect that they’re being used as a smokescreen. Your neighbor is insisting on two particularly unpleasant options as a way of not having to face making a multitude of less essential, less unpleasant cuts. Eventually you get fed up.
“So what’s your solution?” you ask.
“Well, I think you’re right that difficult decisions need to be made. There have to be some cuts, as unpleasant as they are. But I believe in taking a ‘balanced’ approach to solving my budget problem. I also need to bring in more revenue. That’s why I’m going to take some of your money and—between the money I take from you and the cuts I otherwise make, the bank will see that my finances are enough in order to give me that new credit card, so I can stave off financial Armageddon.”
“Excuse me,” you say. “You’re going to which with my money?”
“Take some of it.”
“So you can accumulate even more debt?”
“I don’t think so.”
“I don’t think you have a choice,” your neighbor says, pulling a gun out of his pocket and laying it gently on his lap. “If you don’t give me more of your money I will be forced to lock you in a hallway closet until you do.”
“But there’s no need for that,” he continues. “We are both fine, upstanding, patriotic Americans who only want what’s best for everyone. I’m sure that you’ll recognize the need for hard choices and shared sacrifice in this situation. In the end, we’ll find a mutually agreeable solution.”
What are your thoughts?