Can We Be Honest About Debt? – Guest Post
Guest Post…or rather, my good friend Nathan Jensen posted this on Facebook, I liked it, and requested and received permission to copy and paste. It’s good.
You and I woke up today in a AA nation. Most Americans living today are unable to remember a time when America’s credit rating was anything but AAA+ and it comes as a shock, if not an unexpected shock. While pundits on both sides will rightly argue about S&P’s right to even grade debt after our financial meltdown and debate which side is to blame for this mess–calling each terrorists and extremists and other dirty words, I would like to take a moment to honestly address this situation. because, from what i’ve seen, we haven’t been all that honest.
First of all, I’ve seen a lot of conservatives analogizing the debt situation as a family living on maxed out credit cards. This takes a complex idea and distills it into a concept that anyone can understand, and then misunderstands it. it’s much easier to think about $50,000 than $15 trillion. but in being so simple, it equates the debt unequally and unfairly to make the point. Let’s be honest, the United States is in astronomical debt, and in comparison to GDP it’s awful. but the prevailing conservative perspective is that all debt is bad, while most Americans if they’re honest don’t actually feel that way.
For example, as I write this my own debt is about twice my annual income. This sounds horrible. But it’s actually a really good financial situation, because the vast majority of that debt is my mortgage, and the remainder is what i have left to pay on two vehicles and revolving balances that i pay off monthly, or no interest credit that i’m in no hurry to pay off. Most Americans would be extremely envious of my debt ratio, because they make a distinction between good debt and bad debt. mortgages are ‘good’ debt, car loans are ‘necessary’ debt. The disconnect then, between liberals, independents, and conservatives is the classification of what is good debt and bad debt–and what is a sustainable level of such debt.
Conservatives need to understand that their opponents in this debate firmly believe that social programs and entitlements are good debt. They also need to realize that their opponents are not entirely blinded to the reality that there is an unsustainable level of debt, and that liberals and progressives tend to see that level differently for reasons i’ll explain later. they also need to at least acknowledge that the vast majority of people on the left realize that our debt is an issue. But to more accurately complete the conservative analogy, let’s understand that to liberals a large portion of our debt is ‘good debt,’ or at least ‘necessary debt.’ but even with ‘good debt’ it’s possible to get into trouble with ‘bad debt’ This is why liberals are so focused on military cuts and tax credits for businesses and the wealthy. They are going to see the picture as a family whose mortgage–a good or necessary expense–is probably larger than advisable, but the real problem is their level of ‘bad debt.’ if your mortgage takes up a significant amount of your income, you probably shouldn’t go out and blow the rest of it buying meals for your friends and the latest gadgets.
A fighter jet that takes off like a helicopter is the latest gadget (especially when your enemies use improvised explosive devices and box cutters). GE’s tax bill is a free meal for a wealthy friend. let’s be honest Tea Partiers and conservatives: our military spending, graphed out over the last century is ridiculous. and it’s ridiculous for conservative reasons. we are fighting a proxy ‘war’ in Libya right now because other nations who want Libyan oil refuse to spend what we spend on our military. it’s true, our military spending levels broke the Russians and ended the Cold War. it’s true, there are more rogue states that want to destroy us today than during the cold war. it’s even true that military spending did more to end the depression that any Keynesian economic experiment. but none of those things mean that our current level of military spending is necessary or right. especially when every financial crisis presents the shameful prospect of soldiers and their families living without a paycheck. the problem is that security is a cost that cannot be quantified and cannot be argued against. you will spend whatever it costs to not die a horrible death. and conservatives need to question whether we are spending those dollars wisely. perhaps we are putting in a pool for the neighbors to use while the bank is threatening to foreclose on the land it will sit on?
As for corporate taxes, i actually do believe that we would be better off with all businesses paying lower taxes. After all, no successful business actually sacrifices and pays their own taxes. I also don’t decry corporate profits because i own stocks and see those profits. I hope that more companies make obscene profits because last i checked no one–not even Apple–is building a large money bin to hold it all. That’s why i see taxes on businesses as merely a hidden tax increase on ALL of the public, which is one of the reasons liberals need to be honest about why they seek to close the budget gap in that way.
Let’s be honest, when facing a budget shortfall, a family and a government has only three, difficult options: cut spending, increase revenue, or both. obviously, the conservative perspective has been to primarily if not entirely rely on spending cuts while the liberal perspective has been nearly the opposite. This reality is in part merely a result of the demographic differences between the two groups. A younger, more optimistic group is willing to bet on the future and accept higher levels of debt than an older, more pessimistic group. Yes, right now conservatives are pessimists–they aren’t betting on the future. progressives are the young people who are much more willing to get a second job and max out credit cards (increase revenue and the debt ceiling) to sustain their lifestyle, because they believe that the ‘good debt’ is worth holding onto for the long term. But just because a type of debt is ‘good’ doesn’t mean that any level of that debt is appropriate. A mortgage that exceeds your income might cause you to get another job, but that second job may end up killing you. but even worse (worse than death?), is this youthful perspective on debt. let’s be honest, debt is selling yourself. It’s confidence that in the future you’ll be able to earn what you cannot presently spend on your own. by spreading the debt around, we continually push the bill to other people–individually we push it to our future selves, and our children if we are really bad with money. by concealing that bill in raising taxes on business and cigarettes and property, as a nation we push the debt on those who either can least afford to pay it today or who have no say in whether they will have to pay it tomorrow.
Even if we believe that social programs are good debt, it is entirely unfair to ask our children to pay for them. No matter how you view the current debt situation, we have to be honest and acknowledge that that is precisely what we’ve asked them to do. Liberals need to be honest as well and acknowledge that perhaps conservatives don’t want to cut spending because they want to gut social programs and force grandma to the curb selling pencils. conservatives have grandmothers too, and the vast majority of them are counting on social security for their retirement plans as well. liberals need to acknowledge that in the conservative mindset, just getting another job to maintain your lifestyle is untenable for the longterm. Financial conservatism at its core is seeking financial independence. all debt–even good debt–is financial slavery, as millions of Americans who now find their homes owning them more than they own their homes have discovered. Liberals need to at least acknowledge that as cruel and mean-spirited as some of the cuts conservatives are suggesting may sound, they are not being suggested just to be cruel and mean-spirited. unfortunately, working your way out of a financial hole is a cruel business that necessarily requires you to downgrade your standard of living in the short term.
The current growth of government is unsustainable, and unfortunately S&P clearly believed that our recent agreement was not good enough. We can still argue over good debt and bad debt, over government’s place in the economy during downturns, and even over raising taxes and cutting spending. The debate has become lost in labeling each other terrorists or acting like the other side can’t see an obvious truth. But can we please just be honest and acknowledge that our opponents are not all evil or stupid? that’s just our politicians…