Seduced my borrowed money

I have not blogged in this space for five weeks. Two of them were vacation weeks--spent mostly celebrating graduations from college by my two daughters. The last weeks is just recovering from vacation.

Have you started to notice the new tone about money in America? Some sanity is starting to reappear. It is still faint but the momentum is building. The old moral structure around money (David Brooks term) from the Puritans and Benjamin Franklin is being reintroduced to public dialogue. Is the virtue of frugality making a comback?
First, let us look at what shredded the old American and Protestant virtues of hard work, frugality and savings. The first thing that happened was the widespread use of credit cards. I remember telling my 3 year old daughter (she is now almost 22) that the reason people were poor and homeless was because they didn't have enough money to pay for food and hosuing. She responded innocently, "Why don't they use their credit card!" Well, you could see by then the genie was out of the bag. Between 1989 and 2007, credit card debt quadrupled --$238 billion to $950 billion. Attitudes toward luxury and instant gratification replaced the older virtues of thrift and temperance.
Government joined the party. Before Reagan, all Presidents of every stripe denounced deficits and restrained spending. Eisenhower warned about the military industrial complexes appetite for spending. Truman set his defesne budget based on what could fit in the budget. Even Jimmy Carter never had deficits over $50.
Then the "supply Siders" took over the GOP. Remember the Laufer Curve? The "supply side argument that we just need to tax less and invest more and grow the pie larger" has been in vogue since Reagan came into office in 1980. The original vision made sense. We overtaxed capital and discouraged investment. The economy was sluggish and inflation was rampant. I would know--try to find work coming out of college in 1979 with 11% unemplyment. Reagan said it well: "a man should not be expected to pay more then half his income in taxes. At the time the top marginable rate was 70%.
Americans used to invest what they saved. Now the savings rate is less then 1% (a few months ago it was negative). Now we borrow to save and use leverage in all our purchases. The foreclosure rate is skyrocketing, not just because of subprime loans and sky high prices--the fact that we no longer put 20% down when we purchase homes is the real culprit. If you put 20% down and then the housing prices drop 15%--distressed buyers can still get out and break even. Now they just turn in the keys. They have no skin in the game. But the nothing down and leverage to the hilt approach to money has been growing for many years. The Federal government during Reagans years started the trend. To hide the skyhigh deficits , Congress did two things. In shoring up social security by increasing rates and raising the retirment ages--they also agreed to unify the budget picture. The social security receipts were added to the general tax revenue numbers (they used to be kept seperate) and also added to the spending numbers. Since the current social security receipts greatly exceed the current payout, this surplus in social security was used to mask the size of the Reagan supply side deficits. Thanks to Ross Perot---the ticking time bomb of social security expsenses when the boomers retire--was exposed and the Bush I and Clinton Presidencies spent all their political capital shoring up the fiscal foundations. Then the costly Iraq War and an idiot massive tax cut made the already dire situation disasterous. Bush II's fiscal recklessness is beyond shameful. Tom Delay is the worst enemy any of our grandchildren and great grandchildren can have. The next 20 years of Presidential political capital will ahve to be spent correcting Bush II's supply side lunacy.
A related moral tale is the states participation in gambling. the lottery is a severe tax on the poor and it feeds financial recklessness. 20% of Americans are frequent players, spending about $60 billion a year. The spendy is regressive. A household with less then $13,000 income spends, on average, $645 a year, roughly 9% of their income. I will not be supporting the initiative on the Maryland to bring more gambling into the state.
We need better usagy laws to protect people from the social habits of instant gratification. Payday lending needs to be reigned in. Banks are finally get needed regulation to curb some pernious practices that brutally punish borrowers.

Several years ago in my last pastorate the school board formed a comittee to come up with core values the schools needed to teach. They put a community board together and my freind, the Reformed church pastor , was a member of the Board. (I got stuck on the sexuality curriculum committee that was meeting at the same time.) My friend Tim suggested that one value we needed to teach and encourage was "thrift." He argued his case but the rest of the community members thought thrift was an outdate and "unamerican" concept. We have a long way to shift our values back to where we honor the values of frutality, thrift, temperance and hard work that amde this nation great. draft 6/12/08 by James