BreakPoint
The Bill Comes Due
If you are like me, you are shocked by the cost of the proposed bailout of the financial sector—at least $700 billion. You probably wonder why we should pay so dearly for other people’s mistakes.
But when it comes to one aspect of this financial crisis, many of us have only ourselves to blame.
As I told you yesterday, much of the mess can be laid at the feet of what Tom Wolfe ironically called the “Masters of the Universe” and their enablers in Washington. Much but not all. Our anything-goes, “you can have what you want when you want it” attitude also played an important part in creating this mess.
As you know, the financial crisis was precipitated by the meltdown of the “sub-prime” mortgage market. Millions of Americans took out mortgages they couldn’t afford to buy houses that in some cases they really didn’t need.
Maybe inspired by television shows like Flip That House, they gambled that home prices would keep rising indefinitely and they could sell or re-finance the home before the bill literally came due. They were wrong, and currently, 9 percent of all Americans with mortgages are either behind on their payments or in foreclosure. The number can only grow.
But it’s not just the sub-prime mess. The personal debt of Americans is at record levels. A well-known credit-card commercial has a man shopping for a new television set and using his cell phone to check his credit limit. Not his checking or savings account balance, but his limit! And in case you don’t get the message, the music in the background blares, “I want it all and I want it now!”
It’s not only consumer goods. Everything from the war in Iraq to Katrina recovery is funded by borrowing. Both political parties are quick to promise specific “goodies,” like new entitlements or tax cuts or new roads, but they never say how they are going to pay for them.
The answer of course is that they haven’t a clue, other than to borrow from foreigners and then stick our children and grandchildren with the bill for some future day.
A few years ago, a very intelligent man—a good friend of mine—and I had a conversation I won’t forget. He told me that he was getting out of the financial business because, in part, he was concerned about how much debt Americans were taking on. He knew that eventually our folly would catch up with us and feared a possible collapse.
Well, I don’t know if this is the collapse; I hope it’s just a warning shot across our bow. But in either case, one thing is clear: Business-as-usual can’t continue. Let’s recognize we can’t have it all—whether at the shopping mall or from government.
So first, we put our own houses in order. Next, we demand that our political leaders stop behaving like Santa Claus, or shop-a-holics in an outlet mall. In fact, I’m tempted to say we ought to be voting for the candidates who promise us the least goodies and tell us the hard truth: that is, that we have to start acting responsibly.
Tomorrow on “BreakPoint,” I will share with you a promising plan from one mature political leader who isn’t afraid to say it’s time we all sobered up.
In the meantime, contemplate the words of the Apostle Paul: “Give everyone what you owe him: If you owe taxes, pay taxes; if revenue, then revenue; if respect, then respect; if honor, then honor. Let no debt remain outstanding, except the continuing debt to love one another.”
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For Further Reading and Information
“Accounting for Disaster: Wall Street, Congress, and You,” BreakPoint Commentary, 23 September 2008.
“Faith, Not Fear: God and Wall Street,” BreakPoint Commentary, 17 Septemeber 2008.
Jim Landers, “Our Kids Will Pick Up the Check for Our Financial Mess,” Dallas Morning News, 23 September 2008.
“Wall Street Bailout Faces Lawmakers, Lobbyists,” BusinessWeek, 21 September 2008.
“Policymakers: Congress Must Move Quickly to Avert Damage,” Washington Post, 23 September 2008.
If you are like me, you are shocked by the cost of the proposed bailout of the financial sector—at least $700 billion. You probably wonder why we should pay so dearly for other people’s mistakes.
But when it comes to one aspect of this financial crisis, many of us have only ourselves to blame.
As I told you yesterday, much of the mess can be laid at the feet of what Tom Wolfe ironically called the “Masters of the Universe” and their enablers in Washington. Much but not all. Our anything-goes, “you can have what you want when you want it” attitude also played an important part in creating this mess.
As you know, the financial crisis was precipitated by the meltdown of the “sub-prime” mortgage market. Millions of Americans took out mortgages they couldn’t afford to buy houses that in some cases they really didn’t need.
Maybe inspired by television shows like Flip That House, they gambled that home prices would keep rising indefinitely and they could sell or re-finance the home before the bill literally came due. They were wrong, and currently, 9 percent of all Americans with mortgages are either behind on their payments or in foreclosure. The number can only grow.
But it’s not just the sub-prime mess. The personal debt of Americans is at record levels. A well-known credit-card commercial has a man shopping for a new television set and using his cell phone to check his credit limit. Not his checking or savings account balance, but his limit! And in case you don’t get the message, the music in the background blares, “I want it all and I want it now!”
It’s not only consumer goods. Everything from the war in Iraq to Katrina recovery is funded by borrowing. Both political parties are quick to promise specific “goodies,” like new entitlements or tax cuts or new roads, but they never say how they are going to pay for them.
The answer of course is that they haven’t a clue, other than to borrow from foreigners and then stick our children and grandchildren with the bill for some future day.
A few years ago, a very intelligent man—a good friend of mine—and I had a conversation I won’t forget. He told me that he was getting out of the financial business because, in part, he was concerned about how much debt Americans were taking on. He knew that eventually our folly would catch up with us and feared a possible collapse.
Well, I don’t know if this is the collapse; I hope it’s just a warning shot across our bow. But in either case, one thing is clear: Business-as-usual can’t continue. Let’s recognize we can’t have it all—whether at the shopping mall or from government.
So first, we put our own houses in order. Next, we demand that our political leaders stop behaving like Santa Claus, or shop-a-holics in an outlet mall. In fact, I’m tempted to say we ought to be voting for the candidates who promise us the least goodies and tell us the hard truth: that is, that we have to start acting responsibly.
Tomorrow on “BreakPoint,” I will share with you a promising plan from one mature political leader who isn’t afraid to say it’s time we all sobered up.
In the meantime, contemplate the words of the Apostle Paul: “Give everyone what you owe him: If you owe taxes, pay taxes; if revenue, then revenue; if respect, then respect; if honor, then honor. Let no debt remain outstanding, except the continuing debt to love one another.”
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09/24/08
