Picking America’s Pockets

The economy's in the dumps, the President has just returned from pounding on the door of Japanese markets, and Congress will soon be reconvening. Do you know where your wallet is? You'd better look out, because if past experience is any guide, it's about to be picked. And the pickpocket has an uncanny ability to make you think he's putting money into your pocket when he's really taking money out. Let me explain. The economy is in the doldrums, the recession is lingering. And this being an election year, that's enough to strike panic into the heart of any sitting office holder. So the administration and the Congress are getting ready to swing into action. Do something! Show the country they care! The trouble is, their proposals on what to do all point in the same direction--the wrong direction. They're all geared to stimulating consumer spending. Politicians are talking about things like one-time tax breaks, incentives, and give-aways. And if people still don't have enough money to buy, buy, buy, the government is encouraging them to borrow it. Just before Christmas, the Federal Reserve dramatically lowered interest rates to make it easier to buy consumer items on credit. But buying on credit is no solution, either for the nation or for individuals. In fact, that's how we got into trouble in the first place. When people buy on credit, they add to the already huge consumer debt burden that is weighing down our economy. As that debt gets bigger, and harder to pay off, people will eventually stop borrowing--and the economy will slow down again. Only this time, the amount of consumer debt piled up will be even higher, which will drive interest rates back up again even higher. We'll end up even worse off than we are now. And that's not all. Lower interest rates have a boomerang effect. At the same time that they make it easier to borrow, they make it harder to save. People's savings accounts and savings bonds earn less interest--sometimes not even enough to keep up with inflation. Soon people say, why bother saving? Why not spend that money instead? And when people stop saving, that dries up the money available to industry for capital investment--the very thing we need to repair our economy. Money from investment is what industry uses to put people to work, and to put tools and machines into their hands. If consumers spend their money instead of saving and investing, there's nothing going into the tills for industry to borrow. So any way you look at it, the idea that Americans should borrow more so they can spend more is wrong--even dangerous. It fools people into thinking the economy is reviving--while at the same time it cuts the rug out from under the economy by piling up debt and taking money away from industry. Borrowing is like a pickpocket, a con artist, who cleverly makes you think he's giving you money while really taking it away. That's why the Bible warns in Proverbs 22:7 that a borrower becomes the lender's slave. So the Congress and the President may tell us the answer to our economic problems is to borrow and spend, borrow and spend. But that's the last thing Americans need. What we really need is a return to the old Protestant work ethic, with its virtues of saving and delayed gratification.

01/16/92