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What Has Happened To My Country?

I’m a fairly good student of history. I can tell you lots of information about how and why our country got started. But, even if single boomers don’t know much about their country’s origins, most of them can tell you what it was like growing up in the 50s and 60s.

In most families the husband worked and the wife took care of the home and children. Everyone had a mortgage that ended up being the family’s single highest regular expense.  In my home there was never a doubt that the monthly payment would be made on time. Money was put away each week from my father’s income. It came off of the top before money was spent on anything else. Our home cost $11,500 in 1950. My parents somehow scraped together the 20% down payment and with steadfast devotion paid the loan off in 15 years. No one was comfortable with debt, and typically, most people avoided it like the plague.

Cars were typically bought with cash. My first car, a 1964 Chevrolet Impala Convertible, cost around $4000. Between my grandparents, parents and I, we put together the money to buy the vehicle. When our family went out to dinner we paid with cash. When my mother bought a dress it was with cash. When I bought gas for my car, it was for cash again. What a strange concept we had back then….pay as you go! If you didn’t have the money, you didn’t get the goods or services. If you wanted to take a trip, you saved for it. Bank vacation clubs were all the rage. Pretty simple concept: save a fixed amount every month for 12 months, and you had the money necessary to take your vacation.

The first financial institution credit cards were from Diner’s Club in 1950. These were particularly useful for traveling salesmen. Bank cards started with American Express and Bank of America (Visa) in 1957. But, it really wasn’t until well into the 60s that bank credit cards as we know them today started being issued in large quantities. So, many boomers were well into their 20s before they had any idea that you could buy something even if you had no cash! Bingo! Now, there was a bright new concept. You could go out and buy a new dress, or a pair of skis, or a portable radio, and you didn’t have to come up with a single dime! And, unlike your home, you didn’t need any collateral or down payment. You just charged as you went. Now, this was progress.

When I was 10 or 12 years old my father gave me a weekly allowance. Single boomers remember those days. That was when your parents thought by giving you a set amount of money each week you might start to learn about the value of a dollar, about being financially responsible, about developing skills for planning and projecting future needs and obligations.  I was pretty good at the concept right away. I usually had no problem making my money last from week to week. But, many of my friends were not quite as responsible. They often ran out of money before the week was over and needed to borrow from their friends or, God forbid, got an advance on next week’s allowance. My father, being the kind soul that he was, was always concerned that I might run short. So, around midweek he would always ask me if I needed a few dollars to tide me over until the next allowance day. Ever get that kind of offer from your banker?  With a lot of pride I always turned him down. It was important for me to show him that I could take this new responsibility seriously.

After graduating college I was freely offered more credit cards than I could ever imagine myself using. I was awash in credit. What had I done to earn or deserve this? I wasn’t even related to anyone at these banking institutions. All I had done was graduate college. They must have thought that I would be a good risk, because before long I had far more credit than I had money in the bank. But, it didn’t matter. For, because times were pretty good, one institution after another would bend over backwards to expand their credit card business. Why? Because it was low risk, ridiculously profitable…..and they understood human nature.

People are pretty much the same everywhere. Make them a deal that they can’t refuse and they’ll beat a path to your door. Very few turned down the prospect of getting free credit, and in so doing, assured themselves of the ability to buy almost anything they wanted on demand whenever the need, desire or simple whim grabbed them. So, with so many credit cards being offered, especially at little or no cost, was it any wonder that consumer debt started growing exponentially? In 1965 there were 5 million cards in circulation. Today there are more than 576 million in circulation. The average person today owns 3.5 credit cards. Those who carry a balance, money that they didn’t have to spend, but amounts that the banks were only too happy to lend them, started growing and growing. There is more debt in this country now than at any time in its existence. As of January 2010 the total U.S. consumer debt was at $2.46 trillion. The average American with a credit file is responsible for over $16,000 in debt, excluding mortgages. As household wealth has declined in this downturn, more American families are facing financial distress due to high debt burdens. In 2007, BEFORE the recession began, 14.7 % of U.S. families had debt exceeding 40 % of their income. And, 26% of Americans, or more than 58 million adults, admit to not paying all of their bills on time. 

What has your government done about this? Basically, whether Republicans or Democrats were in power, the government has escalated the trend to expanding credit and debt. It’s almost like a smoker, who might somehow know that too much smoking could be dangerous in the long term, but just feels too good in the short run to stop. Expanding credit typically leads to greater purchasing power which leads to higher sales of goods and services. Who wants to be the guy to stop that? So, they continued the trend without concern for the future, ignoring the inevitable…….that just like smoking, too much credit will ultimately kill you!

Did your government think that it had a fiduciary responsibility to rein in credit because it was getting out of hand? Maybe some legislators did. But, the bulk of them, especially in good times, thought the party would go on forever. And, if their measures felt good, well that was even more reasons not to think about the consequences down the road.  About a year and a half ago I wrote about the housing crisis that helped start this current mess (http://www.lasinglessociety.com/article.php?article=284). I explained how a well meaning President Carter urged the passage of the Community Reinvestment Act of 1977 that extensively paved the way for millions upon millions of Americans to own a home with little or nothing down, and no paperwork that might indicate that they could afford the payment, whether at that time when the economy might have been strong, or in the future when inevitable recessions and downturns would most certainly appear. We heard the denials later on again and again from the banking heads in Congress that there was nothing wrong with the economy or the federal housing programs. But, we know better now, don’t we?

It’s like the fairy tale of the Emperor’s New Clothes. No one really wanted to see or admit the truth…that the risks were mounting daily. Now, we have money being doled out everywhere to”save the system.” And, because votes are at stake, we also have a government which disowns the notion that we all had free will to make our own decisions for which we were ultimately responsible. There’s always a scapegoat; someone else is always to blame. You’ve heard the tripe. “Those greedy Wall St Types.” “Those unscrupulous banks.” “ Those lying mortgage companies.” Were there abuses? Of course there were. But, at the end of the day we are each responsible for our own actions, and as the saying goes, “When it seems too good to be true, it probably is.”

Most of the people who originally settled in this country came here to avoid religious intolerance, persecution, caste systems, and an overbearing monarchy or despot. They sought the freedom to determine their own destiny through the sweat of their brow, and their own creativity and ingenuity. They didn’t seek a handout. They didn’t expect a guarantee. And, most certainly, they didn’t believe that they would be rescued if they failed to make the right decisions. They knew they would sink or swim by their own efforts. Many failed. But, many more prospered and made this country the democratic ideal that so many other peoples of the world sought to emulate. They shunned a large controlling government, because they feared that this would only lead to the abuses of the old world.

Somehow, we seem to have forgotten or never think about our origins. Too many have gotten so caught up in their sense of entitlement that they think that it is their government’s job to give them everything they want, and, worse yet, if things just don’t work out very well, that they will be there to rescue them. 

Politicians from both sides of the aisle have been only too happy to accommodate them. Those who should know better, our representatives in Washington, have forsaken their obligation to do what is right for their country, and have simply done what has been right for them. 

Whether it is trading their vote for a favored federally financed project in their district, or for a policy that will garner greater allegiance in the next election, legislators have forgotten what most of us boomers learned when we were young: There are no free rides. You eventually have to pay the piper! And, when you escalate the public debt into the stratosphere (the Government Accountability Office (GAO), the Federal Government's auditor, argues that the U.S. is on a fiscally "unsustainable" path and that politicians and the electorate have been unwilling to change this path), a country has to eventually face the same calamities that our families in the 50s and 60s needed to face if they lost their perspective of reality and allowed themselves to be overburdened with private debt.

It was Benjamin Franklin who once warned. “Think what you do when you run in debt: you give another Power over your Liberty.” And Thomas Jefferson added,” Loading up the nation with debt and leaving it for the following generations to pay is morally irresponsible. Excessive debt is a means by which governments oppress the people and waste their substance. No nation has a right to contract debt for periods longer than the majority contracting it can expect to live.”

With no term limits for our legislative branch, too many lawmakers are more invested in getting re-elected than concerning themselves with the effect their decisions will have on future generations. How many of us have “innocently” gone along with rhetoric that conveniently makes us feel better for the moment, but may have devastating consequences down the road?

This is a far different country than the one of my youth, or the one that Franklin and Jefferson helped create. My parents tried to teach me to be morally and financially responsible. What lessons are today’s youth learning?