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On Debt, Bailouts, and Reaping what you Sow
I'm not American. I'm Canadian, which is almost the same thing, but not quite. We add silly "u's" in words like favourite and colour. Our government pays for our health care (which I don't think is an ideal solution, either; I think the ideal mix of public/private has yet to be found). We say "out" and "about" and "roof" funny.

But most of all, we haven't had to bailout our banks. Our economy is actually very strong right now, though we're hurting just like everyone else. But of all Western countries, we're probably doing the best! So if any of you want to move up here, feel free!

Anyway, I am watching what is happening in the U.S. right now with all the bailouts with a mix of shock, incredulity, and just plain fear. And then I turn to God and remember that difficult times are to be the norm, and when we are weak, then He is strong.

I want to talk a little bit today about personal responsibility. I'm going to touch on the bailouts, because I think they matter, but on the whole I believe in certain immutable laws of human nature that God put in place: you reap what you sow. If you make a bad decision, bad things will happen. That's just the way it is. We may not like it, but that's how life works.

In our personal lives, it is extremely important to act responsibly. I've talked about that ad nauseum on this blog when it comes to parenting, getting kids to do chores, being strong in your marriage, keeping your relationship alive, overseeing your children's education, and more. We are the ones who primarily determine the course of our lives.

That's why we need to budget appropriately. Credit card debt is a horrible thing. It enslaves you to too high payments and makes you live a lifestyle you ultimately can't afford. All of our expenses need to stay within our means. Perhaps that means that you can't afford a house and you rent for a time. Perhaps it means that you don't have a flat screen TV, that you live with thrift store furniture, that you only have one car (or none at all). This was the case in our family for the first seven years of our marriage. We lived very frugally and managed to save tens of thousands in those years for a downpayment for a house. We could have lived in a better apartment, and we could have bought a car. But we didn't so that we could save up for a house.

What happens if you decide to buy that house too early? You end up owing too much. And the mortgage payments are too high because you didn't have an appropriate downpayment. So you have to borrow from credit cards to meet your monthly expenses. And once you have a house, you have to decorate and furnish it appropriately, right? So you buy all this stuff on the "don't pay a cent for one year!" deals, and then you commit yourself to major debt, even if there's no guarantee that your income will actually increase. You just get further and further in debt. You may look like you have it good on the outside, with a nice house, but your net worth is negative. If, on the other hand, you live frugally, you may look like you're poor. But you're actually further ahead, because you're managing to save.

At one point this was all common knowledge. This was how everybody lived. Today we don't. It's like that Steve Martin skit from Saturday Night Live, "Don't Buy Stuff You Can't Afford". They've taken it off YouTube, so I can't link to it, but here's a remake:

The reason that's funny is because they make something that is pure common sense sound revolutionary--because today it is. We have lost that sense of perspective.

With the bailout, what Obama is essentially doing is saying that all these people who bought homes when they shouldn't have need help, and we have to help them. So that family that has been living frugally in an apartment and saving is now going to help pay the mortgage of someone who bought a house that was too big with no plans to pay for it. That hardly seems fair.

The argument is that the effect on the economy of doing nothing will be worse than doing something. So we have to intervene, even if it sounds dumb.

But is that true? I'm not an economist, but one thing I do believe is the markets, and here's why. TV news reporters and journalists can talk about what a great deal this bailout is. They can talk all they want about how Obama is bringing hope to the nation. But the way to actually tell is by looking at the markets, because in the markets real people put their money where their mouth is. And the stock markets are essentially people betting on the future: they're buying and selling based on what they think will happen down the road. And right now the markets are tanking. They fell 500 points when Obama was elected. They keep falling everytime he talks about another stimulus. And they've lost 20% since the election. Here's an analysis of that that's pretty easy to understand.

In other words, journalists and the chattering classes can talk up the bailouts all they want, but the people who actually have to invest in the economy aren't buying it. They think it's making it worse. And I believe it will.

You're throwing good money after bad money. These people in these homes have already shown they can't afford them. How is helping them out in the short term going to solve that? And if they simply let those mortgages foreclose, yes things would be tough--but likely only for a short while. In the meantime, housing prices would fall to where they should be, and people would start buying again, like those people living in that apartment who have been saving responsibly.

It's the same thing with the bailout to failing industries. These companies have already shown they can't handle money. Why give them more? Yes, it will be a shock if those companies go under. Yes, people will hurt. But then the resources and the people would be moved to a more profitable sector of the economy.

But there's another aspect to all this. As a Canadian, our deficit is quite small. We've been paying down our national debt lately, and it's only 20% of our GDP. The American debt is now 50% of your GDP, and that's before factoring in the trillions in bailout funds. Your deficit stands at about 10% of your GDP.

Why is that important? Well, have you ever been in a position to have paid off your house? What a feeling! It's like winning the lottery! Because all of a sudden you have $1200 or $1500 or even $2000 more money a month, because it's not going to mortgage payments!

By contrast, when we add to debt, every month we have to make massive payments to support that debt, even if all we're paying is interest. The higher the debt goes, the less America will be able to spend on normal government expenditures as time goes on. More and more will have to pay down the debt. And that's our children and grandchildren who will be primarily on the hook. There won't be social security or medicare for them; the country simply won't be able to afford it because it has to pay back all this money. We eventually do have to reap what we sow.

Responsibility is the cornerstone of a healthy society, and right now, whether it's at the individual level or the government level, our society is showing very little of it. And that makes me very, very scared. And very glad we have a God to run to who is above all of this!

So as we're going through these rocky economic times, can I make a few suggestions?

1. Pay off your debt as quickly as you can. Do not go out to eat. Do not buy stuff you don't need. Get yourself on as strong financial footing as you can. Downsize if you have to. It's not nice, but try it.

2. Start saving. You never know when unemployment will hit. Make sure you have a cushion.

3. Research small businesses you can start. Often small buinesses are more stable during a recession than a regular job, where you can be laid off. A small business is more adaptable to the market. Raise your children to be entrepreneurs, so they aren't dependent on others.

4. Learn how to garden! At least if things get really bad, you can grow your own food! Plus, boy is it tasty! And it's fun for kids.

5. Pray, pray, pray. We need God right now. That's the good thing about tough times; they push you back to your Maker. So get close to Him, rest in Him, and know that He will always care for you.

And next time it's time to vote, think carefully about responsibility. Only vote for those who believe in it, of whatever party.

Thank you for listening to my rant! Have a great weekend!
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At 10:46 AM , Blogger Mel said…

Let me state that the bailouts are horrible. It is and will continue to have the opposite effect of hope, why because you cannot remove the incentive to work hard.

I write much about personal responsiblity and also how our current government is removing our ability to succeed and to fail. I even did an open letter on You Tube to the President, House and Senate about what they are doing not to mention what it means to the American People that they voted on a bill no one read.

It is horrible. This is not how my country is supposed to work.


At 11:14 AM , Blogger Tracye said…

I can't say enough how much I agree with you. On EVERY WORD you wrote.

The bailouts sicken me. I believe that if a business is not fiscally responsible, then they shouldn't be in business. If the marketplace doesn't want or need your services enough to keep you afloat, then you shouldn't be in the marketplace.

We're some of those people who scrimped and saved to buy a house we COULD afford. It's not the biggest or the fanciest, and with our third child due in April it's feeling rather tight, but we're not having financial trouble because we bought within our means.

It really bugs me to basically reward irresponsibility with money. Thousands of people (more?) bought larger, fancier homes than they could afford, but we didn't, and yet we're the ones being punished. The frugal, sensible people.

I sincerely hope America is recognizable in four years. And that the voters come to their senses. I'm still shocked he was elected in the first place.

Personally, I wanted Ron Paul to win. I realize he's got some "out there" ideas, but he's also committed to financial responsibility and paying down the debt.


At 12:20 PM , Blogger Sommer said…

Great post! I'm sorry it seems so few people get this!

We are struggling, but some of it is circumstances some of it is lack of responsibility..but, I sure don't expect folks to come to my rescue! Some may out of the goodness of their heart..but we are being forced to pay for other's bad choices. This is very frustrating and I can see my poor grandkids someday paying for all this. Sad!

Thanks for giving such a truthful look at this:-)



At 1:05 PM , Blogger OhLookADuck said…

Oh my goodness, what a breath of fresh air!

It's so hard these days to find anyone being the slightest bit critical of the president's decisions. It is so deeply concerning to me for the reasons you state and more.

Thank you for your honesty, and for reminding us that God is still in control and we still have access to Him. How wonderfully comforting that is!



At 3:23 PM , Blogger Not Your Average Mom said…

Oh how I loved this post. My hubby and I have been talking about this exact same thing! It is like you are reading our minds!
I like to say, " you don't buy new earrings when the baby is starving"...meaning that you take care of your own responsibilities first, before you spend for fun.
It was not always this way - hubby and I in fact had to file for bankruptcy a few years back. As horrible as that was (and we are still determined to one day, somehow pay all those creditors back) it taught us a VERY GOOD LESSON. We are no longer eligible for credit. Therefore, we have no credit debt. And instead of being a bad thing, this is the best possible thing that can happen. We are a totally cash family, and have reached the point where we can fast track to paying off our mortgage! Sure our furnace needs replacing and the eavestroughs are rusty, and the furniture is a decade old...but we have learned our lesson.
Thanks for the insights, I really appreciate your blog!


At 6:08 PM , Blogger Donnetta said…

Interesting that you would post on this topic today as I posted on creating a budget.

I was just mentioning to my husband this last week that we no longer need to worry about paying our mortgage since it appears the government will do it for us. I was completely joking of course!

Like you, we have lived without a lot of the "frills" to live within our means. It just doesn't make sense... *sigh*

Fun video by the way. Sad but true.


At 8:11 PM , Blogger The Lee Family said…

from another Canadian - great post, and so well said.


At 10:03 AM , Blogger Mrs. Anna T said…

Here, too, we are going through tough times. But my heart is at peace, because even though we live very modestly, financially we're better off than some of our friends who went for the latest and greatest.


At 1:00 PM , Blogger Catherine R. said…

Oh, Sheila, I am disgusted with the situation. The America that we once knew is quickly dying. The things that made this country great are all nostalgia.

I am going to pray a lot because my husband and I live frugally but we still have huge debt (thanks to regrettable lifestyles in the past) and our income does not give hardly anything to work with. I could get very upset if I think too much about it.


At 3:39 AM , Blogger Mrs. Querido said…

I'm contemplating moving to Mexico...

No, seriously, as an American (United States citizen) I am appalled at how the wishes of "We the People" are so blithely ignored! I wrote my senators in opposition to the bailouts. I received patronizing letters in return. What more as a regular citizen can I do? It is so infuriating to be the one screaming NO and everyone ignores your pleas for rationality.

The problem is that the government is running on fear right now. Fear of recession, fear of what will other countries think of the "mighty" United States, just plain old fear. And decisions based on fear are never good ones.

It irritates me that the government can take nonexistent funds, disburse them, make themselves look like the country's savior, and then MAKE ME PAY FOR IT!

I vote for the government being limited into how far they can "intervene" in our economy. Let's face it, the US government is not known for its fiscal responsibility and accountability! I have to live by a budget and so should my government. I can't make anyone else pay for the bills I incur and the government shouldn't be able to do it either.

The blessing in all of this is that God is so good to us! We haven't felt the pinch at all. We are tithing more than ever, giving in abundance and being a blessing to those around us. Thank GOD that He doesn't have to be limited by the downturn in the economy! We are a 5 person family, living on one income and we own our home! We are the only family on the block that doesn't have both parents working to support the family. And it is only by God's grace and the wisdom that He gives us with our finances. He prospered Joseph in the middle of a nationwide famine and He took care of him. I am confident that He will prosper (and is prospering!) and take care of us regardless of what the economy does. Besides, we are investing in stocks that never decline, funds that never lose value...the Kingdom Bank will never get bought out :)

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About Me

Name: Sheila

Home: Belleville, Ontario, Canada

About Me: I'm a Christian author of a bunch of books, and a frequent speaker to women's groups and marriage conferences. Best of all, I love homeschooling my daughters, Rebecca and Katie. And I love to knit. Preferably simultaneously.

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