28 March 2012

Making it up on Volume

by Frank Turk

I admit this is not a very theologically-driven post this week.

Watch this video:

If you click over to youTube to scan the comments (which is, of course, usually like reading the restroom walls at a dilapidated bus station) you find that people there are afraid that the National Debt is too high to ever be repaid -- we're doomed.

OK: fair enough.  I admit that I think the national debt is too high by a factor of about 100, and that if it was only $140 billion (you know: "only") I'd be somewhat unfazed by it because $140 billion is really only about 3 days float for a global operation doing all sorts of things, and it's healthy to have enough cash reserve to fend off three days of banking glitches. (and true enough: we could really be well-off to have three days cash on-hand for the same purpose)

Now, that said, is the analogy given by the good doctor Davies really all that sound?  Some say, "no," because a government is really nothing like a household, and the way it spends money is not analogous to household spending.  Meh -- I think that objection overlooks the way analogies work, and it's also a little thick when it comes to recognizing that a budget is a budget whether the budget pays for food and socks and internet access or it pays for tanks and roads and policemen and a court system and so on.  The analogy is established to make the numbers into dollar avlues which we really deal with every day -- and to show that by scale, the problem is rather disastrous.

That is: if the government can be seen as a self-sustaining entity.  And I think that's where this analogy actually goes off the rails.

See: the government is, instead, a service provider in the economy at large.  Now, I'll grant a few things here: I didn't ask for, and don't really want, a lot of the services it provides.  I think for all the good it does, the harm it does to (for example) families and economic liberty are pretty serious if not actually severe.  But as a service provider, the question is only who has chartered it and do they have the resources to pay off the debit it has incurred.

Think about this with me for a second.  The right analogy here is that our society -- our nation -- is the household, and the national debt is sort of like our mortgage.  Right now it clocks at about 100% of our national income, and we have to ask ourselves, "is that too much for a mortgage?"

By comparison, in 2005 the average household mortgage was about $167,000 and the average household income was between $46,000 and $56,000 (the lower number being "households," and the higher number being "families").  For the sake of this comparison, if we take the higher number as the baseline for calculating the ratio of income-to-mortgage, the average mortgage was 2.982 times the average annual household income (it's 3.63 times if you use the lower income number).  So most households -- even in this day and age when about 3-4% of homes go into foreclosure due to financial hardship -- carry a debt someplace north of 2.5 times their annual income and generally survive it.

But here, I admit, the analogy really does fall apart.  For the mortgage holder, at the end of the mortgage term, they own an asset which will usually appreciate at the rate of inflation.  For the United States as a nation, what we get is a larger debt every year with little or no assets to show for it and no headway after we pay billions in interest only against debt service.  The come-back from the investment as a nation is practically nil versus the household buying a house over the long run.  But my actual point here is sound enough: a debt even the double the size of one's current annual income can be paid back (with interest) if one is disciplined enough to actually pay it back on a schedule.

Thus: So what?  My point is very simple: the US Government is not like a house that lives outside of its means.  It is rather like a department of a larger operation which is running without a budget, leeching resources from other more necessary and more profitable operations.  What the Government needs is not actually to be shut down but to be scaled back to the right size for what it ought to be doing -- rather than continually growing every time some new manager comes in with big ideas about all the new customers he can sell below cost to and then somehow "make it up on volume."

Let's not elect somebody who sees it otherwise this year -- either at the local level, the state level, or the national level in all races.  I really don't care who you vote for as long as he or she understands that the Government is spending too much money, and that has to stop.  Immediately.  And they have to have a commitment to pay back what we owe right now because, on principle, borrowing money for things that aren't assets which cannot be resold and cannot generate a quantifiable return on investment is wasteful at best -- and a kind of stealing at worst.

Pray about that, and we'll be more theologicaly-minded next week.


Nash Equilibrium said...

It's a good reminder because unlike a household, government will never scale itself back. The voters will either do it, or no one will.

Mark Lussier said...

Kudos Frank, for venturing into this realm. The issues that are generated by the out of control spending by our government have implications for all of us.

I just purchased a can of coffee at my local grocery store that had been repackaged in a container that was 20% smaller than the previous week for the same price as the larger coffee. That's in just one week! There is no question this is a result of the activities of the Fed printing money to fund the overspending.

Solameanie said...

Applause and amen!

BTW, why has comment moderation been enabled? That's a first for Pyro, I think. Trolls out of control?

rom623rom828 said...

With 1 verse, I think we can turn this into a theological issue.

Whenever I think of debt (whether at the individual, household, company, government level) I think of this verse:

Proverbs 22:7 The rich rules over the poor, And the borrower becomes the lender's slave.

If you owe moneny, for any reason, even if your assets and income can cover such debt, you are still in some sense a slave -- at the mercy of the lender (and contracts and laws) dictating the terms the repayment.

I'll leave it to others to fully expound this verse and how or how it does not relate to the blog at hand.

BrettR said...

Our local congressman stopped by the front door as a way to boost votes. He is of the same thinking as you. When he was first elected, he went to a large gathering of newly elected officials where he was told that his new job was to spend the tax payer's money not to save it. If we save it, someone else will just spend it and you will have no say in it, so spend away! This was at a gathering of "fiscal conservatives."
He says everyday is like swimming up a waterfall. When you are use to eating at a buffet, it is hard to go to a sack lunch.

But there are those who are trying...

dac said...

Not theologically driven? I cant disagree more

Frank Turk said...

Who knew politics would shut the Meta down?

Chris H said...

Shouldn't you be doing other things?

...like ministry?

(Is that better? Did I do it right?)

C. T. Bennett said...

AS others have remarked, the trend over the past two millennia for "Western" society has moved from going to the church for answers (a generally theistic world view), to going to science and universities for answers, and finally, to going to the government and pragmatism for answers: whatever works. As societal character wains, personal indulgence increases and the cost of pragmatic answers goes up. It becomes more and more expensive to provide pragmatic answers to a society that puts its personal desires first. And because human services can never fully "work" -- they are never satisfying -- a natural response is that we think we are on right track, its just that we need more.

I like the post. As Frame says, theology is the application of God's word to all of life -- thinking aligned with the information God has revealed for us would aid managing our resource allocation decisions, including the national debt.

It's too bad that such matters are viewed by society as outside that domain. AS in all areas of life, managing debt, defense, national healthcare and other societal needs are ultimately matters of character, not just programs. Thanks for raising the issue for thought.

Halcyon said...

First: Frank Turk posts a blog post.

Then: The meta crashes.

So: Frank Turk is a menace and must be stopped.

Mark Lussier said...

Thomas Jefferson and Andrew Jackson understood “The Monster” known as the central bank. But to most Americans today, “Federal Reserve” is just a name on the dollar bill. They have no idea of what the central bank does to the economy, or to their own economic lives; of how and why it was founded and operates; or of the sound money and banking that could end the statism, inflation, and business cycles that the Fed generates.

This documentary,
http://youtu.be/iYZM58dulPE, dedicated to Murray N. Rothbard, steeped in American history and Austrian economics, and featuring Ron Paul, Joseph Salerno, Hans Hoppe, and Lew Rockwell, is the clearest, most compelling explanation ever offered of the Fed.

Alan Greenspan was not, we’re told, happy about this 1996 blockbuster. Watch it, and you’ll understand why. This is economics and history as they are meant to be: fascinating, informative, and motivating. This movie is changing America.

Frank Turk said...

Two things:

1. I have turned off comment moderation. Don't hate.

2. I have not un-moderated comments endorsing specific candidates. This is not that kind of blog. Take it elsewhere.

donsands said...

Excellent post Cent.

Sir Aaron said...

CT Bennett:

Exactly right. Our society thinks that it is possible to separate economic values from social values (social liberal/economic conservative). But economic values and practices flow from character as you said.

Leslie Wolf said...

But what if none of the candidates is really interested in curbing spending?

dac said...

Leslie ... shoots ... and ....


Solameanie said...

I had been trying to think of a way to frank the meta just for fun, but came up completely blank.

Seriously, one of the things that fascinates me the most this election year is how the evangelical camp is divided politically this time around more than ever, unless the lefties have always been there and just kept quiet. They tend to get upset with me when I observe that political liberalism and theological liberalism often go hand in hand. I think we can at least say that's true with many in the Emergent crowd.

William Burke said...

I'm not endorsing, per se, a candidate Frank but let me give out some easily discoverable facts about the current candidates attitudes about this subject - fiscal responsibility - which in all seriousness (lacking in some of these comments) is like identifying the class act among a slew of plaid suited used car salesmen when you actually listen intently to what they are saying and writing.

Here goes from the review of a 10 year budget impact under the 5 candidates in the race:
Barack Obama over 10 years would add conservatively $10T (thats TRILLION) to the US Debt. (Not sure how that works since he hasn't gotten a vote on a budget in years, but we'll start there.)
Newt Gingrich would add $7.4T
Rick Santorum would add $4.6T
Mitt Romney (lacking in clarity) would add $250 Billion or $1/4T
Ron Paul would reduce the National Debt by $2.2T

Maybe this might help people seriously consider this topic and dig through the deception of the campaigns.

Source for GOP Review:

R.C. said...

Well done Frank. Kudos to you, and a Bronx cheer to D.C. One point to add that I have only recently discovered- using 2005 as your base in comparing mortgage debt actually more potently demonstrates how bad it is- that is, that ratio you describe is historically unusual, and of course, unhealthy. That is, to say either "The feds are not that bad, they're just like us" or "The feds are really bad, but not like us" is to miss how bad we are. In short, we have an overspending government because we are an overspending people.