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Debt

I didn’t watch Obama last night. I wasn’t protesting per se; it’s just that I knew what he was going to say, and I knew what everyone’s reaction was going to be. He bolstered his support; he made no new converts, and he changed very little. These kinds of speeches have become something of a Kabuki ritual – everyone knows what part to play, and the whole thing is stylized to the point where there’s no room for spontaneity. The lefties are ebullient; the conservatives are panic-stricken, and the media mock the right with barely-concealed contempt.

So, in commenting on this, rather than rehash the same old lines, I thought I’d try to find a position that you might not expect me to have. And here it is:

The national debt is not as big a deal as you think it is.

Understand what I’m saying, please. I’m not saying it’s not a big deal. I’m saying it’s not as big a deal as you think it is. To illustrate, I take you back in time to the summer of 1990, just a few short months after I had self-righteously arrived home from Scotland and ended my service as a full-time missionary. I was traveling with my family through Mesquite, Nevada, and we were staying at the Peppermill Resort and Casino, an oasis of decadence in the middle of nowhere.

My cousin Norm invited me to accompany him to the craps tables to watch him gamble. I consented, mainly so I could look down my nose at him for his evilry. But I got caught up in the excitement, especially when Norm started winning. After a few rolls of the dice, Norm tossed me a five-dollar casino chip.

“Here,” he said. “Do what you want with it.”

Well, I was too righteous to actually gamble with my own money, but this was Norm’s money. In fact, it was a chip, not really money at all. What would be the harm in using this to have a few laughs? With that chip, I started mirroring Norm’s bets, and I found myself up about twenty dollars! So I stepped away from the craps table and over to a blackjack dealer, where I proceeded to lose a hundred and forty bucks of my own money over the course of an hour or so. (That doesn’t count the huge ATM fees charged by my bank as I feverishly withdrew twenty after twenty so I could keep playing “just until I broke even.”)

I learned something that night, which is that I’m a lousy gambler with an addictive personality, and I need to steer clear of the games of chance at all costs. To this day, I have the urge to gamble every time I pass through Nevada, and I’ve resisted the urge for fifteen years or so, but it hasn’t gone away completely.

But as nice and Ensigny as that lesson is, I learned something else, too – a hundred and forty bucks can be a lot of money.

I say “can be” because in my current life, a loss of a hundred and forty bucks would be annoying but hardly devastating. But back then, it felt like the equivalent of my annual salary. I was working part-time in the warehouse of the company that is now FranklinCovey, and I was making about five bucks an hour. I was living at home, so my expenses were minimal, but that hundred and forty bucks was practically a full paycheck. If I lost a full paycheck now, which, thankfully, is much more than $140, I’d probably feel now what I felt back then. Thankfully, I’m in a much, much stronger financial position now.

Yet consider this. My financial debt in 1990 was $0. My debt almost twenty years later is over $200,000. My debt has skyrocketed! So why am I not panicking?

It’s not rocket science.

I owe no credit card or student loan debt; my wife’s car is paid for, and my car will be paid off within the next few months. That will leave me with only one debt – my mortgage, which we just refinanced to be able to pay it off in 15 years instead of 30. That mortgage is collateralized by a house that, even in this depressed market, just appraised at a value much, much higher than I paid for it.

Debt doesn’t operate in a vacuum. It has to be considered against assets.

So what does this mean for the country? It means that the highest our national debt has ever been was in 1946, at the end of World War II. How is that possible? Even adjusted for inflation, the debt was nowhere near the trillions of dollars we’re looking at today.

But in comparison to our gross domestic product – our national income, if you will – the 1946 debt was close to 150% of GDP. Even as the dollars grew, the debt/GDP ratio fell dramatically until the Carter years, when it started to creep back up again. But even at the end of George W. Bush, we were only up to about 75% of GDP – half of where we were in 1946.

Post-WWII America, then, was an awful lot like post-mission Stallion. $140 was a lot of money.

So, yes, Obama’s massive spending is growing the debt at a ridiculous rate – we’ll easily hit 100% of GDP in his first term, and if the spending doesn’t slow down, we could start getting close to WWII levels. But if the economy starts growing again, we’re going to get through it. In addition, our national debt is rolled over on a daily basis. The idea that our children or grandchildren are going to wake up one morning and find a multi-trillion-dollar bill in their mailbox is alarmist nonsense. As long as the economy keeps pace with the debt, which, historically, has always been the case, then future generations will be just fine.

That’s not to say it’s not a big deal. And, indeed, with the retiring of the Baby Boomers, our entitlement programs are expanding far more rapidly than out shrinking economy, and we could be in serious trouble.

So, yes, it’s bad. But perspective is a wonderful thing. Which, to come full circle, is why I didn’t bother watching the president’s speech last night.

Remembering Larry H. Miller
The End of Charitable Giving?

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