Business As Usual

If you were charged with the task of emptying a bathtub full of water with a teaspoon, you’d probably say that it is impossible, even though your intellect would tell you it can be done.  It would take a long time, but you could empty that tub, one spoonful at a time.

Debt is like that, isn’t it?  We get ourselves into debt, and it looks insurmountable, but if we chip away at the little things, we can bail out our tub of debt.  Dave Ramsey, the radio and TV program host, deals daily with people who want to get out of debt.  He has a plan for how to do that, but only people with resolve can make the plan work.  All they need is that spoon.

The nation of Greece has been in the news for a while because of their debt.  The world community just “helped” them with another trillion dollars in debt.  We were responsible for a fair amount of that loan, even though we don’t have any money.  Greece is like a family that has been living on credit for decades, and living a fine lifestyle.  Retirement at 53, healthcare provided, one in five citizens working for the government.  It was nice, but they couldn’t afford it.  And, unless they grab that spoon, they’ll never repay their debts, but rather default, leaving the people and countries who loaned them the money holding the bag.

Spain, Portugal, France, and in fact, most Western European nations aren’t too far behind.  California is also on the precipice.  In fact, Wisconsin’s financial picture is pretty bad, too. 

The two approaches to solving debt crises are to cut expenses or raise income.  In a family, adding more income can happen by getting a part-time job or two.  Cutting expenses may start by downgrading to a more affordable car, living without cable or satellite TV, and staying away from restaurants.

Governments struggle with both strategies.  Raising taxes is not only politically difficult, but has been proven to reduce tax revenue.  Presidents Kennedy and Reagan proved that reducing taxes brings in more money to the treasury.  Even a profligate spender like the most recent President Bush reduced our budget deficit to 1% of GDP after his across the board tax rate cuts.  Raising taxes inhibits those who have the money to invest from taking risks with their money – risks like starting a business or, if they have one, adding employees.

Cutting budgets is also difficult.  Everyone who is getting money from a government entity will fight really hard to keep it.  It’s human nature.

While traveling through Wisconsin the other day, thinking about our state’s financial mess, I drove into a new rest stop on Interstate 90/94/39.  It replaces a smaller rest stop that seemed to be perfectly good.  The new rest stop – and its twin on the other side of the highway – is architecturally beautiful.  It is three stories high, though the second two levels are only for looks.  It is made of brick and stone, and it is clear no expense was spared.

These new rest stops may have been planned when the economy and our budget was better, but I wonder if anyone with a spoon thought that maybe delaying those building projects until we could afford them would be a good idea.  Some of the money probably came from the federal government.  But wait!  The federal government is way more broke that Wisconsin is.  Any money the feds spend is money they don’t have.  Picture a gigantic Visa card, and some poor schlub making the minimum payments each month.  That’s us!

Interestingly, in a state that is home to a number of paper companies who are struggling, the state also took out all the paper towel dispensers in favor of more politically correct electric dryers.  That might not cost any paper company jobs, but it sends a message that our state doesn’t support the use of paper.

Anyway, thinking about Greece at a rest stop in Wisconsin leads to thoughts like these.  I just hope we find some spoons before our tub overflows.


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Filed under 2010

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