“Every Form of Refuge Has Its Price”

Make no mistake about it, the heart of the current (and future) financial crisis lay with entitlements, or what some deem “federal benefits.” Though many point to the collapse of mortgage-backed securities and the real estate market as triggering the Great Recession, ultimately we are where we are as a result of far too much debt in the U.S. economy. In other words, as the current debate over the debt ceiling illustrates, ours is a crisis of debt.

Very early in our marriage, my wife and I learned a valuable and simple lesson when it comes to managing money: how to live on budget. As I have written before, upon making an early commitment never again to be in debt, we have lived the last 12 years of our 13-and-a-half year marriage completely debt free. This includes owning our home, cars, (along with having four children), and so on. (See a video of our financial testimony here.) Our budget discipline played a huge role in achieving this tremendous financial freedom.

Of course, any American with an intellectual capacity greater than that of fans of Jersey Shore understands the lack of budget discipline that has plagued Washington D.C. for decades. One statistic stands out above all others as an illustration of the fiscal folly perpetuated by the federal government: According to the U.S. census, in 2009, nearly 139 million Americans—over 46%--received at least one federal benefit.

Included in these numbers: 46.5 million received Social Security; 42.6 million Medicare; 42.4 million Medicaid; 36.1 million food stamps; 22.2 million WIC; 12.4 million housing subsidies; 6.1 million unemployment. The United States has created an unprecedented culture of dependency.

Sadly, far too many Americans are content with our current welfare state. A recent Wall St Journal-NBC News poll reveals that fewer than 25 percent of Americans favor cutbacks to Social Security or Medicare to reduce the federal deficit. As the Journal noted, “Even tea party supporters, by a nearly 2-to-1 margin, declared significant cuts to Social Security ‘unacceptable.’”

For another illustration of how numerous Americans are willing to take us even further down our debt hole, last year, when President Obama spoke to an audience of college students on the subject of health care, he declared that the students will now be able to remain on their parents’ health insurance plan until age 26. Upon hearing this, columnist Dennis Prager noted, “I do not ever recall hearing a louder, more thunderous and sustained applause than I did then. I do not believe that if the president had announced that a cure for cancer had been discovered that the applause would have been louder or longer.”

The Heritage Foundation’s 2010 Index of Dependence on Government, which “is designed to measure the pace at which federal government services and programs have grown in areas in which private or community-based services and programs exist or existed to address the same or similar needs,” had a 2009 measure of 272. In 1990 it was 123. In 1962 it was 19. Thus, in about 50 years, according to this Index, dependence on the federal government has grown by over 1300%.

Republicans and Democrats alike—in other words most Americans—are to blame for the monstrosity that is the U.S. federal government. We like to point fingers, but the sad truth of the matter is that, by and large, our government is simply a reflection of its citizenry. Far too many Americans have decided to look to government to provide for them, with far too few understanding the real price of such a relationship.

“Every form of refuge has its price,” sang the Eagles’ Glen Frey in 1975. The line is from the Eagles’ hit song “Lyin’ Eyes.” Don Henley and Frey wrote the song about a beautiful woman who (seemingly) marries a “rich old man” so “she won’t have to worry.” However, though she has many of the finer things in life, she finds herself rather unfulfilled.

It is time for America to realize the price of having our government provide us with so much. It is a price that we literally cannot afford. To roll things back will not be painless; however, as President Grover Cleveland (a democrat) noted, “It is the responsibility of citizens to support their government. It is not the responsibility of government to support its citizens.”

Copyright 2011, Trevor Grant Thomas

At the Intersection of Politics, Science, Faith, and Reason.
Trevor and his wife Michelle are the authors of: Debt Free Living in a Debt Filled World
tthomas@trevorgrantthomas.com

What You Own vs. What You Owe

“An absolute principle of economics,” the late Larry Burkett wrote in his 1992 # 1 best seller, The Coming Economic Earthquake, is that, “No one, government or otherwise, can spend more than he or she makes indefinitely. At some point the compounding interest will consume all the money in the world.”

Larry added that, “With so many variables in the economy, the one non-variable is this: What you own belongs to you and not to a lender.” What Larry was encouraging folks to do here was to make debt a rare thing, and to get completely out of debt as soon as possible.

In this best-seller, Larry may not have foreseen the subprime mortgage crisis, but writing about mortgages, home equity loans, and easy lines of credit, he did note that, “Clearly many American homeowners have transferred the wealth stored in their homes to the lenders. In this case, it leaves both in jeopardy. Given the wrong set of circumstances, the homeowners will default, leaving the banks with huge inventories of homes they can’t sell.”

Approximately 18 months ago, it seems that “the wrong set of circumstances,” became “the perfect storm” for many homeowners, lenders, and the government. The latest big victims of this storm: Investment bank Lehman Brothers (fourth largest in the U.S.), insurance giant AIG, and mortgage giants Fannie Mae and Freddie Mac.

Hundreds of billions of dollars will have been lost by homeowners and lenders by the time this turns around. I’m speaking here not only of those individuals who lost their homes, but also of those who have seen their homes plummet in value as a result of this mess.

With its bailout of companies “too big to fail,” its purchase of failed assets, and a pool at the Federal Deposit Insurance Corporation to insure investors in money-market funds, according to some in Congress, the total cost for the federal government in all of this will be over a trillion dollars. Of course, by “the federal government” what I really mean is the U.S. taxpayer, or better still: you and me.

How did it get to this? The details are somewhat extensive and complicated, but simply put: America had too much bad consumer and corporate debt, especially in the area of home mortgages. The better question is: Where do we go from here? There is no easy answer, but first and foremost I believe that all parties involved here: the government, lending institutions, and U.S. citizens, need a much more cautious attitude toward debt.

Even Time magazine recently noted that, “We all will have to start living within our means—or preferably below them. If you don’t overborrow or overspend, you’re far less vulnerable to whatever problems the financial system may have.” That sounds like something Larry Burkett would have said.

My wife Michelle and I can testify to this wisdom. We have now been married for nearly eleven years and for about the past 10 years we have lived our lives completely debt free. This includes owning our home, our cars, and so on.

We are not, nor have we ever been, “rich,” at least by American standards. I’ve been a public or private school teacher for the last 15-plus years. Michelle worked full time for a Christian ministry early in our marriage, but has been a stay-at-home mom for about the last 7 years. Our income over the life of our marriage has always been at or slightly above the median income for Americans.

I take almost no credit for where we are financially. Michelle has always been more financially disciplined than me. Early in our marriage, through her efforts and the ministry founded by Larry Burkett, Christian Financial Concepts (now Crown Financial Ministries, www.crown.org), I embraced the simple, wise truths put forth in Scripture concerning money and debt. In other words, we are where we are financially by the grace and wisdom of God.

Our financial path has literally been a calling. After about a year of marriage I felt God was calling us to commit to live our lives totally and completely debt free, never going into debt again for anything. I have always felt that this calling was not simply to bless us personally, but that we were to be an example to others and encourage them to trust God to provide all that they need. (A snippet of our personal testimony from Crown Ministries can be seen here.)

I am not saying that it is wrong to be in debt. However, debt should be rare (as it used to be), and any debt should be paid off in full as quickly as possible. The bottom line financially, whether we’re talking about the government, banks, corporations, small businesses, churches, or an individual is: How much do you own and how much do you owe? Let me say from experience, it is much better to own than to owe.

I plan to share more of our financial journey, including some of the struggles we’ve faced with the current economic climate and other challenges as well, in my next column.

Copyright 2008, Trevor Grant Thomas

At the Intersection of Politics, Science, Faith, and Reason.
Trevor and his wife Michelle are the authors of: Debt Free Living in a Debt Filled World
tthomas@trevorgrantthomas.com