Debt

The nation and the world watched with shock, horror and disgust as the United States congress argued and bantered till the last minute to raise the debt ceiling, adopt a budget and avert the United States’ first ever default. As best I can understand it, the irreconcilable conflict had at least three positions: the Democrats who wanted to raise the debt ceiling so that the U.S. can continue borrowing and pay its debts until after the 2012 presidential elections, the Republicans who wanted a short term increase in the debt ceiling that will require another round of negotiations within the year and the Tea Party Republicans who wanted no increase in the debt ceiling forcing the government to immediately reign in its spending to current levels of income. (I am sure this is an overly simplistic appraisal of the situation.)

Regardless of political positions or opinions, the underlying issue to our current crisis is debt. We simply owe more than we can pay. Everyone, Democrats and Republicans alike seem to recognize that this cannot continue. We cannot continue as a nation sinking further and further into debt.

Perhaps debt and credit will be the defining issues of the twenty-first century. We have watched Greece, Spain, Portugal and Ireland wrestle with debt issues that totter the European markets. We are still struggling to recover from the debt and credit crisis of 2008 that sent our economy spiraling into the "Great Recession."

The generation that grew up in the Great Depression and fought the second World War learned early in life the value of saving and of avoiding unnecessary debt. But they are quickly passing from the scene. Those of us who grew up in the second half of the twentieth century and the early years of the twenty-first are having to relearn those lessons the hard way.

For decades we have lived under the illusion that budgets could be based on credit. We ran up credit card debt adopting life styles and standards of living beyond our income. We even coined a phrase to describe it: the “standard of living bubble,” defined by Investopedia as “The concept of consumers living beyond their means for an extended period of time. … the use of consumer credit and spending increases in order to provide the illusion of increases in standard of living.”

Prior to the “Great Recession” of 2008 the average savings rate for Americans was negative. We were, on average, spending more than we earned. Fortunately, we are making progress. Americans are reducing personal debt and increasing personal savings. Now we are painfully watching our government wrestle with the same debt issues we each must address. The way forward will not be easy and will not be rectified overnight. But, if we as a people and a nation learn to live within our means we will establish a firm footing for prosperity and health.

Writing in 1757 as Poor Richard, Benjamin Franklin warned, “when you run in debt, you give another power over your liberty,” and “the borrower is a slave to the lender and the debtor to the creditor.”

The Scripture says “Owe nothing to anyone except to love one another.” (Romans 13:8).