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Tuesday, July 13, 2010

Fiscal Cancer

Here is your link.

Erskine Bowles, White House chief of staff under President Clinton compares the debt this nation is piling up to cancer. I am thinking a freight train coming downhill is closer, but maybe liver or pancreatic cancer would be accurate. Definitely not benign.

This nation has overspent it's way into a huge financial hole. I don't think we can grow our way out of this hole.

First, because the debt scares people. When there seems to be risk of the government declaring bankruptcy most people want their money safe instead of risking it on a possible future business success.

Second, because the actions of government at all levels in this nation scare people. People are willing to gamble with their money when they believe they can accurately assess the risks involved. That requires a stable and consistent playing field. With this congress and this administration there is a proposal for a bunch of new taxes and regulations every week. A person can decide that they can succeed in a certain venture this week but the rules and regulations could change tomorrow so that they will fail. When government gets involved then all bets are off.

Third, because if the economy started to really recover then this congress and this administration would react by saying "Hey, everthing is great so we can increase spending even more" and that sort of thing. Government spending tends to be like highway traffic capacity. No matter how many lanes you add to the road the traffic will increase until the road is over capacity.

The federal and state governments need to take the time to read Dave Ramsey's books. That might prevent the collapse of the government. The decision to only spend what you have, to spend on necessities instead of luxuries, and to keep some in reserve would mean pain for everyone, but I don't see any way around that. If you have ever listened to Mr. Ramsey then you know what I mean. Sometimes people call his show and tell how they gave up their fancy car for a beater, gave up their boat, gave up the wide screen TV, gave up going out to eat every night and took a second or even a third job so that they could pay off some ridiculous debt. It is a painful process but in the end they are free. This nation needs to do that, but I don't think it will happen. The other alternative is for the government to declare bankruptcy. IOW to just come out and say "We aren't paying our debts. Too bad for anyone that holds any of our bonds because they have just become worthless."

The best we personally can do is get out of debt and have a plan B. A plan B for income. A plan B for food, clothing, and shelter. Having a plan C, D, and E wouldn't be a bad idea.

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