Andy Stone: A Stone’s Throw
September 7, 2011
A lot of people argue (and “argue” is really just a much-too-polite way of saying “scream”) that we need to solve our nation’s current economic problems with “good common sense.”
It boils down to this: When you’re deep in debt, stop spending.
That does have the attraction of simple logic to it. It’s what we all instinctively feel is right – or ought to be right, anyway.
It’s solid folk wisdom and it often comes packaged with statements like, “We need to run the government the way you run your household. You can’t spend more than you take in. If you can’t afford it, don’t buy it!”
It is also part and parcel of the argument advanced by those who call for the “simple” solution of a balanced budget amendment to the U.S. Constitution.
(And not to get too far off track, but I am puzzled by people who call themselves “conservatives” and pledge deep aggressive fealty to the Constitution – and then immediately want to start amending that Constitution to meet their concerns of the moment.)
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The problem is that the “simple” solution is simply wrong.
That is often the problem with simple solutions to complex problems. If you’re going to rely on horse sense, you have to be careful you’re not talking to the wrong end of the horse.
It has been said that if you put an untrained person at the controls of a perfectly sound airplane in mid-flight and that untrained person does what seems obvious and reasonable, the almost immediate result will be a catastrophic crash.
Well, believe it or not, running the United States economy is at least as difficult as flying an airplane. You can neither fly an airplane nor run a major nation based on simple, obvious folk wisdom.
Look, the average American can’t balance his or her checkbook. So why would we think those average Americans can figure out the best way to save a national economy in crisis?
(And when I refer to average Americans, that is a group that very much includes most members of Congress – especially the newly elected ones who don’t even have basic on-the-job training. They’re still trying to find the men’s room. In fact, sadly, the average Congressman belongs to the group that should be labeled “Below Average Americans.” Listening to them is definitely listening to the wrong end of the horse.)
The issues become more difficult because, in our current situation – gravely deep national debt and a gravely wounded national economy – the correct answer is counter-intuitive.
We need to go deeper in debt to get out of debt.
We need to borrow more in order to pay off what we’ve already borrowed.
I know that sounds wrong, but it happens to be true.
I could try saying that to ford a river, you have to wade deeper to get to the other side. But that’s a slogan, not an argument.
Unfortunately, the solid, economics-based arguments are fatally loaded down with academic jargon and, worse, math. (See “balancing checkbook,” above.)
That’s why people take shelter in folk wisdom.
So let me try this analogy, based on actual household-budget logic:
You’re deeply – desperately – in debt. Fortunately, you have a job and you can make the monthly payments. But the total amount you owe is terrifying. Sometimes you lie awake at night worrying about it. (I don’t know if we’ve all been there, but I know I have.)
Then, disaster! Your car, parked in front of your house, is destroyed by an uninsured drunk driver. You have insurance, but you have a high deductible and your car was an old beater. Your insurance company offers exactly $0.00 to settle the claim.
But you need a car to get to work. You commute 50 miles each way. It’s too far to walk. You can’t hitchhike. There’s no public transportation.
You need a car or you’ll lose your job. If you lose your job, you won’t be able to make your loan payments and the banks will take everything you own.
What a mess!
But the answer is simple and obvious.
No, you don’t listen to your cousin Vinny who knows a guy who can steal a car for you.
You have a job, you’re keeping up with your loan payments, you owe a lot but your credit rating isn’t too bad.
So you take out a loan and buy a car.
Sure, you’re going deeper in debt, which seems crazy, but you really don’t have any choice. Balanced-budget austerity won’t get you to work.
You have to borrow more money to keep going and pay off your debts. You have to wade deeper to cross the river. (There’s that slogan again. Just can’t help myself.)
Suddenly, it’s not counter-intuitive.
Borrow the money, buy the car, keep working hard, make your loan payments, keep up your credit rating. Maybe some day you’ll get a raise.
It’s really as simple as any folk wisdom. But it also has the virtue of being right. Horse sense from the right end of the horse.
And, similarly, right now our national government needs to borrow more money and then spend that money to keep our crippled economy going until it can get back on its feet.
Personally, I think that money could best be spent on making the hundreds of billions of dollars in repairs that our national infrastructure desperately needs. OK, I hate the word “infrastructure.” I’m talking about repairing, rebuilding our country’s roads and bridges, our highways.
We need those repairs. Our country is falling apart. Come on, we cannot be a great nation without roads and bridges.
And don’t forget: Government hires private companies (private enterprise!) to make those repairs. And those companies have to hire people.
Those are real jobs. Those people make real money. They really spend it on the things they really need. And other companies have to hire other people to make those things.
And the wheels begin to turn again.
That wasn’t so hard to understand after all, was it?
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