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Brandeis University's Community Newspaper — Waltham, Mass.

Our nation: Hooked on credit and in need of a cure

Published: March 21, 2008
Section: Opinions

These are rough times for the powers that be. The President appears at once a lame duck and a total ass. The people for whom his tax cuts have meant more than beer money probably still trust him, but that’s about all. He has little to do but serve out his term as general contractor for the country’s wars, occasionally threaten to veto social legislation, and help John McCain lose the election. The economy is going to pot ahead of the Republicans’ schedule. It’s nowhere near November 4, but already the (wink-wink) independent Federal Reserve has been “forced” (quoth a major news network’s website) to turn Japanese and prop up an undercapitalized bank, Bear Stearns. Investors had been peering down warily at the contemptible ants who have been forced over the years to borrow more and more to maintain the standard of living that ants attained before all the jobs in the national ant farm came to involve cash registers and pizza boxes and crappy benefits. Apparently, there’s not enough left on the ground to suck up anymore, and these anteaters now think it best to spit the ants out and fall back on their trust funds. As good Americans, we know that they have the God-given right to do as they please with their money, even if that means fashioning it into incredibly strong origami chains and putting them around others’ necks, but it’s still not good for stability and order and people who benefit from them.

The Fed is already going all out with the monetary whip to keep us charging ahead, and Congressional Democrats have joined with our Fearless Leader to craft a “fiscal stimulus” package that involves cutting taxes in the midst of massive deficit spending to pay people small sums of money just prior to an election, so they will buy extra junk and beer and cigarettes (or, nowadays, just manage to pay for gas) on the theory that their doing so is the sort of thing that improves US economic performance. But the fact that we ants are facing harder-than-ordinarily-hard times will make it harder for the administration to persuade us that the attack on Iran penciled in on my calendar a little before Election Day will be reason enough to vote for the Grand Old War Party. The Democratic majority in Congress must feel at least somewhat secure in the knowledge that they will gain seats in November whether they try to solve the country’s existing problems now or not. But surely the wiser ones among them are fretting at the prospect of being held responsible for a national malaise for which they don’t know the cure after one of their number begins to occupy the Oval Office next year.

Many people high and low and in-between in stature are putting their faith in a white knight, who will in fact be black or a lady, and who, it is hoped, will gallop forth from the endless Democratic primary and slay the various dragons that now seem poised to burn some or all of us. The collective mind’s eye trains itself on an election, as though the most important problem facing our country is the selection of a party’s candidate from a lengthy menu of two with little beyond the superficial to distinguish them. But elections don’t solve problems; they tell us only who will be held responsible for problems left unsolved. People don’t want to get hurt tackling real problems, but prefer the two-hand-touch of a voting machine asking them an unfortunately near-meaningless binary question. There is ample reason to think that the public’s view of reality is as chemically enhanced as that of my roommates on a Friday (or Thursday, or Sunday, or, alas, Tuesday) night.

And guess what? It is. Credit is our national opiate. Americans themselves are certainly hooked. So readily available in recent years, it has eased what would otherwise have been the much more painful and politically controversial conversion of our country into one that makes nothing but sewage and houses for people who make sewage. As long as credit cards and loans are there for the asking, we consistently underestimate the beating we will take from paying more in the future– partly because of the artificial fillip in our pride that comes from avoiding the unseemly slap in the face of the lower standards of living that we’d face if we consumed only what we could afford today. In running up credit card debt, patronizing the licensed loan sharks who dispense payday loans, and accepting variable-rate mortgages and other loans, we agree to loan terms fraught with risks that might be realistic for professional gamblers or contract killers, but which have little basis in the lived reality of ants.

It’s hard to blame people for not wanting to live like the paupers we’ve become. Optimism, whether it is justifiable or the product of blatantly disingenuous argument, is a very, very American thing. Sad facts are always easier to face if we can pay somebody to announce to the world the expert opinion that they’re happy. Openly coming to terms with our weakness, moreover, might turn the enormous, growing, conspicuous phenomenon of economic inequality in our country into a live political issue. Little wonder, perhaps, that the anteaters have been so loose with their lending to the ants for so long. Those who might once have borrowed because they could now borrow because they must, and those with the option of lending to them have seen it as a good deal cheaper than the cost of facing a poor and angry public.

The decisions of businesses and institutions are simply the product of our (or, more accurately, of specific groups of rich people’s) collective decision-making, so it’s no surprise that many organizations are also wallowing in debt. These institutional movers and shakers have seen it as a sound business practice to borrow money to meet both long-term and short-term needs, apparently in part because of what might be thought of as the institutionalized pride of capitalism. If other businesses, for example, are expanding, business leaders will argue, it would make their business appear weaker, and perhaps less valuable at market, to fail to do the same, even if that meant using funds-not-yet-earned. This might hold true even if the whole expansion in an industry was fueled by borrowed money– one silly goose would follow another down the path of greater risk because of the perceived cost of not doing so. A bit of personal pride no doubt creeps into the process of institutional decision-making, as well: would you want to preside over retrenchment, belt-tightening, adjustment, and pain, when your tenure might instead be remembered as one of expansion and growth and breaking ground on new buildings? Better to let somebody else with no choice in the matter pay in the future– even at exorbitant or indeterminate interest rates–than to swallow hard and say no today. And in a sense, society borrows through businesses and institutions as employers when they hire cheap migrant labor. What are often described as “jobs Americans don’t want to do” are really “jobs Americans don’t want to do for low wages.” Employers with positions like these to fill have never liked the idea of paying what the labor market would otherwise require to fill them, so politicians allow a steady flow of migrants into the country to work cheaply today– even though everyone ought to know the political clout they will gain over time at the expense of natives and the social costs of integrating them into society will be borne in the future.

Certainly, this is how our government operates. A mix of institutional pride and individual leaders’ desire for self-aggrandizement ensures that the everyday operations of the federal government, most state governments, and a good many local governments are paid for in part with IOUs. At the state and local levels, this is quite apart from the separate bond issues that seem to be required every time someone gets a mind to fix a road or refurbish a park or build a bridge– nobody includes such “special” or “extraordinary” expenses in ordinary budgets anymore. At the federal level, ordinary deficit spending is also quite apart from war spending, which the administration actively encourages people to think of as somehow completely unrelated to the rest of the budget. A foreign policy of might-makes-right costs a lot of money, but is at the same time quite cheap if Buck Rogers, Blade Runner, the Jetsons, and other future taxpayers are compelled to foot the bill. And the various pension and entitlement programs operating at massive deficits, typically off the balance sheets of the governments responsible for them, show how easy it is to make even the most solemn promises to an electorate or workforce, least possible to break in good conscience, when the responsibility for keeping them lies elsewhere.

In the right circumstances, of course, buying on credit is necessary and good. Unfortunately, we may wish we had a great deal more of it if the loss of confidence in Bear Stearns becomes part of a wider trend and results in much tighter credit on harsher terms for individuals. But we have turned to credit too often in the wrong circumstances– so often that we have developed an unhealthy dependence on it.

And it’s this addiction, in part, that makes our focus on the election seem like so much of a pipe dream. America spent its way into a number of holes, but if the Bear Stearns collapse is a portent of how people with money to lend view the rest of our credit-based financial house of cards, we may have trouble finding cash with which to spend our way out. The expectations that an election-obsessed public will place on the shoulders of its white knight will probably be much greater than that person can possibly meet– and this assumes that the white knight will in fact be as noble as we hope, and willing to acknowledge and attempt to tackle these problems at all.

Indeed, assuming that our credit holds out, the path of least resistance for either Democrat or their unabashedly militarist Republican counterpart will be to avoid any policy changes. Keep the wars going, and start some new ones– it strengthens one’s position as president, and results in a huge kitty being placed at one’s disposal with little oversight for payment to one’s contractor pals. Center domestic policy on tax cuts– it requires absolutely no creativity or attention on one’s part to the circumstances of those in society who are hurting, and delivers political support from a surprisingly broad range of people. Push all costs off for the future, and never budget honestly for “extraordinary” expenses like repairing potholes or promises made to employees, the elderly, and the sick: it makes people think that there’s enough money available to spend on tanks and tax cuts and other tools of one’s self-aggrandizement, and it subtly reminds those groups of people how little one really cares about their unimportant lives, anyway.

As individuals, then, we will surely miss our creditors if they choose to desert us– going cold turkey is a hard way to quit, and there is no doubt that some die trying. But with respect to our government, perhaps if the war-happy and self-promoting leaders who may well be running the government both before and after the election were occasionally made to talk to the hand when they go fishing for cash to kill the next Iraqi or hand out the next pittance tax refund, we ants would be thanking the anteaters for doing us a favor.