19 April 2011

How to Not Reduce Your Household Debt

Deficit hawks (or “deficit peacocks”  as many on the left prefer to call them, since they plainly have no actual interest in doing what needs to be done to reduce the deficit) are always asking the American people to look at the budget and spending of the Federal Government in terms of your own household budget.  “You can’t responsibly run up these kinds of deficits and borrow against the future in the way that the government does in your own home or business,” they say (I won’t get into how businesses ACTUALLY operate in this country).  So I decided to look at how the current proposals to reduce the deficits and national debt would apply to my own home finances.


I’m a middle-class father of 3 making a decent salary that allows me to support my wife and children, but we certainly aren’t putting much away in savings or investments, and we don’t have much discretionary income for wasting on fun and games.  We have some credit card debt, not a lot, but a few thousand dollars that eats up a couple hundred bucks of interest every month.  I’d LOVE to be able to pay off all of that credit card debt.

WHY do I want to pay off my credit card debt?  The simple answer is that if I were to pay off the debt, I would be saving all that money I spend on servicing the debt, and it would mean a couple hundred bucks more every month that could go to buying things for myself and my family that would make our lives better, or to saving for the future.  I mean, why the hell else would someone want to pay off their debts?

Perhaps we should ask that question to Paul Ryan and the Republican Party, because they don’t seem to have an answer to this question that makes any sense.  They appear to want to reduce the deficit/pay down the debt for the simple sake of doing it, as if that “virtue” will somehow translate into something good for people.  No matter what you believe, you can’t run a government based on the belief that God will magically reward you if you are righteous and virtuous enough.  Some right-wing leaders may actually believe this, and many more proclaim this to be true, but the “serious” people know that there are other factors involved.

The real goal is to reduce the size of the government, and to reduce taxes on the very rich.  Perhaps if I were exceedingly generous, I would say that they wish to reduce taxes on all of us, but the vast majority of those reductions will benefit the very rich, and the vaster majority of the reductions in government will hurt the poor and middle classes.  In fact, in Paul Ryan’s plan, the deficit isn’t even reduced in any meaningful way for MANY years to come, and the projections are based on assumptions that have been panned as unrealistic by virtually every legitimate economist in the country.  So let’s just call it a wash, and say that Ryan’s plan doesn’t actually reduce the deficit at all, and just shifts the cuts in spending directly to cuts in taxes for the rich.  It’s pretty close to the truth no matter who you ask.

Back to my household finances metaphor.  Here is what Ryan proposes YOU do to reduce your credit card debt! 

You are going to make significant cuts in your grocery bill, medical costs, vacations, clothes for the kids, and other such budgetary items that you already don’t spend as much as you’d like to be able to spend in order to give yourself the quality of life that your parents’ generation had.  Now, we’re going to ask you to make those cuts to essential expenditures (but we're going to call them "discretionary spending"), and use that saved money to pay down your credit card debts, but we’re also going to cut your salary at the same time.  We’re not going to wait until after the positive results of paying down the debt start to accrue to make that salary cut, we’re going to cut your salary first.

Now, if you somehow manage to actually pay down your debts in any significant way, which would be a minor miracle under this plan, any savings that you are able to make from reductions in interest payments to your creditors will NOT be shifted back into your household budget.  No, they will be offset by further reductions in your salary, because you have now shown that it is possible for you survive on less, so you must need less.  Forget about the idea of making your quality of life any better, because you deserve a better quality of life much less than the rich man who pays your salary deserves to have that small amount of money added to his already vast holdings.

Get it?  Now you understand the Republican plan to reduce your personal debt!  And by the way, if you happen to have any money left at the end of your life, they plan on instituting a 100% Estate Tax on all estates UNDER $1 million, so that “extra” will be swept up for your boss’s benefit as well!

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