08/01/11

Dam the Debt? Will We Survive?

Author: Roger Barrier

Here are a few comments I have written on the question of the economic future of our country and ultimately the global economy. It begins with a letter. When you send your "Ask Roger" a question, I attempt to answer to the best of my ability. Republicans, Democrats, can anyone agree to see the bigger picture? God can. Here is the inquiry I received:

Dear Roger,

What are your thoughts regarding the significance of President Obama and Congress to hurrying up to pass a bill allowing an increase in our country’s debt ceiling?

Love, Julie

Dear Julie,

Winston Churchill, the most famous prime minister in English history, said, “If you’re not a liberal when you’re twenty-years-old you have no heart. If you are not a conservative when you’re fifty-years old you have no brains.”

If we insert the word “Democrats” in place of “Liberals” and “Republicans” in place of “Conservatives”, we begin to get a feel for why it is so hard for the two sides to come to an agreement on all national monetary issues—especially the national debt.

Democrats have a strong belief that a major responsibility of the federal government is to care for the poor by funding enormous entitlement programs. The best way to do this is to continue to raise taxes on those more financially fortunate.

The Republicans, on the other hand, think that the federal government should stay out of the entitlement business and allow the private sector to produce jobs and the kind of stable economy which allows the poor the opportunity for financial advancement.

Both sides have their flaws and both have their strong points.

Several thoughts come to mind in no particular order.

First, when the federal government is $14 Trillion in debt common sense says that both increasing revenue and cutting expenses is the only possible way to solve our incredible debt load.

Second, taxation can be used for social engineering. “Taxing the rich,” for example.

Third, we have all heard how Robin Hood stole from the rich to give to the poor. Unfortunately, that interpretation is incorrect. Robin Hood did not steal from the rich; he stole from the Sherriff of Nottingham who was the federal government of his time. He was overtaxing the people.

Fourth, today’s dysfunctional federal government is no longer concerned with what might be “best for the country” Their personal focus is obviously, “What stance can I take to get the most votes so that I can stay in office.”

Once again the United States is forced to face the reality of an out-of control national debt. As of August 1, 2011 at 08:54:59 GMT our national public debt is: $14,353,628,773,944.54. That is a lot of numbers.

Maybe this can give us some sort of handle on the size of our debt: The estimated population of the United States is 311,041,717 so each citizen's share of this debt is $46,146.96.

The National Debt continues to increase at an average of $3.81 billion every day.

For weeks the Democrats and Republicans have argued, dickered and called each other names while the credit rating of the USA was held hostage by their pettiness. The world has watched closely because a USA that fails to pay its debts could easily plunge the world into economic chaos. Most people I know are fed up with both President Obama and Congress for their inability to work together for the best of the country.

I believe that our out-of-control, constantly downward (upward?) spiraling national debt will bring down our nation. It is the biggest issue facing our country (except for poor leadership).

The Bible has a lot to say about borrowing and going into debt. Government entities at every level would do well to abide by the common sense wisdom of the Word of God. The Biblical goal for any government is not a balanced budget but a surplus budget.

Debt is spending money that you have not already earned. Our federal government is a master of this.

Debt on the scale that it is utilized today is a very recent development in our culture. I think that it comes about largely as a result of Keynesian Economic Theory which was first put forth by the English economist John Maynard Keynes in The General Theory of Employment, Interest and Money, published in 1936.

In the early 1980's, I sat with a friend and discussed the long-term implications of Keynesian economic theory for our country. We both concluded that the long-term-economic future didn't look bright. I will summarize parts of our discussion below.

In my opinion Keynesian Economics is the misguided philosophy that the government can create and maintain permanent prosperity for its citizens by printing up money and extending credit to its citizens through its central bank—in our case through the Federal Reserve System.

Let’s bring the problem of debt into focus with a few statistics:

1928 – The national debt in the USA was $0.

1935 – Debt of $60 Billion which is small compared with the size of our country and economy.

1946 – Debt quadruped to $270 Billion. Most of World War II is in that figure.

1966 – Debt only up to $400 Billion. Stable years of low inflation.

1976 – Debt doubled to 750 Billion. Most of the cost of Vietnam War is in that figure.

Today – twenty-five years later: our national debt has soared past the $14 Trillion mark.

The Private Debt has increased more than the national debt.

1928 – Only 4 Billion. 98% of all homes had no mortgage. No one borrowed money to buy a car in 1928.

1948 – Total private debt grown only to 50 billion. Small in comparison to size of economy. A few homes had 10 year mortgages. A few cars financed for an average of 8 months.

1958 – In 10 years the private debt went from 50 billion to over 1 trillion dollars. The seeds of inflation that we struggle with today were sown in those years.

1968 – Crossed the 2 trillion mark.

1978 – 3 trillion mark was passed.

Today – Total private debt is $16,036,521,445,917. $2 trillion more than the national debt! Today most homes have a mortgage against them for 25-30 years. Most cars are in hock for three to five years. Both government and private citizens are piling up debt at record rates.

We are passing through the Keynesian Economic Era.

Under this theory, if business gets in a slump, or if the government spends more than it receives in taxes, then they just print more money to take care of it. It takes no genius to figure out what is happening. As they print more money it dilutes the value of the money in our pocketbooks. Printing more money creates the illusion of prosperity when all of that money hits the street. But, by increasing the supply of money and extending more credit in the economic system, prices ultimately increase. In other words, the government creates inflation. We all wind up getting less for the same amount of labor and capital.

Inflation is nothing in the world but an immoral system of taxation (see Isaiah One). The government creates inflation by going into debt, by accepting deficit budgets, by spending more than they receive, by printing money – and this way they still get all the things that they wanted in the first place – like bombs… welfare… social security… new dams… salary raises… bureaucracy… etc… and they don’t have to legislate an unpopular tax increase.

The ironic thing is that periodically they legislate a tax decrease and appease us by giving back to us a little bit of what they took away through taxation. But listen, the tax decreases are just a drop in the bucket to what we lose through inflation. How many people do you think that they are fooling with this device? Well, I am afraid that they are fooling many. I hope that they don’t fool you.

I mentioned John Maynard Keynes as the Father of Keynesian Economics, which our world is practicing today. You may have gotten the idea that I am laying the blame for inflation at Lord Keynes’ doorstep. That is not true at all. The root cause of inflation—and I have never heard an economist say this—is the sin of materialism in the human heart.

When I teach my classes on Biblical Economics I use a checklist to help people analyze whether or not they are struggling with the sin of Materialism which is making material resources our god (Matthew 6:24).

Notice that while the following symptoms are personal, the federal government is guilty of most of these characteristics as well.

What are the symptoms of the sin of materialism?

·Overspending

·Compulsive buying

·Discontent with what we have

·Holding on to more wealth than we need (Hoarding)

·Failing to give God the top portion of our income

·Spending everything we make and saving nothing for the future

·Borrowing money for depreciating items

·Cheating on our income tax

·Using a credit card and not paying off or being able to pay off the balance completely at the end of the month

·Getting nervous or upset when the pastor preaches on money

The Bible’s idea of what constitutes contentment is a far cry from ours. Paul wrote in 1 Timothy 6:6-8: “But godliness with contentment is great gain. For we brought nothing into the world, and we can take nothing out of it. But if we have food and clothing, we will be content with that.”

Food and clothing and shelter refer to the bare essentials of life. Therefore we can define “contentment”, primarily, as the strict essentials of life.

One of the reasons we have trouble balancing our personal budgets (or the federal one as well?) has to do with what we Americans consider to be essentials. Are iPhones essential? Not really. How about three cars in every garage? Hardly. Are people entitled to every handout the government can think up? Of course not.

Consider our national debt. We spend all the money that we receive in taxes, and then we go out and borrow billions more and spend that! Then when some unexpected need arises, such as a war, we borrow money to fight the war!

Now I want to share a Biblical illustration of how government finances are to work.

In Genesis 41 Pharaoh had two dreams. In the first dream he saw seven fat cows emerge from the river. Then seven lean cows came emerged and ate the seven fat cows. In the second dream he saw seven healthy heads of grain and then seven thin heads sprouted and gobbled up the seven healthy ones.

No one could interpret the dreams, so Joseph, who was in prison and had a reputation for being able to interpret dreams, was called forth and he interpreted the dreams. He interpreted the two dreams as representing seven years of abundance in the land of Egypt to be followed by seven years of famine.

Joseph outlined his plan for saving Egypt from the upcoming famine in Genesis 41:33-56.

And now let Pharaoh look for a discerning and wise man and put him in charge of the land of Egypt. Let Pharaoh appoint commissioners over the land to take a fifth of the harvest of Egypt during the seven years of abundance. They should collect all the food of these good years that are coming and store up the grain under the authority of Pharaoh, to be kept in the cities for food. This food should be held in reserve for the country, to be used during the seven years of famine that will come upon Egypt, so that the country may not be ruined by the famine."

For the next seven years Joseph did just exactly that. The results were incredible as recorded in Genesis 41:53-57.

The seven years of abundance in Egypt came to an end, and the seven years of famine began, just as Joseph had said. There was famine in all the other lands, but in the whole land of Egypt there was food. When all Egypt began to feel the famine, the people cried to Pharaoh for food. Then Pharaoh told all the Egyptians, "Go to Joseph and do what he tells you."

When the famine had spread over the whole country, Joseph opened the storehouses and sold grain to the Egyptians, for the famine was severe throughout Egypt. And all the countries came to Egypt to buy grain from Joseph, because the famine was severe in all the world.

The plan saved Egypt from famine and not only that, Egypt wound up feeding all the neighboring countries.

Go back to 1700 and follow a graph of inflation and you will see a bulge in the inflation rate every time that we have fought a war. We fight our wars on borrowed money and we do a lot of other things on borrowed money.

We should not have one dime of national debt in our country. We should have a surplus—like Joseph did when he was running the show back in Egypt.

Each year we should collect enough taxes to pay all the expenses of this country and put some surplus in savings. We should be lending or investing those savings instead of borrowing and paying interest.

If we had a political party based on the Word of God that is exactly what would happen. It would not call for a balanced budget. It would call for a surplus budget. It would call for paying back every cent of national debt.

Please note that according to the Bible not all borrowing is a sin. Borrowing for appreciating items can be a wise investment and a godly thing to do. On the other hand, borrowing for depreciating items like cars and refrigerators ultimately lowers our standard of living. It couldn’t do anything else!

Julie and I do a lot of Biblical teaching in Peru. Peru is not a very exciting country. It is not a tourist destination by any stretch of the imagination. But, people are people, alike in every culture. We love going there.

Over the years we began to hear about one of the most famous presidents in recent Peruvian history. Sorry, I have forgotten his name and am unable to identify on the internet just which one they refer to. A number of years ago the inflation rate in Peru was running over 3000% and the government was borrowing money to subsidize everything from bread to gasoline. The country was going “down the economic tubes in a hand basket!” With the support of both the government and the people the leaders worked out a deal that on a particular upcoming day the government would stop artificially propping up every product in the economy.

And so, on that day, all the prices changed. A liter of gasoline went from 37 cents to six dollars. Bread cost four dollars instead of forty cents. The people put up with it because they knew it was the only way to save their country from crippling debt and economic chaos. The suffering was intense—but, their country is now economically stable—and they are pleased. It is a great story.

Our USA is following in their footsteps—at least in the economic sense of borrowing trillions of dollars to falsely prop up our economy.

The question is whether or not we will take a bold and balanced approach to reducing our debt or wait until chaos ensues when our economic house of cards collapses

Well, Julie, I hope this helps.

Love, Roger