An Idea which seems Nonsensical to this Writer

Imagine that you find yourself with a house now mortgaged at twice its approximate real value. Let’s say that you owe 300,000 dollars on a house that is now worth 170,000 dollars. You are stretched to make payments month after month for an asset that is almost 50% devalued. So far, this should not require too much imagination. I know of two families that fit this description.

Now comes the harder part to imagine. Let’s say the housewife decides she knows how to fix the problem. Owing too much money and being stretched is not nice. So she applies for every credit card she can: Visa, Mastercard, and American Express. Let no credit card be unused. Max every card to the limit.

What happens? The poor struggling household that couldn’t find a way to make ends meet finds itself awash in cash. Suddenly there is stimulus everywhere. Goods such as new cars, new furniture and pools are added as opulence dictates. Let no purchase be unattempted.

Of course you see the problem with such a household. (I know of more than one that has followed this pattern.) What is the end of such a household? The interest will eat them alive. I remember many years ago adding my own annual interest on cards—the amount I paid in interest exceeded the cost of a high end desktop computer each year. Needless to say I took steps to stop the profligate usage of cards and have never returned.

So why is our nation any different? When Reagan stimulated the economy, he did so with returning taxes in healthy amounts to the people. When Obama speaks of stimulus, what we need to remember, is that he is doing the exact opposite of Reagan. He is taking the “credit card” and charging ahead. No purchase is too big to be attempted. Banks and car companies, people and their inflated mortgages, health care and government programs—all can be paid for with the trusty credit card.

What will be the outcome? The government will find itself awash, just as the imaginary household above, in all sorts of wonderful, opulent goods. But the piper must be paid in the end. Everything that we are adding now, it seems to me, will have a cost that has to be paid for later. We purchase credit-card prosperity now, but the bill will more than take that away. This must result in higher taxes.

The most alarming item to me in this imagining is that government will become much bigger; the citizen will become poorer by a greater factor because such money will be encumbered with interest. Obama, declaring war on the small businessman, has declared that he will take the taxes only from this group. So this group naturally restrains its spending (no more new business started—unemployment results). But simple math tells us that even if Obama confiscated the entire income of this group he could not pay for his envisioned grandiose schemes. Taxes or inflation (this favorite way for government to increase taxes) is the result.

The whole plan seems, to this homespun economist, to be nonsensical. Unless of course, Obama’s real plan is to grow government. Damn the people! Full speed ahead!