Staying In Debt?

You would think after the recent financial crisis that the feds would want us to take better care of our money.

How are we supposed to make any headway getting out of debt with all this effort at getting us to spend?  When the fed talks about stimulating the economy.  That translates into: “Joe Public needs to get his credit card out and go shopping, damn it!”

A recent article in the WSJ focused on our country as a whole getting back to the basics, getting out of debt, and not spending so much on material goods.

Our not spending is considered by many at the treasury department to be a BAD thing…

And why is that a problem?  You would think signs of common sense debt reduction would lead to “Hallelujah!”, and a puppy dance with hands raised high?

How is your staying in debt a bad thing?

1.       You are paying off debt instead of buying new stuff.  Silly selfish bastard…. You aren’t very patriotic! You aren’t helping “the economy.”  (Forget the fact that you helped the economy so damn much for the last 10 years it will take you 20 to get  out of debt.)  All of those stimulus checks and tax rebates were for you to spend at Wal-Mart, not send to Capital One or to pay off Sallie Mae!

2.       When you don’t spend there are no sales taxes to collect.  The government gets no part of your money when you spend it paying off bills. Yes I know sales tax money goes into the state and local government coffers.  But the more money the state takes in the less they beg the feds for money….

3.       The feds are doing their best to keep interest rates low so we will be tempted to borrow money to buy stuff.  The whole goal of QE 2 is to keep mortgage and other rates low so we will buy more homes and stuff.  The reason this recession started was because too many bought more home than they can afford.  Right now though, the banks aren’t ready to cooperate.  They are actually reviewing your income and ability to repay the loan, weird-huh!

4.       If you are financially self-sufficient, you aren’t dependent on the government.  It is harder for them to buy your vote with pork projects if you can take care of yourself.  They need you in debt so they can “help” you.

5.       If you aren’t buying those items selected for support such as certain energy efficient appliances, or cars with tax rebates, those who pushed for those subsidies start to look like fools instead of saviors.

The above Journal article reports our household debt has dropped to 116% of our disposable income, down from a peak of 130%.  So we shouldn’t go to braggin yet, as we say here in the south.  A good debt ratio is less than 100%-of course zero makes an ideal target.

Savings Rate

We also actually have a positive savings rate over 5% (saving 5% of our income)-the most since the early 90’s.  Remember

the early 90s?  Pearl Jam, and the Beastie Boys anyone???

I for one am going to continue my efforts to thwart Big Brother by paying off my debts, and keeping my materialism to a minimum.  At least until I get my tax refund….

Comments: What say you?  Do you think the feds would rather we be spending money we don’t have rather than us busting our a… behinds getting out of debt?  What are you doing with your tax refund or extra money? Spending or Saving?

{photo credit: eliazar c.c.}

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