Easy Credit Isn't So Easy Anymore
By: Mark Tapscott
Editorial Page Editor
12/02/08 7:37 AM EST
Detroit's Big Three automakers are back in town today, hat in hand, begging for $25 billion or more in government aid. And that reminds me of a reality that may shock a lot of very smart and sophisticated people in places like Washington, D.C., New York and Los Angeles, namely that Uncle Sam is demonstrating the accuracy of some ancient wisdom found in the seventh verse of the 22nd chapter of the book of Proverbs in the Bible.
That's the verse that says "the borrower becomes the slave of the lender." We moderns hate to admit it - in fact many of us won't - but that truth is just as binding today as it was when it was first written 2,500 or so years ago by King Solomon (who, by the way, knew a thing or two about the nature of genuine wisdom).
Now, the head honchos at GM, Ford and Chrysler are back in town this week prepared to submit to Congress their plans for what they will do to save the Big Three if the government will just fork over the green backs in the form of loans and loan guarantees.
Put another way, they are negotiating the initial terms of their enslavement. Limits on executive pay and politically correct green mandates on product design are only the start of much more to come (see future editions of The Federal Register for further details).
In any case, that $25 billion for Detroit sounds like a pittance compared to the estimated $7.7 trillion Washington has already shelled out in bailouts and guarantees in the federal government's effort to "rescue" Wall Street and the rest of the private sector from the economic crisis the government caused with its easy mortgage credit mandates on banks and other lenders.
But not even that $7.7 trillion is the full story, as is pointed out in today's edition of The Wall Street Journal by two governors - Mark Sanford of South Carolina and Rick Perry of Texas. Sandford and Perry note that every penny of the bailouts and guarantees from Washington was borrowed, mostly from foreign creditors in places like China.
Sanford and Perry also note this even more disturbing fact:
"Former U.S. Comptroller General David Walker puts our nation's total debt and unpaid promises, like Social Security, at roughly $52 trillion -- an invisible mortgage of $450,000 on every American household. Borrowing money to "solve" a problem created by too much debt seems odd. And as fiscally conservative Republicans, we take no pleasure in pointing out that many in our own party have been just as complicit in running up the tab as those on the political left."
And, like the struggling debtor who loses ground every month despite making minimum payments, America's total debt continues to grow, thanks to interest, even without a spendthrift White House and Congress, no matter which party is in power. Year after year after year, we've elected and re-elected presidents, senators and representatives who promise us everything and keep spending more and more.
Sooner or later, the lender tells the borrower who keeps coming back for more that there is no more, the time to pay up has come. Bankruptcies are declared, assets are sold, jobs are lost, budgets are slashed, services eliminated, and life becomes starkly and harshly simple. Call it the prison of lost opportunity.
Until very recently in history, debtors prisons were a common feature of daily life. If you think an economic depression has little to do with jail, just ask your grand parents what life was like when for a decade and more they weren't sure how they were going to make ends meet, put food on the table or pay for this year's new pair of shoes for the kids. Economic jails are in their own ways just as punishing as those with steel bars.
Nation's can't be jailed, of course, only their citizens can be.
That would be you and me.
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