Debt Crisis Hits Home

Picture this: a family of four is sitting down at the dinner table enjoying a delicious meal together. Mom asks, “How was school?” A child asks, “What did you do at work today, Dad?” The hungry teenager hastily requests, “Would you pass the potatoes, please?” The family seems happy; all material needs and desires are satisfied. Looks can be deceiving, though. This family’s lifestyle has brought them to the brink of fiscal disaster.

Most of us know that a credit card can be a dangerous device. Over the years, Mom and Dad used their plastic conveniences to purchase whatever their eyes and hearts desired. They bought new cars, new appliances; they added a new deck to their house and redecorated the interior of their home; they went on exotic vacations, ate out all the time, and even purchased a  brand new boat and RV – all on credit.

And it’s not like they accumulated this debt because of a lack of income over the years. Indeed, their income grew rapidly over the last couple of decades. They just consciously decided to spend a lot more than what they took in.

Life was good, comfortable, pleasant, and a whole lot of fun. Deep down the family knew they didn’t need all of these things, but they were easy to acquire and brought quick happiness.

That transient happiness quickly faded when reality hit.

All of the spending in which the family indulged created a mountain of debt. This debt amounted to over $50,000 per family member. The family’s pursuit of instant gratification over the years began to turn into a financial nightmare when creditors and bill collectors started calling to collect their money. You may think that figure is outlandish and unrealistic. Yes, this family does not literally exist, but the example was used to make a point. Did you know that each American’s individual share in the nearly $16 trillion dollar national debt is at least $50,000?

We often get lost in the seemingly incomprehensible debt figures. Millions and billions and trillions (oh, my!) have been in our political vernacular so long that the true gravity of their meaning and worth has been lost. But, what is a few trillion dollars of debt among friends, right? Well, apparently over $50,000 per person.

If our fictional family of four has accumulated a total of $200,000 of debt, what responsible actions should they make to set their financial house in order? They first come to terms with their extravagance and stop spending recklessly. Demanding even higher levels of income, however, is not an option. Their boss is maxed out too. So the family sells assets; they downsize and begin to live within their means by ensuring that their expenditures do not exceed their income. This is a painful, but necessary, process that most of us innately understand or have even experienced firsthand.

So, if individuals and families must grapple with their debt and practice fiscal restraint, should the federal government not do the same? But what does the government do when it’s in debt? It continues to spend with reckless abandon. There is something wrong with this picture. If families in debt must buckle down and drastically change their spending habits and lifestyle, the government should do the same.

If our fictional family is to tackle their spending crisis and debt dilemma before becoming financially undone, their mindset has to change. They have to become financially disciplined, committed to living within their means, resisting the ever-present temptation to spend frivolously. They have to also distinguish between necessities and desires and create a strict budget with the unshakeable commitment to remain faithful to it.

Our federal government should do the same. After all, the way a family conducts itself financially is essentially a microcosm of how government should operate. Families have to live within budget constraints and closely monitor their expenditures. Their spending cannot exceed their income, lest the family is harmed in the short and long term.

Understanding the seriousness of our national debt and how to deal with its existence is not as complicated as some make it out to be. Just think of how your own family would operate in a debt-induced financial crisis. A responsible family would find ways to pinch pennies, make the tough choices and sacrifices, cut spending, and work hard to live within its means. If that strategy has worked for countless families across our nation, it will surely work for the federal government.

Scott Blakeman is an intern with the Civitas Institute.