Should Governments Be Personal Debt Management Role Models?
So, I see that the U.S. government have just agreed yet another new higher debt management ceiling. I wonder how much their example is being followed by each household in their personal debt management.
I hope that none are because it is just not feasible to simply increase our personal debt level as soon as we get into some sort of financial problem. Unfortunately though, that is just what so many people have been doing on a regular basis throughout the “civilized” world today, it does not seem too civilized an action to take to me.
But then, all they are doing is following the lead given by the government who simply seem to be able to change the legislation at will. O.K. there was a bit of negotiation going on but did anyone ever think that there would not be a resolution by today? I know I thought that there would be. The alternative would have been a dropping of the country’s AAA rating. They just could not let that happen. We must not get our credit score reduced either in our personal debt management planning.
Who is going to pay for this rise?
Silly question. Of course it is the tax payers and shoppers. Interest rates are likely to rise sharply, prices will increase in the shops and we will all feel the pinch and need even more dtringent personal debt management.
There is another irony here as well as reported over at ironicsurrealism.com. As short a time ago as 2006 a little known senator voted against the increase in the debt ceiling saying “The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure“. You probably guessed it, that was Barack Obama. Of course, he now says that he regrets voting against it then. Just shows how different being in power is to not being in power.
It seems amazing but, according to the Treasury Department, Congress has increased the debt ceiling 78 times since 1960. In President Obama’s term of 2 1/2 years so far debt has increased by $4 trillion. Ordinary American people have to pay for this.
Anyway, I have digressed a little from my main point and would love to hear how you all feel about the government setting the standard a personal budget and personal debt management.
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Hi, Trevor,
this issue is always something falling on burden of tax payers. And rising the personal debt level never solves anything, it is better to deal with it while the debt is smaller than waiting for it to hit another ceiling. Guess it is similar to being a junkie-the more you soend, the more you want to consume…it's a neverending circle paid by the society.
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kristina, I love it, the government is a load of junkies
Well first off, no I think there's little government does that serves as a realistic example for the average guy. Still, reality is their doing what we put them in office to do, and it's complicated and messy. In some cases their dealing with problems that have been building for decades, and of course there are alwasy personal agendas. But how will we ever change that – oh, I know … pay attention to what the elected officials in our cities, counties and states do and if they aren't doing the "job" then we need to vote them OUT. Too many people vote based on a familiar name or ethnic background (big problem where I live), or they simply don't vote at all … that's a solution to exactly nothing.
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And I bet the poticians play on that ethnic background card to their own advantage.
Trevor,
I almost fell off my chair when I read your blog post title. If we do as the US government, and now as I understand it many European governments, we'd all be in jail or flogged as debtors.
No one wants to be the bad guy, step up to the plate and say it's time for us to take our lickings for being (and allowing our politicians for being…) irresponsible. I don't like negativity, but there is no way to get out of this without some pain.
There may be no compromise to this situation because it cuts to the core beliefs of us all. You can compromise if you don't mind giving up your values. Or, you can stand fast on your beliefs and face the music.
This time the "fat lady" is going sing for a long time.
RICK
Rick Lelchuk recently posted..How Artificially Sweeeeeeeet It Is!
Well said Rick and, as in lots of things, there must be pain to get gain. I think that this time the fat lady is hitting Top "C".
HI Trevor,
I think George Bush upped the debt quite a bit starting the wars in Afghanistan and Iraq, and from memory Regan waw responsible for quite a bit too! Both sides of politics seem to contribute to the problems while blaming each other. it is the same in Australia where we have a low debt.
On the personal side I just figured out over the last 10 years I have paid the price of our house in interest to the banks. No, I don't own the house yet, although it has increased in value. It points out the difference between the haves and have nots. If I had purchased the property for cash, or interest free, I could have invested over $100K in a property portfolio that would have already given us enough to retire on.
Like it or not debt keeps us working. It all started with Roosevelt and Keynes when they initiated marginal income tax.
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Thanks John, good point about the amount of interest you have paid on your mortgage. People don't realize how much that mounts up.
Hello Trevor! My idea about your post, and answering the question "Who is going to pay for the rise?" I think debt in government should be payed for the government himself or let say the officials. What do you think Trevor?
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Now, that's a good idea, if the politicians run up a debt for the country, they should put their hands in their own pockets. Can't see it happening though.
Year ago, when we all believed in the democratic process and a democratic government, I would have probably said "Yes, let the government set the standards." These are elected officials whose goals are to serve all of our needs. But we have all seen the corruption, self-centerdness and allegiance to paid constituencies, so that at this point the government is not setting an admirable example for us to follow. I don't have answers, just lots of questions.
Erica
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Thanks Erica, I believe that the majority of people have lost faith in politicians. It is one thing seeing this kind of activity in third world countries but, when it is nearer home, it is worrying.
Hi Trevor,
Ah, don’t get me started!!
The world is in debt from the regular guy all the way to the top. I remember thinking how silly it is for people to get in to debt (I like to deal in cash myself). When I looked in to it, I realized that if the government can be in such debt, how would a regular person even think it’s wrong.
The governments, I feel, should be setting an example for us all, in every aspect of life.
Emma
I too am afraid that the regular person will think like that Emma.
I wonder where this will end? Now that S&P has downgraded the USA's credit rating, people are predicting some pretty gloomy things. Obviously, the government can't continue to raise the debt ceiling indefinitely, something has to happen to correct things. What and when, who knows?
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I must confess that I did not expect S&P to downgrade, I thought that the government had taken action to avoid that.
Twitter: HansSchoff
says:
Hey Trevor, I agree with you. Our leaders are looked up to (normally) because they're supposed to know what they're doing and they're supposed to have our best interests at heart. But it's quickly becoming a 2-class system – those who make the rules and those who have to live by them. The political class have their own set of rules they get to follow and live by and benefit from, rules and benefits the rest of us do not get to live by. Something we do might land us in jail, but a politician might only get a slap on the wrist.
But back to your point, the government creates the rules and so the people look to the government to see what's right and wrong. So when government can change the rules or break the rules when they see fit, what's the point. If the government's going to keep spending recklessly, why should the average person cut back – especially when bailouts go to those who were reckless? It's a big mess and needs to be cleaned up properly. What's for certain is that everyone needs to be looking out for their own financial future because there's no relying on the government or it's promises!
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Twitter: prfuller
says:
Hey Trevor
Interesting comment about Obama. The difference between then and now is Obama voted against it from a minority position, ie it was going to pass anyways. How is that different from say Backman’s position. She was encouraging her majority party from voting for it, which was truly irresponsible.
The Debt Ceiling issue is a red herring. Raising the debt ceiling is just recognition of past budget decisions.
Peter
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Peter, I suppose it is different voting against something which is going through anyway.
I think there is more then meets the eye when it comes to the government.
It’s really sad that there is not more of a sense of urgency being that this is a really HUGE crisis! It’s completely insane to keep printing and going in the red without a solid plan.
Its nice to see post like these. Many people are in the dark on what is going on. This post can shed some light to many and sow the seeds for people to do their own research into the real deal with our economy and what’s going on in the world as a whole.
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Hey Trevor,
I wonder if we can escape the current system of just increasing the debt ceiling. Most of the money that is created instantly creates debt, which means that we will be living in debt as long as the current currency model maintains in place.
Alice recently posted..Credit Card Debt Erased Without Effort
Makes you proud to live in a democratic, capitalist country where money means nothing to the government, except things to throw around. Perhaps they should have just saved a few trees this year, and cut their own paychecks.
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true words Andy
Twitter: hollyfulfordjef
says:
I am not a huge political “fan”, however I think that your point here is quite ironic!! Yes for sure they should be a a role model… but will that ever happen? Not likely!! I also believe that their hands are tied to some degree that when they get put in office they have a lot to clean up from the previous person and it wouldn’t be pretty if they tried to change everything that the people wanted. I often think they do what they can to get the least amount of critics… haha. No matter what they do , good or bad there is always going to be grumblings from people thinking they know better. I wish that those who complain the most would have the knowledge and expertise to get out there and do what they think is right. They’d soon realize they need to help not complain!!
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It is strange how all new governments blame the previous one – and keep doing so for years… when they are in opposition, they know exactly how to solve the challenges.
Yes. I agree with you Trevor Barrett. What I observed in new administrations is they start their work from complaining, and showing people all the mishaps of the previous administration and not doing anything to resolve those problems.
Yes they should be role models for the people as they are the mirror of a country and they should tell the people how things should be handled.
I am sure that you are absolutely right! It is not good that politicians do such things
Hi Trevor,
The government has set a very bad example and they need help, but no matter who gets into office, the problem seems to continue. I wish we could put all government grants and programs back on a ballot and have a nice public vote on what stays and what can go. It would be great to wipe the slate clean and start over, but it’s too bad that’s not likely to happen.
Susan I have often mused over what would happen if we got rid of politicians altogether and had a group of people who ran the country by ballot. Imagine how much mo0ney would be saved on the upkeep of all the buildings, not to mention the salaries and expenses. That would be true democracy everything decided on by the people. Alas …..
Hi
Government play the very important role for progress of the country. It gives the debts an easy conditions which are good for country.
thanks,
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Twitter: 2009Taxes
says:
That is not a good way to run a budget for sure, but Congress hasn’t passed a budget in 3 years so they are quite confused. I think inflation is the one thing that can really help with a large amount of debt as the value of the debt is reduced along with the currency. That is the governments short-to-long term plan I fear.
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