Steve Marr Business Proverbs

 
When the Creditor Comes Knocking

The doorbell rings. You jump up from dinner and answer to find a bill thrust in your face for $708,000. That’s what a family of four will owe to cover the U.S. public debt and unfunded government liabilities. You stutter in disbelief that it’s impossible, “How could it be?” so the collector breaks it down for you.  Current Federal government debt over $12.1 trillion dollars; $39,400 for every man, woman and child - (source: US Treasury Department). Un-funded government liabilities; Social Security - $14 trillion, Medicare - $74.7 trillion, and prescription drug coverage - $18.6 trillion. You stagger as he continues to read a long list including trillions of dollars more in guaranteed mortgage securities, bank insurance, flood insurance, government employee pensions and an endless litany of programs totaling a hard-to-believe $177,000 for every person in America! That totals $708,000 for your whole family (source: Federal Reserve Bank). “And if you don’t pay, we are authorized to sell all your belongings to offset the loss,” he says flatly.

As you try to wrap your brain around the numbers and the possible loss of all you have worked for, the bill collector continues, “If nothing changes, we expect the national debt to balloon out of control nearly doubling over the next 10 years. We need to collect now, before America defaults.”

Like a drawer full of revolving credit cards, federal budget deficit projections, much of which will simply cover interest payments, are driving the national debt up at a rate of over one trillion dollars per year for the foreseeable future. As it goes up, so does your share. With total confidence you reply, “I can’t pay that.”

Although no bill collector exists to collect on America’s debt, the results will be the same. Loss of property, wealth wiped out over night, a long period of depression.     How will America ever catch up? How will you pay your share? Can your family? Can your neighbors? Every family needs to pay for housing, food, clothing heat, lights, and other necessities. The average personal debt for mortgages, consumer loans credit cards, and other loans are $54,000 per citizen (source: Federal Reserve Bank). Stunningly, we have allowed our government to run up a debt more than 3 times the average household debt in America, per person! A tab we would not accept as individuals.

The harsh reality is the “average’ family income of $156,000 yearly cannot pay these obligations totaling over a lifetime of payments. The average income per citizen in the United States is $39,000 (source: Bureau of Business and Economic Research), $78,000 for a married couple, and $156,000 for a family of two. This income includes Bill Gates and Warren Buffet, as well as those who are destitute. Do we have enough Bill Gates and Warren Buffets around to pick up the difference? Clearly, the scope of the debt is on a scale we have never experienced as a nation. Washington must answer, “How will America pay this debt?” Don’t wait for it. The answer isn’t likely to come from those swiping the cards as fast as they get them. If you can’t pay, the government can’t either. The Federal Reserve is just moving the balances from card to card hoping to stay ahead of the financial tsunami.

 
God’s Word on debt

In the Bible, borrowing is always described negatively. Deuteronomy calls borrowing a curse for disobedience (see Deuteronomy 28:45-51). “The foreigners living among you will become stronger and stronger, while you become weaker and weaker. They will lend money to you, but you will not lend to them. They will be the head and you will be the tail.” US ability to manage international affairs diminishes in proportion to how much other countries literally own us. China currently holds 900 billion of US debt. The Congressional Budget Office predicts US Public Debt to reach 101% of the GDP by 2011 (not including all the unfunded liabilities which drive that figure up to many times more.) In business terms, we are bankrupt. No one would loan money to a business that cannot guarantee at least partial repayment.
While borrowing is not specifically prohibited in Scripture, the Lord never instructed anyone to go out and borrow money as a way to meet a need. When the Lord wanted something done, He always made some provision other than a loan. Biblically, paying back debts is mandatory. King David wrote, “The wicked borrows but does not pay back …” (Psalms 37:21 ESV) and Paul instructed, “Pay all what is owed …” (Romans 13:7 ESV). King Solomon wrote, “The rich rules over the poor, and the borrower is the slave of the lender” (Proverbs 22:7 ESV). James wrote, “You do not know what tomorrow will bring” (James 4:14 ESV). The precept: we should not borrow without a compelling reason and when we do we should be fairly certain of paying it back.

Whenever a nation or an individual takes action contrary to God’s precepts, we set in motion negative consequences. Borrowing is a type of enslavement, and presumes to know the future. When we let our Government borrow on the presumption of an ever-increasing tax take from citizens with stable jobs and increasing incomes to pay off future debts we collectively break all of God’s borrowing precepts. Paul wrote, “The sins of some men are conspicuous, going before them to judgment, but the sins of others appear later” (1 Timothy 5:24 ESV). We may believe the economy is getting better and more stable and everything will be okay, but reflect for a second on the tragic situation of Tiger Woods. He was on top of the world, athlete of the decade, and by all outward appearances was living the “perfect life,” but below the surface his alleged affairs were setting in motion a night that would unravel all his outward appearances. America has had a long affair with money, spurning the love and wisdom of God. Our money still says, “In God We Trust,” but in reality, God’s will does not play into the thoughts of Americans much. We do not know what event will be the catalyst, but a day will come for our nation when our economy pays the price of its debt.
 

What Happens When We Don’t Pay?

It is not likely that the leaders in the US Government will take responsibility and avert inevitable disaster; just as unlikely that we can pay the debt through taxes. Just look at the mindset of most politicians. This means, in one fashion or another, the government will be forced to default on its promises and loans. The debt burden is already too high to pay, and its increasing every day. With a more “modest” additional 1 trillion dollar deficit next year, each citizen in America will owe another $5,000 by the end of the year.

Generally, political leaders and many economists believe that “deficits don’t matter” or that “we need to spend on programs that benefit the American people and improves the economy.” This just isn’t true. Washington spending is a sickness that cannot be treated, not an economic growth strategy. In Washington, any discipline in spending is considered a cut in benefits to the needy and used as a club to beat other politicians over the head. (Washington style accounting leads to odd ways of looking at money. For example, when the amount the budget is set to grow in one year is reduced from 11% to 4% growth this is called a ‘cut’ even though actual spending grows faster than inflation. Real cutting, actually spending less, never happens. The government always spends more by at least 4% yearly.) This year, government spending rose by 15%. While you were tightening your belt, Federal salaries went up (the average federal salary is $79,000. Everyone else, $39,000.) This is not a rant against government. It’s a warning: We can’t expect Washington to become fiscally responsible.

When a family is unable to pay all its debts, they default by declaring bankruptcy. The courts will cancel all, or part, of the outstanding debts. The rest of us pick up the tab to get the family back on its feet. When a lender forecloses on a home, the house is sold and part of the debt is paid with the balance from the sale. However, there are no bankruptcy provisions for governments and no courts to cancel its debts. When the Federal government defaults on promises to pay, the results are severe cutbacks in services at a minimum with economic collapse and a nationwide depression as the extreme.  The European Union recently refused to bail out the failing economy of Greece, one of its own member nations. Should we expect anyone to come to America’s rescue?
Default may come in several ways. Medicare promised to people who paid into the system for 40 years is already being cut back, along with Social Security. Interest payments will be cut back or cancelled to bondholders (as happened to the holders of Chrysler and GM securities: Different debt instrument, same government). Increased borrowing to cover the shortfalls in the current economy will eventually lead to higher interest rates, making money more expensive to borrow. In addition, as the government borrows more, less money will be available for business growth and individuals, thus creating an additional drag on a failing economy. In 2010, the Treasury will need to sell 2.5 trillion in government bonds to finance our debt. Standard and Poor’s rating service, along with the Chinese government, have warned our government that our AAA credit rating could be in jeopardy, sharply pushing up the interest rates to sell bonds. We do not know the future, but clearly with a debt this size, the Federal government will default in some way, at some point in time.

At the point of default, options disappear. Printing more money to pay off the debt can temporarily stave off disaster, but causes inflation that can lead to a devastating result. Printing money is like an addiction. The more we have the more we need until no amount satisfies. In fact, the more we print the lesser the value. All nations that have gone this route have ended badly from Rome, to the Weimar Republic, to the current situation in Zimbabwe, where rising costs have wiped out savings and brought the economy to a standstill. Greece squirms on the chopping block. In a very real way, printing money to pay the debt acts as another form of default with the same or worse consequences.

The government, like any family, already faces fewer choices in balancing this debt, California being the most visible example of the challenge. Default looms, and the domino effect will hit families hard. I do not claim prophet status, and given that only the Lord knows the future, I do not know if the effects of this debt will strike next week, in a few months, or in several years, but the pain will come. Are you ready?
 
What we can do as Christians

A heroin addict suffers pain from withdrawal, and likewise the economy will experience pain when the intoxicating effects of deficit spending are forced to stop. The question for Christians, “Do we want to deal with the pain now, or suffer worse later?” I know this sounds morose. I am generally optimistic on the ability of America to spring back, however we have crossed the line. Placing the blame on others won’t help, either. We have gotten into this fix by letting political leaders set the standard instead of holding them to a Biblical standard.

Five things must be done as a church to mitigate these consequences and get ready to help others:

• Confess that we have allowed our leaders to borrow beyond what we can repay and take steps to restrict further spending. You or I may not have supported this path, but as with abortion, we have allowed this to occur collectively.
• Take personal responsibility to keep our personal financial house in order by borrowing only what we can pay back and by reducing our debt load as much as possible. Crown Financial Ministries (www.crown.org) and Dave Ramsey (www.daveramsey.com) offer pathways to get out of debt bondage. John Wesley taught, “Earn all you can, save all you can, give all you can.” If you are in poverty, you cannot help others in poverty. Church leaders should make it a priority to offer these and any other means possible to help Christians out of debt.
• Accept the reality that the government will not honor every pledge made, and plan accordingly. King Solomon wrote, “The simple believes everything, but the prudent gives thought to his steps” (Proverbs 14:15 ESV). There is no evidence that government will be able to honor all the Medicare benefits, Social Security payments, government worker retirement packages, and other spending. You must come to grips with this and how that affects you personally, your family, and your church.
• Take action to improve your financial situation. Even those fairing well should consider putting off retirement, taking a part-time job, or generating some stream of income to buffer the likely drop of future benefits. Take action each month, regardless of your personal situation, to become less dependent in the future. Planning and working week-by-week and month-by-month can do a lot to prepare.
• Pray. First that the Lord will wake up our leaders and avert the inevitable (He can) and if not that Christians can be ready to respond to this calamity and guide people in need to Him. The prophet Elijah spoke to the people that a three-year drought would strike the land (see 1 Kings 17-18). The suffering was hard for Elijah and the 7,000 other righteous people who never bowed to Baal, but out of the drought that devastated the country came a display of God’s power that drew an entire nation to Him. We need to be ready to offer the eternal hope of Christ to a hurting world.

• “What is impossible with men is possible with God” (Luke 17:27 ESV).
• “My grace is sufficient for you, for my power is perfect in weakness” (1 Corinthians 12:9 (ESV).
• “For God gave us a sprit not of fear but of power and love and self control” (2 Timothy 1:7 ESV).
• “And my God will supply every need of yours according to his riches …” (Philippians 4:19).
• “I will never leave you or forsake you …” ( Hebrews 13:5 ESV).