Blessed Debt

There were a few interesting comments to my post on Louts.  Take a look, if you wish.  A Followup post, Teeter-Totter, will be this weekend.

As I write, Wednesday morning, Oct 13, 2021, the chatter on the television is all from or about 90 year old William Shatner, just returned from his 3 minutes in space.   This is all about privatization of space, for the already rich.  There won’t be many common folks ready to pony-up $250,000 for a seat on later flights.  Some billionaire has already gobbled up all the seats for the first moon-shot, to come some day.  It is a fantasy world “bucket list”.

Not that fantasy is restricted to the rich.  Earlier this morning I was driving home from my daily walk, past the under construction ‘woods’ of new houses.  Off-screen to the right was the advertising board for these new houses, listed for $609,000. There is a market, apparently.

Woodbury MN Oct 13, 2021

In D.C. the hearings continue about January 6; talk about refusal to honor subpoenas and what to do about that.  And talk about the national debt which is (depending on who is in control) irrelevant, or a horror, spun incessantly.  (In a side comment about Shatner’s space trip, someone got in a shot at the Obama administration, which apparently slowed down the private sectors race toward space, after trying to clean up the financial mess left in the wake of the near collapse of our economy in 2008.).

I am not an economist, but today seems a good time to try to translate some numbers to help understand reality which is, after all, where most of us have to live.

Personally, I have come to believe that Debt is essential to those who already have wealth and want to increase it.  Debt is profit.  The only question is who benefits from the debt.  I could elaborate, but won’t.

There are about 330,000,00 of us in the United States, easily, still, by far the wealthiest collection of people in the world.  There are about 7 billion of us on the planet Earth.  Last numbers I have, from 2017, the U.S. has about 4% of the world’s population and 23% of the wealth: Wealth of UN Countries.   (I was good friend of the man who generated this list for his important book on UN Reform.  He was a world class academic and extremely careful in his presentation of data.  He died three years ago, and his work lives on. More about him and his work here:

Now, to a few basics (errors are mine, help me correct them).

$3 per person gets us to about a Billion dollars.

$3,000 per person gets us a Trillion.

Surely, that’s serious money…but if you take a serious look at personal debt, now or in the past, for yourself, personally, somewhere in your history is probably a lot of debt.  It could be for that new house, or car, or college or other expenses, or whatever.  But our society has long been organized around debt management.  That’s because debt is essential to wealth of the wealthiest.  You know the refrain, “credit” seems preferred to cash in this day.

Take those $600,000 houses in the picture above.  The odds are pretty slim that their buyers will be paying cash money for them.  There will likely be large mortgages (loans).

If you’re reading this you can make lots of words out of this single picture.

A whole bunch of those Trillions we already have incurred as “national debt” were gifts from previous Presidents and their necessary enablers in Congress.   It is Congress, after all, which controls debt.  It’s in the Constitution (basically Article I Sections 7 and 8).  You might remember those huge tax cuts in 2017.  These were gifts to the already wealthy and biggest businesses; they came via Congress, signed by the President.  There was no hand-wringing by the winners, then – rather victory laps.  But the tax cuts took huge amounts of income off the books, thus leading to increase in debt….

A bit before that, 2008 and the years prior, we spent like drunken sailors on assorted wars, and dismissed the problem of debt.  “Go shopping” was a refrain for recovery from 9-11-01.

For all sorts of reasons, good and not so good (like buying that house) debt grows.  Depending on one’s bias, any particular item of debt is blessed, or evil.  Depends on how YOU see it.  Here’s one chart that seems reasonably unbiased and gives a general idea, anyway (and is the first one when I googled).  I just add it to give you an idea.  Comments?

Succinctly, there are people far more knowledgeable than I who know what debt really means in context of the fiscal health of ourselves and our nation and our world.

All of the rest are useless sound bites uttered daily.

What is your personal debt, compared with your personal wealth?  That’s the first question we should ask ourselves.

When we translate this to a nation and a world, all we are doing is adding a whole bunch of zeroes.

Be aware.

COMMENTS (also at end of post):

from Jeff: Blessed Debt: at first I thought this was a post on the phenomenon of church mortgages.  These are a separate grouping within the banking industry I discovered a few years ago.  Loaning to churches to build is an interesting business.

Debt: I am no expert, but on the national debt and the current spending of the Federal govt, the biggest portions are Defense and social entitlement spending.  The rest of budgets and debts are mostly small potatoes.  So it really is Medicare, Medicaid, other aids to people in poverty or on the borderline and the defense budget.  “Guns and butter.”  as the economists used to say.
Many say the debt, the spending is unsustainable.  I think the key thing is to watch the ratio or % of the debt to the GDP of the USA , as long as it remains in a % basis that is “serviceable”…. just like a home mortgage…then debt is not a big problem.
As long as the spending is something that provides a return ….good health care that is preventative can be very profitable for a country, child care, PreK education, reducing student debt, physical/power/cyber infrastructure all provide a good return on investment.
So like a home purchase or getting an education, they are wise.  With the caveat that you keep the spending and debt within the % acceptable for a GDP…it makes sense.
Tax cuts:  the main thing people do not understand is that tax cuts are “spending”, the govt is essentially giving money to certain groups.   When you consider that the majority of tax income in the USA is paid by the wealthiest it is clear that the tax cut spending is lavished mostly on the wealthy.   The Bush tax cuts and the Trump tax cuts were also spread over 10 years in the budget, together they amount to 3.4 trillion dollars.  That sounds very familiar to the current Biden budget plan ….3.5 billion,  which I believe will eventually come down to somewhere in the 1.8 to 2.0 trillion when the Senators of AZ and WV have given their imprimaturs.   Both the tax cuts and the biden plan are spending .
Final thought and why Republicans are fighting so hard.  Things like PreK education and child care reimbursements, and possibly dental care under Medicare would be wildly wildly popular ….much like Medicare is today.  They understand this, and understand as well this could be the start of a generational change in priorities… we have spent 40 years trying to unravel the New Deal , and this is essentially the
first step in reinstating some of that social spending again.   In the last fiscal year the defense budget was 775 billion dollars, if you spread that over the next 10 years that would be 7.75 trillion dollars of defense spending… yet no one ever sees that debated ad infinitum or being discussed as a life or death bit of spending for the USA….
Church mortgages might have been a holier discussion.
from Fred: You and the contributors have done a nice job in linking privatizing outer space, housing construction, and national debt to the policies of the two parties. In simplified terms, we’ve been seeing recent GOP administrations adding to the debt with give-away benefits to entrenched US “haves,” followed by Democrats working to repair the damage done. Obama got the job of saving the economy from the Bush “Great Recession”. We can still recall the near panic in US financial sector and those financial houses that were “too big to fail,” and corporations that paid no taxes. The Dems, as always, worked to even the playing field with programs tailored to the working class and poor. In the past both sides in Congress worked together to divvy up the budget’s available allocations. Now we’re seeing extremes on both end of this struggle demanding the entire pie. The GOP has already won this game of give and take by refusing to play it. The current socialist side of the Progressive movement has returned to its early 20th century roots and is trying to achieve the change for which their predecessors fought. But we Old Timers remember the likes of FDR’s Brain Trust, Norman Thomas (the great socialist and the nation’s conscience), Upton Sinclair’s utopian vision for California, Henry Wallace, Wisconsin’s LaFollettes, MN’s Floyd B. (I’m a radical) Olson, and North Dakota-based Nonpartisan League (NPL). They all made splashes on the American Left—the NPL perhaps the most noteworthy—and some progress for the little guy, but not the lasting impact for which they yearned.



7 replies
  1. norman hanson
    norman hanson says:

    Given that raising the debt limit to cover previously approved programs has occurred over 100-times including several times when Trump was in office, it is extremely disappointing to see Sen. McConnell refusing to allow the Senate Republicans to vote to approve what has become somewhat of a periodic routine adjustment. Granted, given that he has stated that his sole purpose is to make sure that Biden’s public policy proposals are not approved, he is more than willing to play chicken with his Democratic colleagues That is, he wants to force or appear to be forcing at least until someone blinks at the last moment to use the reconciliation process to pass Biden’s big bills. Then, of course, McConnell, Trump, Cruz, McCarthy and all of the gang will eagerly campaign against those “big spending Democrats” in 2022…and be successful in doing so…regardless of the fact that the debt limit needs to be increased to cover the costs of some of the programs approved jointly by the Congress! McConnel seems to have no issue at all with playing roulette with the economy of the US! None what-so-ever and that is very disappointing as well as disillusioning!

  2. Larry Gauper
    Larry Gauper says:

    Excellent essay, Dick, and I agree with all of your assertions. You’re spot on. Without personal debt and an FHA backed loan, my wife and I would not have been able to buy or first home at age 24 in 1967. The price was $16,300. But that got us into the real estate market. Over the years we made money on that house and got into a bigger one, eventually, into the rambler we own now and that we built it in 1996. We have always paid off our loans although we’re not classified, in my opinion, as financially “rich” people. We’re frugal and didn’t buy some of the luxuries offered over the years. Social Security and Medicare are part of our retirement plan, What makes me nervous – and the investment markets too – is the Republicans in Congress not wanting to pay America’s bills. During the last administration, over $7.1 trillion was racked up and went to the national debt. Some for foolish expenses like a very expensive border wall and senseless wars.. Republicans approved those expenditures. But now – for pure political reasons – they don’t want to pay for the expenses they chose to make. They’d rather see Social Security, Medicare, Medicaid and Veteran’s Benefits crash. Not to mention our entire economy. We have a reprieve going now but all of this crazy argument will back in December instilling fear in Americans and the world. Senseless. And all because the Republican majority in Congress want to feel powerful until their hero, Donald Trump, returns to office. Hopefully, he’ll be in jail by 2024. But, as your house photograph and costs point out, there is a HUGE divide in this country that is eliminating what always made America strong: the middle class.

  3. Dave Thofern
    Dave Thofern says:

    Nice piece, as always, Dick. As I watched the News Hour story on Shatner’s $250,000 10-minute joyride into space, I thought of all the things that $250,000 could buy that would be a whole lot more beneficial than a space ride. I don’t begrudge Capt. Kirk his wealth. I just hope that he at least appreciates how fortunate he is.

    The idea of national debt has been so politicized (what hasn’t?) that it’s probably hopeless to think that there could be a rational discussion. People far smarter than I will make arguments that the national debt is going to be the end of America as we know it, while equally smart people claim that there’s nothing to worry about as long as GDP outpaces debt spending. Not sure where I stand in that debate. What I do know, is that the United States, as a whole, is a fabulously rich country in terms of wealth and resources, and, if we had the will, we could find ways to better care for the less fortunate both at home and abroad.

  4. Lydia Howell
    Lydia Howell says:

    Well done piece, Dick. My main caveat is you’re a bit imprecise in some significant spots:
    As President with a Republican Congress, Donald Trump ran UP the nation’s debt on a $2 Trillion tax cut–95% of which went to Billionaires, Multi-millions & the biggest Corporations. To ut this in terms of everyday working people: my closest friend (who was self-employed at the time, earning about $35,000 a year) got about $10 a month in his tax cut. The Trump Administration–like ALL Administrations–also borrowed (average) of $700 Billion for wars.

    The U.S> government has borrowed in the past for such endeavors as the national highway system under President Dwight Eisenhower (R). While I don’t entirely understand the “debt ceiling”, I do get that it’s a promise to pay back debt ALREADY INCURRED IN THE PAST.

    People need to recognize that Republicans ONLY care about “national debt” when DEMOCRATS have the White House. Then, “Balance the Budget!” & “Don’t Add to Debt!” become cudgels to STOP any programs that would benefit everyday Americans–especially those with low incomes (which is 40% of us today!!!). Somehow, Republicans have no problem with the endless SUBSIDIES given to giant Corporations who PAY NO TAXES–yet, the idea of paying for child care (which EVERY other Western industrialized nation already has–EXCEPT the U.S.) amounts to “Socialism!!!! BOO!”

    I think as a country there’s a difference between useless “Debt”–for wealthy people’s tax cuts or endless wars–and PUBLIC INVESTMENTS in infrastructure, both physical & human. As for my own personal debt: I don’t have any. When you’re far enough down on the income scale, no one loans you money! I got in trouble with the single credit card I had over 30 years ago and have never gotten another (the INTEREST CHARGED on credit cards is in the same real as loan sharks!)

    As a country, we should be asking ourselves what it is we need to create more equity, more sustainability and more peaceful prosperity for more people.

  5. Florence Hedeen
    Florence Hedeen says:

    We’ve carried no personal debt since 1987 when we paid off our final loan. In our retirement, we’ve significantly increased our charitable giving, confident that we can support ourselves at our chosen level of comfort until we die. Only time will tell, but our investments are totally in charitable funds and they’re well ahead of the market. We’re definitely more concerned that we, the people, address world-wide global climate change, including how and where we choose to live.

    • dickbernard
      dickbernard says:

      The mantra in my growing up was in general “live within your means”. If you couldn’t pay for it you couldn’t buy it. It was not good for the “economy” shall I say. In recent years I was the ‘go-to’ for my farmer Uncle, who probably was viewed as poor, and as such didn’t appear to do much for the local economy – he didn’t buy stuff, like the latest tractor, or even new stuff. We discovered when he died that he wasn’t poor, but you’d never know it by how he had lived.
      We are a nation which has grown by consumption and waste. The polar opposite ideals seem to be “more by any means necessary”, and “waste not, want not”. This is a tension our society lives within, very imperfectly. By no means in my opinion are the rich happier than the poor, in any real way. But we’re so far down the road on this dilemma that I doubt it will ever be solved. But I think it’s worth the fight.

  6. Brian Gately
    Brian Gately says:

    Hi Dick,

    I’ll reply here and on your site. My world has been development finance–aka microfinance. I started in the Peace Corps in Colombia, in the small business/cooperatives program. Then I joined the National Credit Union Administration, and retired from them as a supervisor here in NYC. I lived in Puerto Rico and was the examiner for PR and the US Virgin Islands. I help start 5 credit unions. Then I joined the National Federation of Community Development Credit Unions, I was the director of technical assistance…and now I still work with groups, mainly Native Americans, helping them start their credit unions, like even in Minnesota, Bois Forte up by the Canadian border. (Northern Eagle FCU)

    So what is development finance? Leveraging yourself up. Can a 9-year-old, using their own strength, lift a Buick? Sure. Give them leverage. A jack. As you may know “leverage” in finance is another term for “debt”. This is how people leverage themselves out of poverty. Students take loans (get indebted, use leverage) to get degrees so they can get hired. People do this also to get cars, houses, what they need to live and get ahead. In credit unions (credit and savings cooperatives) the general rule is people under 40 tend to be net borrowers and over 40 net savers. The borrowers pay interest on their loans and the savers get interest (dividends) on their savings. Win-win.

    Who brought Europe out of the Dark Age? Jews. Back then Christians (and even today Muslims) were told it is a sin to make money on money (earn or charge interest). Jews (many having bank-sounding names) weren’t restricted. At first they would take others’ gold and store it for them for a price, in a safe place. But then guess what? This sounds sneaky but banks and credit unions do it all the time today. If Nancy comes in and puts her gold (savings) with them, and then Brian comes along and wants a loan, whose money does the bank (the Jews) give him? Nancy’s! And the same with other savers/borrowers. What happens if the savers all want their money? It’s called a bank run. Collapse. (To help prevent this the FDIC was created.) Banks and credit unions generally keep less than 10% of their money in reserve (not lent out). Not much of a margin, but it works

    Now, what is money? A store of value and a medium of exchange. Trust in the government. What caused the 1929 crash? Partly the gold standard. The dollar was tied to gold. Then later just to silver, and now just to trust the government. (Better.) Back in 1929, the government could not “print” money, ergo the crash. If I’m not working, I’m not buying things to help you work. You can put cattle in a field and wait forever and they won’t create money. People create money. Out of nothing. Except trust.

    Even 50 years ago, most money in the USA (or most anywhere) wasn’t in coins and bills but in numbers on a balance sheet. Even today the money supply in the USA is only 1 or 2% hard cash. The rest is now electronic debits and credits. As you know, every debit has a corresponding credit. My debt is your asset.

    National debt? The richer you get the richer I get. You and I work in Haiti–they’re smart people, but why so poor? If I don’t have money, you don’t have money. Can there be too much debt? Of course, then you have a currency collapse. It happened in Weimar Germany, in Mexico, in Bolivia, and many places. My advice to anyone: diversify, don’t have all your wealth in just a currency. Have hard assets and/or wealth in other currencies.

    And so it goes…


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