Since the November presidential elections there has been much in the news about the “fiscal cliff” that this country is facing. In a nutshell, the so-called fiscal cliff refers to set of laws and regulations that were enacted during the early Bush administration years that are set to expire on December 31, 2012. Basically, two things are set to happen automatically if Congress cannot agree on a new path: first, there will be an across-the-board increase of taxes. Second, there will be automatic cuts to government entitlement programs with defense spending and Medicare being identified most often as the target of a large portion of those cuts.
The Consequences. The tax increases speak for its self. If there is no action taken, there will be an increase in the amount of income taxes that you and I pay annually. It appears imminent, one way or another, that this is going to happen. Government has overspent its budget consistently over the past decade and at warp speed the past 4-5 years. Somebody has to pay. It is like a family that makes $50,000 per year who has been spending $110,000 per year over the past 10 years. Where do you think that family would be? It doesn’t take a Harvard economist to figure it out: IN DEBT! Lots of it! And that is where the country is today.
A second consequence of the tax increases has to do with the overall economy. If people paying more taxes to the government it means they are spending less at Walmart, Costco and every other retail/wholesale business that is patronized by John Q American. Think about it. Say, for example, you bring home $2000 a month. Let’s say that you’ve been paying $400 of that money in taxes. If taxes are increased you may now be paying, say $550 in taxes. You still got paid the same but now $150 went to Uncle Sam. Somebody didn’t get paid this month! Maybe it was your mortgage, maybe it was the light bill, or maybe you’re eating less. But the point is that money did not end up in American commerce and now the economy is weakened. Experts fear that it may send the country back into recession and everything that goes along with it, e.g., job losses, higher unemployment, a flock to more government entitlement programs, etc. Not good!
Speaking of unemployment, the second part of the equation is cutbacks of government jobs. More people are going to be out of work if things are left alone. And even worse, these cuts stand to weaken our national defense and affect those citizens who have been the major payers into this system for decades: seniors! That’s right. Medicare is one of the entitlement programs set to absorb its fair share of the cuts. The ironic thing is that it is these very people, the senior citizens, who have paid into the system for 50 years!
The Upside. If there is something positive to the fiscal cliff dilemma (assuming that Congress cannot agree on a course of action and time expires) it is that it forces the inevitable. At some point tough choices are going to have to be made which means cutting spending and possibly increasing revenue (taxes). Think about it. If you are not able to pay your bills each month, what are you going to do? Aren’t you going to look for ways to spend less and maybe take on additional work (increase revenues)? And more importantly, isn’t that going to be a little uncomfortable to have to make those decisions?
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- Turn off cable!? Are you kidding me?!
- I’m already tired and you want me to work another 10 hours per week
- There goes the Christmas budget this year!
- Stay home for vacation?!
- …and it goes on and on and on...
The truth is that this country, as well as, you and I are not going to deal with our debt problems without having to make some very difficult decisions. That requires commitment. Commitment to a guiding philosophy and overall thought process that is intolerant of debt.
Why are we surprised? As the past 5-6 years have unfolded, I have been amazed at the thought process found in our nation’s leadership. It has transcended political parties and has become a cancer to our country’s livelihood, well-being and integrity. We have seen our credit ratings drop (a measure of how well you’re doing managing your money) and the loss of credibility across the globe.
I also find it hard to throw stones at our politicians. They reflect what we, the American people, are thinking and the truth is that we’ve been thinking “buy now, pay later” for a long, long time. Individually, most Americans are not much different than the country as a whole: run up the credit cards and debt until we’ve ruined our credit, our reputations, and are held captive by our financial limitations brought about by debt. Everything, and I mean everything, is subject to financial bondage.
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- You don’t want to answer the phone during dinner time because you know it’s a creditor calling for their money,
- you lose sleep because you’re not sure how you’re going to pay the mortgage this month,
- Junior needs a new pair of shoes and
- you’re skipping this year’s family reunion because you haven’t paid Uncle Bob back that $2500 you borrowed last year!
Now here’s the really surprising part…we knew better! Yes, we were warned! Didn’t Paul say to “owe no man nothing but to love him” (Romans 13:8)? Did Proverbs 22:7 not warn us that “the borrower is slave to the lender”? In Pillar 2 (see 12 Pillars & a Prayer), Deuteronomy 28, did Moses not tell the Hebrew nation that they would “borrow from no one, but lend to many nations”? It is hypocritical for us to bash Washington when we are likewise guilty. While we do not let our politicians off the hook for their insatiable desires to spend money that they do not have, at an individual level, we must hold ourselves accountable for our financial appetites and habits. Let the record show we were given a blueprint for this thing. Once again, we must acknowledge that God knew better than us. The 12 Pillars & a Prayer are not just a cutesy little title for a book; they form a solid foundation for living life in abundance and getting our financial house in order.
In that sense, we are all at our own personal financial cliff. What will it be? Will we make the right decisions that will break the bonds of financial oppression? It all starts with one quality decision: will I do it my way or yield to One whose wisdom is far beyond mine? He says, “think debt free!”…will we listen?
Until we talk again, sorry for being a little long winded today…
Dr. Russ
