There's a story the mainstream media loves to tell to illustrate housing bubble follies, and it goes a little somethin' like this:
Family sees friends' fancy house and fancy cars and buys matching toys without the income to back it up. Banks avert their eyes, lend the money. Family's debts come due and they opt to refinance to put the bill on the house, which eliminates their easily earned equity. Banks avert their eyes, lend the money. Housing market crashes. Family freaks out. So does the bank. Mayhem ensues.
(Maybe you know someone who fell into a similar trap. Maybe you find parts of your own story above. Don't be embarrassed.)
Turns out, the early part of this decade saw plenty of Americans crash and burn in such a way. (Other families, those whose income actually did grow to match their expenses, those folks landed softly, as per their plan, but they don't get a lot of play in the national media.) A good chunk of Americans got foreclosed on or had to declare bankruptcy or sold their homes at a six-figure loss. Lots of people got burned whether they "deserved" it or not. Which is a great topic for a future post.
The economic pain is ongoing. too: just pick up a newspaper, while you still can, and read five stories about how the economy is ruining dreams.
But you've heard all this before... what might not be clear yet is that we're pursuing a similar strategy on a national level.
We, the family U.S.A., owe an unconscionable sum to lenders. It's an unfathomable figure, but I'll link to it anyway. I refuse to type it. It's bigger now than when I typed the final "e" of the word that ends this sentence. (I just re-read that, and that's a pretty nifty mind trick, if I say so myself.)
Anyway, not only do we owe enough money to dedicate about $450 billion this year to INTEREST payments on that debt, but our annual pay. i.e., tax revenue, is inconveniently shrinking. You might have noticed we are in a steep recession. Just FYI.
So, because cause and effect are very real forces, our family is projected to be over $1.75 trillion in the hole this year. Reagan, Daddy Bush and Bushito were immorally careless to the tune of $8 trillion combined, but that nation-crippling project took them 20 years. (And they had to work around Bill Clinton's annoying penchant for balancing the budget.) Obama is shattering some hideous records here at a frightening pace. 1.75 trillion this year, maybe over a trillion again next year.
But if rosier times ARE around the corner, if health care reform passes and rescues countless households, if the giga-stimulus stops the bleeding, if home prices ever bounce back, if the stock market slowly but surely gets back on its horse, if consumer confidence rebounds soon enough, then we, the family U.S.A., could avoid forecluptcy at the hands of our creditors. And bankrosure, too, we could avoid that too.
In fact, not only could we emerge from Obama's presidency in a healthier, greener, energy-independentier lifestyle, but the long-term dividends from such moves could far eclipse our deficits this year and next. We could reverse the course set by so many shortsighted "leaders."
And that's Obama's bet. He's said to be a fair poker player; he's preparing to put us all in. Let's hope, for our kids' sake, that our hand is good enough.
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