Lamentations of an Educated Voter: Our Finances

The stock market plummeted upon hearing the news about the economic relief bill that was defeated in Congress. But despite proclamations of doom and blood flowing in the streets, nobody really knows what the consequences of this congressional, economic, and presidential failure will be.

I must admit that I have mixed thoughts about the state of our economy and what ails it. Because I made the right financial decisions when I was younger, the struggling economy does not impact me or my family in any significant way, save for high gas prices. Because I have always paid my bills on time, resisted the urge to put everything on a credit card, and tried to live within my means, I'm not particularly worried about mounting bills and having to choose between food, car repairs, and medicine. The only debt I have is student loan debt, and even with those, the interest rates are manageable.

My inner conservative thinks everyone is getting what they deserve. If you tried to make a quick buck by flipping a house you couldn't afford, you deserve to get soaked. If you are a manager at an investment banking corporation that relied too heavily on profiting from bad loans, you deserve to have your company's stock value plummet. If you make fat cat purchases on a small fry's salary (e.g., laptop computers, flat screen televisions, SUVs with V8 engines), you deserve to be faced with the anxiety of not knowing where your next meal will come from. Personal responsibility, common sense, and basic financial literacy might not be compatible with our culture of instant gratification, but it is times like this when the wisdom of fiscal prudence is most apparent.

The American Dream is alive and well for all those who work hard and do what it takes to achieve it. Economic prosperity, material wealth, and financial independence are not birthrights. Somewhere along the way, we as a society have lost touch with this notion. The ideas of sacrifice and learning to do without seem increasingly foreign. Why do people drive SUVs instead of station wagons? Why do college students spend so much money downloading ringtones instead of paying down their credit cards? Why do young families decide to buy a house and not rent an apartment? Why are music CDs a more likely destination for teenagers' money than bank CDs?

So many people are trying to live beyond their means. But now it appears that their irresponsibility has finally caught up to them. They are saddled with debt. Their credit is tarnished. They have houses they can't sell, cars they can't drive, and credit card payments they can't postpone. My inner conservative is quite content with that.

I can understand how so many average people got sucked into living a lifestyle they couldn't afford. In addition to our collective financial illiteracy, we live in a society where we are encouraged to spend, spend, spend and keep up with the Joneses. But while I can understand how Joe and Jane American set themselves up for failure, I can't understand how our national leaders in Washington have exercised a similar level of ignorance.

We are fighting two wars, paying billions of dollars in entitlements, and cutting taxes all at the same time. Our two main presidential candidates are talking about even more tax cuts, continued fighting abroad, and/or increasing social programs. Where is all this money coming from? And why doesn't anyone have the courage to ask? Our national leaders are supposed to be more intelligent, more perceptive, more insightful, more pragmatic, and more knowledgeable about the world and its institutions than we are. But if our own government can't balance its own checkbook, how can we expect Joe and Jane American to do the same? Or are the irresponsible leaders in Washington merely a reflection of the irresponsible electorate who gives them their support at the ballot box year after year?

This is where my inner conservative is silenced by my inner liberal. While I believe people should reap what they sow, there comes a point when the consequences of a few people's irresponsibility become unacceptably severe for society as a whole. Let's say that Company X made a string of bad investments and poor financial decisions. Now its stock value is falling precipitously and it is forced to go out of business. The company managers and top executives are indeed getting what they deserve.

But they are not the only ones who are getting soaked. What about the hundreds or thousands of regular employees at Company X who had nothing to do with Company X's poor business decisions? Now these workers are at risk of losing their jobs. Losing a job obviously has a devastating impact on a family. And what about stockholders who invested hefty chunks of cash in what they thought was a reasonably sound company? They are at risk of losing most or all of this money. And people who have invested in Company X for 20 or 30 years are at risk of losing most or all of their retirement savings. What are they supposed to do? Some people may coldly say they should have diversified their portfolios or done more research about Company X's dealings. But it is unrealistic to expect everyone to have the business acumen of Alan Greenspan or Suze Ormond. And what about the people at Company X who simply want a job? They have families to feed, college tuition to pay, and school clothes to buy. They just want to clock in at 8:00, put in 8 hours of hard and honorable work, and go home. Why should they have to suffer because a few powerful and irresponsible managers put their lives in jeopardy?

This brings me to the subject of the failed economic relief bill. Notice that I call it an "economic relief" bill and not an "economic bailout" bill. Some people may indeed be bailed out even though they don't deserve it. But a lot more people likely stood to benefit from this economic assistance. If vulnerable companies do not receive this emergency infusion of cash and temporary absolution of debt, it may become increasingly difficult for them to borrow money, and that hurts everyone. The Wall Street problem will become a My Street problem in a hurry.

If a company cannot borrow the money it needs to help pay the short term costs of regular business operations, these companies may be forced to trim their payrolls. That hurts Joe and Jane American. If a person is unable to get a housing loan because the bank either has no money or refuses to lend it because of the tight credit market, that means you will be stuck with a house that nobody can buy. That hurts Joe and Jane American. If you need to get a loan to start a small business, but can't because of the lack of credit available, your business plan will have to be placed on hold and your business idea risks being co-opted by another entrepreneur. That hurts Joe and Jane American.

$700 billion is an incomprehensibly large amount of money, so it is natural for politicians and regular people alike to recoil in anger at the thought of pumping this cash into failing or failed companies, some of which may be headed by people who don't deserve it. But it seems like the same financial illiteracy and poor decision-making that got us into this mess threatens to prevent us from making the right decision to prevent it from getting worse.

You need two wings to fly a plane. This is why I am neither a conservative nor a liberal. What's best for America usually lies somewhere in between the two extremes. It looks like Congress was able to come up with a bill that had enough elements from both ideologies to be palatable to most congressmen, and that's what makes its failure so unfortunate.