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Chr⁠i⁠s⁠t⁠mas B⁠i⁠lls ⁠i⁠n July?

By: The James Madison Institute / July 6, 2011

The James Madison Institute

Blog

July 6, 2011

By Robert F. Sanchez, JMI Policy Director
The calendar says “July,” and the Florida weather says “summer!” Even so, our nation’s financial ledger says “January” and “winter.” You remember January: It’s when the bills come due for all of that end-of-the-year spending that you put on your credit cards back in December, whether it was for pricey baubles given to your loved ones or for generous donations sent to your favorite charities and causes in time to get the income-tax deduction.This micro-economics view helps to explain the macro-economics story that was splashed atop the front page of last Monday’s Wall Street Journal under the headline “Debt Hamstrings Recovery.” As the story explained, “Around the globe, the inability of governments and households to reduce their debt continues to cast a shadow over Western economies and the financial health of individuals. Today, U.S. consumers have more mortgage and credit-card debt than they did five years ago, and the U.S. budget deficit is worsening.”Even so, some in Washington, D.C., remain reluctant to take the tough steps necessary to reduce federal spending whose runaway growth is the underlying cause of the feds’ record deficits. Moreover, some in Congress are even demanding “enhanced revenue” as part of any deal to raise the federal government’s debt ceiling – although extracting more money from the taxpayers would arguably reduce their ability to pay down their own debts.That would be especially worrisome right now because the real estate market is still in trouble nationwide, and the ability of prospective homebuyers to pay down their debts will be crucial to a revival of the housing market. Indeed, new federal guidelines for mortgages will require higher down payments and will discourage lending to people who already are overextended on their credit cards, car loans, student loans, and other debts.It’s a good rationale for letting people keep more of their own hard-earned money instead of sending it to Washington to be parceled out to politicians’ constituents and cronies. Moreover, reining in federal spending and avoiding tax hikes could at least advance the nation’s economic calendar a month or two from winter to spring. That would be welcome because spring is the start of the growing season, and — for the economy — growth is a tonic that can cure winter’s ills.