Credit as a solution?

We have now heard the latest "brilliant" (note the sarcasm) idea from the government's economists: loosen up credit. In other words, encourage everyone - from Fortune 500 CEOs to the kid working at McDonald's - to go even deeper in debt. This apparently includes those seeking home loans, car loans and even credit cards. To the economists' minds, if people will just buy more things they can't afford, we can borrow our way out of this recession. After all, what's good for the federal government must be good for the average working man.

Of course, the economists and elected officials are neglecting the obvious: that's how we got into this sad economic state to begin with. Loans were made - often at the encouragement of the federal government - to people without the means to pay those loans back. This began a downward spiral that ended with multi-billion dollar handouts, all paid for by the tax payer. To think that more of the same is the answer to our economic woes is, at best, illogical.

Now, I'm not going to allow this blog to become an ongoing advertisement for financial adviser Dave Ramsey. I respect his financial advice and attempt to follow it myself, but he's fully capable of peddling his own wares. However, I do believe his advice should be listened to, both by individuals and federal economists. And just what is that advice? Basically, don't go into debt. Not for a car, not for a vacation and certainly not for a credit card. He makes an exception for a home loan, as long as the buyer pays a 10 percent down payment, accepts a 15 year, fixed rate mortgage and as long as the monthly payments are no more than 25 percent of the buyer's take home pay.

How can we apply these principles on a federal level? Probably, very simply. I would advise that, if the federal government is determined to bail out financial institutions, we attach one non-negotiable condition: that tax payer money can only go for (1) student loans, (2) business loans or (3) private home loans, provided the buyer follows the above Ramsey principles. All borrowers would need to show that the investment will likely result ultimately in financial gain and all borrowers would need to be able to demonstrate that they have a realistic expectation of being able to pay back the loan. If this means federal oversight, then so be it. If a bank doesn't want to limit itself to such government-backed loans, then it is free to use its own money any way it pleases, only without the help of the American tax payer. Likewise, institutions that do accept federal financial assistance would be free to use other, private funds for any kind of loan they wish, but they would do so at their own risk. They won't be bailed out for making pay day loans or backing credit cards.

We cannot borrow our way out of a recession, any more than we can tax our way out of one. Sound economic principles need to apply to borrowing and spending - both on a private and federal level - if we are to get back onto solid ground.

Technology and the rebuilding of the Republican party

I keep having this feeling that both parties - Democratic and Republican alike - are missing the boat when it comes to the changing world around us. We are indeed, to coin a phrase from Thomas Friedman, living in a flat world, where modern technology and a world wide economy increasingly govern our lives. But to listen to the recent campaigns of McCain and Obama, the topic was obviously the elephant in the room - the one that everyone was determined to ignore.

Obama is now our president, but unless I missed something along the way (which is certainly possible)he doesn't have a plan for us to more effectively play on this field. What does he believe is the role of the federal government when it comes to our country and the changing world? Is there still a plan around somewhere for aiding schools that have no access to the Internet, or perhaps not even computers? Will an Obama presidency attempt to help Americans who lost their jobs to foreign companies? Wasn't there a plan around at one time to build an "information highway," a cheap, readily accessible, high speed network that would give Americans a leg up on the emerging Informational Age?

I call upon Obama, and all our representatives, to address this issue. If we are to effectively compete in a flat world, we all need to address the subject.

Welcome to the economy, Mr. President

I'm not very good at predictions, but I feel confident in saying that Tuesday night, John McCain will not be our president elect. He is a great man, but he won't be our next president. Nor, I hate to say, should he. I fear what many voters obviously fear: he doesn't appear to have a firm grasp on modern technology and he doesn't have a plan to help our weak economy. To anyone with even half a brain, it's obvious that our government's oft repeated failure to balance the federal budget has aided our economic decline. Especially after our recent unfunded bailouts, we owe so much money, primarily to China, that there's precious little to loan to fledgling companies and/or assist out-of-work voters. We can't offer serious tax cuts, which would help our economy, without going even further into debt. Likewise with public works projects - such as repairing our aging highway system - which could at least temporarily employ a goodly amount of citizens.

John McCain's answer has been that old standby: cut federal government spending, but he hasn't said where we should cut. I - as well as most voters - are skeptical. If Ronald Reagan couldn't balance the budget solely with spending cuts I doubt that McCain can.

Not that Barack Obama has any great plans. Or, if he does, he hasn't shared them. But, he at least acknowledges that the federal government can't continue to spend like a drunken sailor without raising taxes somewhere, on someone. And, as a Navy veteran, I know about drunken sailors and the fact that the bill ultimately comes due. Followers of financial adviser Dave Ramsey know that the worst thing you can do is go into debt. And, to my mind, what's works for the family budget should also work for the federal budget.

So, ultimately, the economy killed McCain's chances at the oval office. Had we (God forbid) had another 9-11 style terrorist attack, McCain would be our next president. But, instead, our economy went south and that means an Obama presidency. Fellow Republicans should take comfort, though. The Republican party will be born anew on Tuesday night. Our defeats will be the ashes from which we raise again. Let us make a pact now, though. That this new Republican party will adopt as one of its primary principles a balanced federal budget, and that this time around we won't just give lip service to that goal.