The recession made a lot of people realise how unsustainable their personal financial activities were.
Suddenly, people started cutting up their cards, going out to eat less, and generally scrimping.
But the government won’t let you do it!
At every turn, the government penalizes you for being responsible, and subsidizes the irresponsible, so that if you try to do the right thing, you get totally screwed.
For example, you might have chosen to get a few more years out of that old, reliable car to save a bit of money and preserve the world’s precious natural resources. But this summer, the government gave your neighbour $4,500 upfront to go into debt buying a new one.
It's a natural inclination for everyone to want to save and build up assets for future generations. That builds up in us biologically, and it's a good thing. But if you make too much money, the government demands a big cut.
It's even worse if your estate is in the form of real estate or a small business, because then you can't easily just liquidate some cash. Frequently that forces families to sell their entire companies to large players (like Berkshire Hathaway), just so they can pay Uncle Sam.
Thankfully this idiotic program was short-lived.
But it was very instructive about how the government manages the economy.
The government decided that bailed out automakers deserved a shot of adrenaline, and so it paid people to trade in their working cars for new ones. Sure, customers liked the subsidy -- the $4,500 discount -- but in almost every case, when the buyer took out a loan, it meant the customer was going more into debt than they were in before.
So you did the responsible thing and held onto your car, while your neighbour took the free upfront money. Thanks for that!
By keeping interest rates extremely low throughout the 90s, the government was basically telling savers to buzz off!
What, were you really keeping your money in a savings account, money market, or CD when the yields were a total joke?
Not only would that be stupid, but you were missing out on all kinds of great rates on credit cards (again, thanks to cheap money) allowing you to live excessively today, and pay the price later.
This is on a theme similar to low interest rates. By constantly debasing the dollar, the message remains: spend your money now, or it's going to be worth a lot less tomorrow.
Debt repayment. Isn't that a good thing?
Yes, it's frequently a good idea to pay down your debt if you've got some extra cash. But the government doesn't want you to, or at least it discourages it.
See, you get a tax rebate on interest you pay on your home. But you get no credit for just straight-up paying down debt. So by paying your debt early, you're blowing future tax rebates. Not smart.
Do you have dicey credit? No problem, you can get an FHA-insured loan (even today) that essentially subsidizes your mortgage with the full faith and credit of the United States.
But it doesn't apply to higher-end 'jumbo' homebuyers, who are often in the best financial position.
So, higher interest rates if you're in good financial shape, lower ones if you're struggling.
It's well-known that the power to tax is the power to destroy, so why do politicians keep threatening to raise the capital gains rate?
All that will accomplish is less investment and more spending.
Not exactly what we need, is it?
One of the biggest sources of debt many people face is student loans.
Now it's true, that going to school, and getting an education can be a very valuable thing, one that's worth going into debt for.
But by subsidizing student loans so aggressively, the message to students is: college is a free ride (for now), don't bother thinking about the future.
And so you get new college entrants making a lot of very dumb, but enjoyable and self-indulgent, decisions, about what majors they take on. See all the art majors working at coffee shops, moaning about their student loans.
Of course, the responsible kids, who went to state school and majored in engineering don't have this problem, but then they're deprived of that fun, tempting college experience.
So why does the government do this?
Because politicians play to the interests of business, who want you to spend, spend spend.
If we ever get a savings subsidy, you'll have to smack us to wake us up.