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Hernando Today

We can't afford each other

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By JOHN REINIERS

More Than Words

Published: November 15, 2009

Not only can we not afford ourselves, we can't even afford each other.

It doesn't seem to resonate with the average American to say that Social Security and Medicare are going bankrupt — or that Congress's proposed government health care will only exacerbate our insolvency.

We simply can't afford all of this.

As average Americans make decisions about what to buy or what not to buy as they go about our lives, they don't even think about replacing their aging four-door sedan with an Alfa Romeo, or buying Martha Stewart's $8.9 million celebrity mansion in Connecticut — or trading in a leaky Carolina skiff for an $8 million luxury yacht.

Why? It's because they have to pay for it, and know for a certainty they don't have that kind of money. And more importantly, they know their neighbors, or the government, or the filthy rich won't pick up the tab either.

We don't think that way about Social Security, Medicare, Medicaid or the latest government health care system rolled out by the House of Representatives.

Why? Because we don't think we or our neighbors have to pay for this stuff directly or indirectly, either because we delude ourselves into thinking we've already paid for this or that the government will magically get the revenues from evil corporations or the wealthy to pay for all those social programs that we have a "right" to.

Of course, we pay for this largess by losing jobs, as more and more entrepreneurs create jobs globally in places where they can avoid excessive taxes. (Starbucks growth plans for 2010 include China and Europe, after shutting down 600 stores in the U.S.)

Two recent events — one quite significant and the other parochial — made me rethink the never-ending bankruptcies of our cities, states and even the federal government. First, Gov. David Patterson's recent announcement that New York State would be bankrupt by Christmas. (The traditional Dutch "lump of coal" in a New Yorker's Christmas stocking would at least have some intrinsic value to their creditors.) This sobering news came on the heels of Mayor Michael Bloomberg's grim reminder to his constituents in the Big Apple that their city's pension system — one out of every $10 in the city's budget — is bankrupting them. And then, of course, California, which one economist suggested we sell to China. An asset buyout in exchange for debt. Interesting.

The other is a local event: Our county's chamber of commerce supports a Junior Achievement classroom program in which volunteers serve as role models teaching eight-graders an understanding of the economics of life. The students spend hours in a real world creation of their own future financial life — career selection, budgeting for rent, car expense, insurance — all the costs they don't have a clue about. My wife has been a regular volunteer in recent years. One item not on the agenda is bankruptcy.

Wow! Wait a minute. Something is wrong with this picture. Isn't this supposed to be a real world exercise? After all, it seems that all our state and local governments have joined hands with Washington in bankruptcy. Shouldn't students know of this, or is this a bit too negative?

We don't teach ethics in K-12, so we have become a nation of corruption from the lowest level of society to the highest level of government and Wall Street. We hardly focus on the economics of life or teach civics courses taught under the rubric of the real world society of today — demographics and the like, unpleasant as it may be — and its relevance to government.

Come to think of it, contemporary civics or government textbooks could include an entire chapter on government bankruptcies. That would have been foreign subject matter to our Founders. That would make this Junior Achievement class even more relevant — an eye-opener for our students.

We've got to get away from thinking deficit spending and bankruptcy and think of living within a budget. What better way than starting with our kids, as Junior Achievement does, given that some will choose government as a career.

On May 20, 2005, Hernando Today published a piece (Google Desktop sure is a lifesaver) that I wrote: "If it sounds too good to be true," which the students in Junior Achievement could debate as an exercise in both personal economics and civics. I suggested that those readers on Social Security should take a look at "Your Earnings Record," which Social Security provides us. Excluding my years in the military, I paid $2,823 into it for the first 20 years. If I could have retired then and the government told me I was entitled to a modest pension, I would have thought it was too good to be true. Some people did. Of course, they were of retirement age.

In my early working years I didn't even know what Social Security was. I just took the take home pay in my pay envelope and paid bills. If Social Security had been repealed and the government told me to save $2,823 for 20 years, would I have done so? If the government required my boss to put some of my pay aside before I got my hands on it, it could have worked. It would have been a useful lesson in personal economics for me then, as it would for students today, particularly if personal savings accounts were added as a supplement to Social Security using a portion of their 12.4 percent contribution.

That's how you learn to afford yourself and develop a sense of why government should also spend within its means.

As Dean William Ralph Inge said in The Training of the Reason, "The aim of education is the knowledge not of facts, but of values."

John Reiniers, a regular columnist for Hernando Today, lives in Spring Hill.

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