This past week, the Federal Reserve cut interest rates yet again in hopes of easing the strain in the credit markets and jump-starting the economy. The government is also doling out billions of dollars to taxpayers through economic stimulus checks, coming soon to a home near you. What both of these stimuli hope to gain is: your money. In other words, the Fed hopes you'll start spending again -- really soon!
I'm not an economist, but this much I have figured out: If our spending is always more than our income, we're heading down the wrong fiscal road. That's where we've been for quite some time. Except for brief periods in our nation's history, we never have been very disciplined with debt management.
On Jan. 1, 1791, during George Washington's second year as president, the national debt was more than $75 million. On Sept. 30, 2007, the government estimated the balance owed at $9 trillion. The nonprofit, nonpartisan Institute for Truth in Accounting calculates the actual national deficit to be closer to a staggering $56 trillion. Our annual trade deficit is a whopping $800 billion, from $38 billion in 1993. That's $90 billion with Mexico and $250 billion with China.
Even at $9 trillion, we, the people, could satisfy our national debt if we required every American to pay roughly $184,000 each. Of course, that's not going to happen, especially because many Americans are in the same chronic income-debt ratio rut as the federal government.
According to the Federal Reserve, the total U.S. consumer debt reached $2.46 trillion in June 2007, up from $2.398 trillion at the end of 2006. Credit cards account for roughly $850 billion of that amount. Credit card companies are the Godzillas of greed, using deceptive methods of control and abuse that rival any slave-trafficking scheme.
Credit card company corruption has become so prevalent that the Fed had to intervene this past week to prevent potential fraud. CNN reported last week, "The Office of Thrift Supervision, which oversees the nation's savings and loans, endorsed a seven-point plan to tackle 'unfair' and 'deceptive' practices by companies that issue credit cards." But is the government coming to save the day, or are they merely asking credit card companies to be more lenient with their indebted clients to extend vassal relations?