Buy Now, Pay Later

We've heard a lot about debt lately. According to some (mostly conservatives), public debt is illegal, immoral and probably fattening as well. This is only a slight variation on themes we have heard ever since Franklin Delano Roosevelt was inaugurated in 1933.

Our current economic downturn, though, was not caused by public debt. It was brought on by a breakdown in the over leveraging of private debt. It was a consequence of financial deregulation and the resulting bubble in housing. After the bubble collapsed, in 2007, 2008 and 2009, we saw a massive reduction in overall debt in the U.S. Overall borrowing (net increase in debt, including US state and local government, federal government, financial companies, non-financial companies, and US household borrowing) dropped like a shot from about four and a half trillion dollars in 2007 to two and a half trillion in 2008 to negative 438.4 billion dollars in 2009. Yes, federal government borrowing increased, but that increase was overwhelmed by reductions in borrowing and spending by state and local governments and private borrowers.

"Neither a borrower nor a lender be," Polonius advises Laertes in William Shakespeare's Hamlet.

That's very bad advice if the goal is economic prosperity. In fact, debt (properly managed and regulated) was the foundation of our postwar prosperity. Without consumer debt, aggregate demand for products would be a fraction of what it became in the 1960s.

Just imagine the consequences to the economy if we were to abandon "buy now, pay later." Actually, I don't have to imagine it. I remember it. If my grandmother wanted to buy something at the department store - say a winter coat - she would put it on "lay-away." She would pay the store a certain portion of the price and the store would set it aside (or lay it away) until she completed paying for it. Then she could take it home.

It was possible in the 1940's to take out a loan for a major purchase such as a car. It helped to know the banker. That was possible, since most banks were local businesses. That made travel a problem. Only local businesses would accept a check made on your local bank. If you went on a trip you needed to take enough cash for expected expenses. There were no credit cards.

If you worried about being robbed of your cash, you would buy traveler's checks before setting out. To cash a traveler's check, you had to countersign it in front of the cashier. That system was "pay now, buy later."

The ordinary transactions of daily life were very much more complicated sixty years ago than they are now.

Do you remember long distance telephone calls? I'll save that for another time.

Irene's Wake

I've been a bit busy lately cleaning up after Irene. I've got a couple of posts in the works, but have to sleep on it. Tomorrow is another day.

Sex And The Military

At last Thursday's Republican debate, Rick Santorum declared "any type of sexual activity has absolutely no place in the military.”

What arm of the military did he serve in?


He didn't?


That explains it.

Language and the Constitution

While boxing up stuff to put in storage while the house is restored from Irene, I came across an interesting clipping.

The late James Kilpatrick, conservative columnist, commentator on the US Supreme Court, in his final years published a regular column titled "The Writer's Art." One of his final columns, "Simplify Overstuffed Sentences," printed on page 13A of the News and Observer of Saturday, August 30, 2008, shed an interesting light on the Court's 2008 decision that the Second Amendment grants an individual right to keep and bear arms. I posted a comment on that issue last January.

Kilpatrick's 2008 column takes issue with loose use of "people."

"A recent item in the Washington Post began 'Federal prosecutors charged 11 people yesterday with the theft and sale of more than 40 million credit card numbers...'
People? Eleven people? Suppose the charges are dismissed against 10 of them. What's left? One people.

"The solution to this perplexity is to reserve 'people' for lots and lots of human beings with some common bond - e.g. the dispossessed people of Darfur. The noun 'person' carries a smaller load of baggage.

"Thus the Constitution speaks of the right of 'the people' peaceably to assemble, to keep and bear arms, and to be secure in their homes. But when it gets to crime and punishment, the Constitution says that no 'person' shall be put in double jeopardy, no 'person' shall be compelled to be a witness against himself, and no 'person' shall be deprived of life, liberty or property without due process of law.

"Those old boys who wrote the Bill of Rights had a lovely feel for language. I wish our present leaders were equally blessed."

Kilpatrick didn't say so right out, but one of the leaders he might view as linguistically challenged is justice Antonin Scalia, who drafted the decision in District of Columbia Vs. Heller. In that decision Scalia concluded the "right of the people to keep and bear arms" was an individual right.

Kilpatrick would dissent.

If the authors of the Second Amendment had intended the right to be an individual right, they would have written 'persons.'

Imprison Mosquitos?

My last post on mosquito control was intended as a tongue in cheek comment not only on mosquitoes, but on programs that obviously need to be carried out by government. The idea of relying on individuals to spray their own property is (I thought) patently ludicrous.

Had I attended last Monday's county commissioners meeting, I would have learned that one commissioner insisted the county's spraying program confine itself to public rights of way.

You can't control mosquitoes that way.

Normally, mosquitoes confine themselves to an area within one to two miles of the place they hatched. Some are more peripatetic, and have been found seventy-fives miles from where they hatched.

Unless the commissioner in question knows of some way to confine mosquitoes to the lot on which they hatched, the policy she proposes will be totally ineffective for mosquito control.

Why worry? Aren't mosquitoes just a nuisance? Well, no. They transmit diseases that can be fatal to man and beast. West Nile virus and equine encephalitis, for example.

My father suffered from malaria. He didn't contract it in the jungles of New Guinea where he served during WWII - he contracted it as a child in Holmes County, Mississippi.

Malaria disappeared from the US in the 1940's as a result of a number of measures, including aggressive use of DDT. We know better now about other adverse consequences of DDT.

Maybe someone will develop mosquito prisons.

Another Government Program

I was up early this morning and saw the public works crew fogging for mosquito control.

Another government program.

Why don't we just let each homeowner fog his or her own property or implement his own preferred mosquito control measures?

Is a Penny Saved a Penny Earned?

Benjamin Franklin told us "a penny saved is a penny earned."

Maybe.

Three years ago, during the budget process, Oriental's town manager briefed the commissioners (I was one of them) on increases in various insurance premiums. One of the expenses was (as I recall) about $900 for flood insurance. We discussed the option of self-insuring on the grounds that during hurricane Isabel, the highest storm surge in anyone's memory, the only loss was the carpet. Two or three years' premiums would more than cover such a cost.

We deliberated and decided to self-insure for flood loss.

Hurricane Irene confounded our expectations. The storm surge flooded Town Hall about a foot deeper than Isabel. There was quite a bit of damage.

Some of the damage would have been covered by flood insurance. Some would not. Mold, for example. Some damages would have been reduced by depreciation. It would be good to do a careful calculation of the benefits we would have received from flood insurance against the expense we avoided by self insuring. The board might or might not want to reinstate flood insurance.

As Yogi Berra said, "it's difficult to make predictions, especially about the future."

Do We Really Need Smaller Government?

Yesterday's New York Times had an op-ed piece entitled "Our Hidden Government Benefits." The article summarized a 2008 survey.

"A 2008 poll of 1,400 Americans by the Cornell Survey Research Institute found that when people were asked whether they had “ever used a government social program,” 57 percent said they had not. Respondents were then asked whether they had availed themselves of any of 21 different federal policies, including Social Security, unemployment insurance, the home-mortgage-interest deduction and student loans. It turned out that 94 percent of those who had denied using programs had benefited from at least one; the average respondent had used four."

I confess. I have used government services all my life. Still do.

Did you put your hurricane debris out in front of your house to be picked up? FEMA pays most of that bill, the state of North Carolina a big chunk and town government the rest. How would we deal with that without government? Not very well. Today I received a check from FEMA and one from my insurance company (to be repaid from the National Flood Insurance Program). There will be more payments. I also received my monthly social security check.

This afternoon I have a doctor's appointment to review my annual blood test results. Who pays? The U.S. Government. Earlier this week the town's mosquito control operation fogged mosquito breeding areas. Who pays? Town government, supplemented by state government.

The list goes on. We all use government programs.

We live in a democracy. The government isn't "they," it is us.