Monthly Archives: July 2011

more debt madness…

I have a habit of writing to my elected representatives.  These days, it’s made much easier by the fact that all of them have handy little “contact us” email fields on their websites.  Back in the day, I used to handwrite my letters — my first were a pair of communiques to Senators Fritz Hollings and (the late) Strom Thurmond, both of South Carolina, regarding reduced funding for the National Endowment for the Arts.  During the same period, I also wrote several to President Clinton.  My mother was not particularly thrilled when reply envelopes from the White House arrived in the mail.  She was certain I was accumulating a Secret Service file.

Anyway, I took a moment today to write the following note to my state’s senior senator, Dick Lugar.  I’ve emailed his office a few times over the years, and I expect a polite form reply, as I’ve received every previous time.  But I still feel a civic duty to contact my country’s law-makers when circumstances require —

Senator Lugar,

I’ve read your office’s press release of July 25, and my thoughts are this: it is all well and good for you to support prioritizing Social Security and veterans payments, as well as other certain obligations, in the event of a government default. But it is your duty as a United States Senator to make sure a default never even becomes a possibility.

On that subject, it is ludicrous to suggest, as your release does, that passage of the Cut, Cap, and Balance Act would itself prevent default, as the act makes clear that a debt-ceiling increase is contingent on PASSAGE of a Balanced Budget Amendment. We can certainly agree that passage is quite improbable. I would also hope that we can agree that, while an easily-sellable gimmick, requiring the federal government to balance its budget denies it the flexibility needed to respond adequately to extraordinary circumstances, such as war and economic downturns.

As I’ve stressed each time I’ve contacted your office, I want to be able to support your re-election despite my Democratic association. I value your experience, and certainly don’t wish Indiana to lose the advantages derived from your seniority. But to see you vote on so reckless a bill as the CCBA — I would almost presume to think such a vote is meant to defend against your Tea Party challenger — it makes it increasingly difficult to do so. I hope you will take that seriously as you chart your course over the coming year.

With the greatest respect,

Eric Anderson, Jr

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default for the masses…

Of all the debt ceiling antics that have drifted into the absurd — the incessant posturing; the frightening lack of maturity; the fact that a passel of fanatical “conservatives” can hold the nation’s credit hostage in their single-minded attempt to deny the president a second term — it has still remained largely distant.  Infuriating, yes.  But far, far away, out in that cesspool called Washington, where looking for evidence of common purpose and higher patriotism only reveals one to be hopelessly naive.

But today it got personal.  I don’t know why I hadn’t thought about this before.  I’m sure I could have come to this conclusion had I followed the logic.  That is, it has been said repeatedly that any delay in the government’s ability to meet its obligations would result in higher borrowing costs for the government.  Which would then, of course, be passed on to the corporate, and individual, borrower.  Or, as Nicholas Kristof put it in Sunday’s Times

Yet even that brief lapse [a technical default] in 1979 raised interest payments in the United States. Terry L. Zivney, a finance professor at Ball State University and co-author of a scholarly paper about the episode, says the 1979 default increased American government borrowing costs by 0.6 of a percentage point indefinitely.

Any deliberate and sustained interruption this year could have a greater impact. We would see higher interest rates on mortgages, car loans, business loans and credit cards.

So here’s where I get confessional.

I have a terrible credit history.  Pretty abysmal, really.  It all started when, during my freshman year at IU, I got myself a CapitalOne card so that I could purchase a cell-phone.  The card, however, quickly became an enabler of many, silly little trips to the mall and too many nights of eating out.  It was soon followed by another card.

Clearly, I had ignored all the advice given to us at orientation (ie, when the orientation leaders pulled the credit card offers from one student’s “welcome bag” and ripped them up for all to see).  Clearly, I believed myself to be more capable of handling the responsibilities of credit than my peers.

Clearly, I was mistaken.

To keep a long story short, it didn’t take much time for me to fall woefully behind on payments, to the extent that, between over-credit and past due fees, I had no hope of ever crawling out of the hole I had dug.  Finally, by the spring of 2004, CapitalOne had given up on me and offered a charge-off settlement, which I gladly accepted.  Yes, it killed my credit rating.  But that’s life, right?

After taking a credit break, and living cash-only for a few years (which was made far easier by the fact I worked mostly for tips waiting tables), I took a chance and applied for another card.  This time, I pledged, I would stay far below the limit, and charge only as much as I could pay off within a month… or two… well, I’d do the best I could.  And I’d slowly repair my credit history in the process.

Surprisingly enough, this went pretty well — until the fall of 2008.  Incidentally, it had very little to do with the economic nose-dive, and everything to do with the fact that a particular source of my income — a retired professor I assisted — passed away, leaving me few options but to stretch what savings I had and live on borrowed money until I could secure new employment.

I’ve never quite rebounded from that glut of necessity-driven credit spending.  I’ve dutifully kept up payments — if not always on time, and more often than not it’s only the minimum payment.  But I’ve committed myself to paying back the debt I’ve accrued.  And occasionally I’ve even paid off a card in full — only to come upon an emergency situation where I have to put a balance back on the card to get by.

So, yeah.  Not an entirely stellar credit history.  But I would wager my experience with credit cards is not all that uncommon.  Am I proud of it?  Hell no.  I take it as no small disappointment that I couldn’t exhibit more self-control when I was younger.  I mean, sure, I agree with those who would say “what company in their right mind would give a credit card to an eighteen-year old with practically no income?!?”  And that’s a fair point.  But that’s water under the bridge.  I screwed myself, and my low credit score, and high interest rates are simply what I have to deal with.  I accept that, because it’s what I did to myself.

Now back to the debt ceiling…

I accept the repercussions of my own actions and poor decisions.  But I will be damned if I will put up with an interest rate hike simply because a few jackasses in Congress are so myopically focused on reducing federal spending that they’re willing to kill the country with the cure.

So here’s what I say to them:  if the federal government defaults, so do I.  I have a hard enough time keeping on top of the bills I’ve created for myself.  If my (already usurious) rates are raised even more because of the lack of sense in Washington, D.C., I’m just going to call it quits.  I will let my lending institutions know, and they can deal with it as they please.  Damn my credit rating — it’s been in the toilet for years and isn’t going anywhere anytime soon.

Do I expect this will matter in the long run?  Other than actually getting rid of my debt, but in the most irresponsible way possible, probably not.

I imagine the only way it would matter is this:  if enough people sent the same exact message to their lenders, and if those lenders took the threat seriously enough to (maybe, possibly) pledge to withhold all campaign donations to any member of Congress with their head too far up their ass to accept a deficit-reduction package that includes revenue increases.

Any takers?

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