In Real Life, “Money for Nothin’” Leads to “Dire Straits”
“That’s fine, except it will hurt people living from paycheck to paycheck.”
If there’s anything more common out there right now than economic ignorance, it’s people who damn well understand it but have a kneejerk tendency towards compassion at the expense of common sense.
Here in Georgia, gas is in short supply. Even people, many of whom are Republicans, who understand that a price increase would stop the hoarding and allow the market to right itself, still blast “price gouging.”
“If it goes to $6, $7, or $8, how will people already living from paycheck to paycheck pay for it?”
The answer to those who understand economics is simple—firm yet relatively polite… cut back on something else, or do without. To those of us who don’t live “paycheck to paycheck,” the answer is, “You’re a fool.” To live this way is the result of choices, and we don’t see it as a bad thing that you might be forced to make some different ones.
The same “fairness at any cost” thinking caused the housing bubble, and now the financial meltdown. Government set out to make mortgages “affordable.” Affordable for whom appears to be the question now. Affordable for the taxpayers who will be forced to buy worthless assets? Affordable for the government-created companies who traded in junk and worthless paper? Maybe just affordable to the politicians who created a perceived wrong to buy votes, and now will use the genuine crisis they created to insist you need them now more than ever!
How can government, rightly known for overspending on anything and everything, even have a concept of what “affordable” means?
What is affordable will always boil down to value, and attempts to artificially increase or decrease price without regard to actual value will fail. To afford something is to have the resources to pay for usable value. To pay extravagantly for what ends up with no value will crush you. To pay little for what has significant value will lead to scarcity. Government still hasn’t learned its lessons about encouraging both.
Sadly, this is encouraged by a populace that neither has any real concept of “affordable,” else a lot fewer people would live “paycheck to paycheck.” To live continuously under such circumstances is simply a failure of choices. You either made choices that hindered earning ability, or you made choices that increased your spending necessity. To wit, you won’t find many people who sacrificed wants to expand their education or who forsook luxuries to pay only for bare necessities living “paycheck to paycheck.” Affordability runs deeper than having the ability to pay for something today. Affordability is about being able to live with the ramifications of that expenditure later. Until you own those choices, you won’t make better ones that lead to true prosperity.
If you bought a house only by virtue of the fact that you made an assumption the value could not decrease, you couldn’t afford it. If you bought twice as much house as you needed because you suddenly did not have to put any of your own money towards it, you couldn’t afford it. If you bought a car with 60 or 72 month financing, you couldn’t afford it. If an emergency, from gasoline to a medical bill, cost you an extra $250 this month that you couldn’t pay with cash, and you spent money within that month on going out to dinner, movies, video games, or other wants, then you couldn’t afford it.
And if you can’t afford these things, why should anyone else have to fork over money to make sure you have what you “need.” And while you can go vote for the politician who promises to take money from those who have it so that you can have a house, food, gas, medical care, child care, etc., you go right on ahead and enjoy that until those who have it stop producing. For that is only to force those who have money now to pay for what has little value to them, and to allow those with less to pay too little for what is valuable to them, that which they cannot get on their own. It crashes every time it’s tried.
The market will not right itself until society understands what it can afford, and what it can’t. If we design solutions to protect those who felt entitled to material things for which they couldn’t pay without excessive leverage, then we subsidize those who use excessive leverage to acquire material things. That people have no room to tighten their belts is a myth, and the key to production and real prosperity comes from those who feel the pressure of the belt and strive to increase their earning ability.
The very thing we can’t afford are the people who will read this and call it B.S., as they watch their flatscreen TVs bought on credit and fill up their $40,000 automobiles financed for 72 months and hold ARMs on quarter million dollar houses, who instead wonder how Washington is going to “fix the economy.” If you’d managed your own personal economy wisely, you wouldn’t expect Washington to fix a damn thing. And, you’d be offended at the irresponsible myrmidons who do.
Jared A. Chambers
