Almost invariably, there is a cycle that takes place in consumer spending. Business spending isn’t all that different, but somehow we figure that government spending is different.
When the average consumer is building their lifestyle, they usually start out small (relative to the terms of their upbringing, whether it be smaller house, used car, apartment, etc) and build from there. They typical consumer will rent an apartment, or buy a smaller home, and then at intervals in their life, the will upgrade.
Many consumers also will go through cycles of difficulty, at which times they will either lose a job, leave a job, or their job will disappear as has happened to so many people during this difficult time in the economy.
During these cycles of difficulty, the average consumer will live on their savings first, then possibly credit cards, and then they will either adjust their lifestyle to their current living standards, or they go bankrupt and are forced to change their standard of living. The only way to get back to their previous lifestyle, is to earn more money.
Businesses go through similar cycles. They grow, they contract, they want to expand quickly so they borrow money, if they don’t spend the money on things that generate more money, they either have to make major cutbacks, or they become bankrupt.
While the economy can be much more complicated, and there are many ways to hide or mask true issues, the foundation is pretty simple. You can’t spend more than you make forever. At some point you have to repay the debt, and repaying debt is much harder than living within your means. Once the debt is there, you still have to pay your normal daily living expenditures, but you also have to pay your debt payments……
Bottom line – if we don’t spend our country’s money wisely, we will not only not fix the problem we are facing, we will make it worse.
