Tag Archives: Borrow

The Debt Ceiling

The Skimmer’s Version—Just the highlights for those who won’t read the full article

  • Step #1—Live above your means
    It starts by living above our means. We want something, that we truly can’t afford and we want it now. Leave no money in reserve for an unexpected crisis.
  • Step #2—Borrow money to address a Crisis
    Encounter a crisis for which we are not prepared and borrow money to address the crisis
  • Step #3—Don’t pay off the debt when you can
    When things are good we want to enjoy our high standard of living rather than cut back and pay off the debt.
  • Step #4—Assume continuous growth
    The American expectation is one of continuous and growing prosperity. We always assume that home values will go up, wages will go up, we will get promotions, stock values will go up and the next generation will do better than the last. Recessions are temporary and growth is normal.
  • Step #5—Borrow to maintain a high standard of living
    When times are bad borrow to maintain the high standard of living to which we are accustomed. We even borrow to create the appearance of continued growth.
  • Step #6—Borrow to pay your regular bills
    After decades of continuous borrowing there comes a point that we can’t pay our regular monthly obligations. Once we reach this point we are in serious trouble.
  • Step #7—Take pride in your clear credit history and your appearance of wealth
    We can reach this point and still look like we are wealthy. There can be a tremendous amount of money passing through our hands. We can also have an excellent credit rating. It is possible to have always paid our bills on time.
  • Step #8—Demand more credit
    At this point we begin to think irrationally. We sense that we are in a financially desperate situation but pride, arrogance and an emotional commitment to living above our means causes us to see the only option as borrowing more money to get us through the tough time.
    The real solution is to drastically cut spending, but irrational thinking makes us behave like a compulsive gambler. “I have a sure bet. If I can just borrow some more money to gamble, I will be able to pay it all back and more.”
    This demanding of more credit (raising the debt ceiling), views the lender as the responsible entity. The attitude is, “I have a perfect credit rating. If I can’t pay my bills now, it is there fault, because they won’t loan me more money”.
  • Step #9—The End
    This will end when we stop borrowing money. That can happen in one of two ways. Either we decide for ourselves to stop borrowing. We must, suck it up, cut spending and begin to pay off the debt. It will be very painful and take a long time. Or we continue to try to borrow. At some point the lenders will decide that we are a bad credit risk and they will refuse to lend us any more money. This won’t happen right away. For a time we will continue to borrow and make the situation much worse.
  • Conclusion
    Most of us have no problem understanding this scenario in our personal lives. Many of us have gone through it or have watched a close friend go through it. Why can’t we see that the Government raising the debt ceiling is totally irrational? Either we fix the problem now under our own control or others will “fix” it for us and we will have no say in the matter.

The Home Version

Sometimes we hear about the US Budget and think of it an amazingly complicated thing that only someone with a PhD in Economics can understand. The US budget may be big and complicated but the principles for handling the national budget are the same as handling your household budget. So here is a little home budget metaphor to help us understand the national debt problem.

Our story begins with a young family in 1998 buying their first home. They looked and looked for a home that they could afford. There was nothing in an area in which they would feel safe raising their family. Finally the Real Estate agent found a house that they loved. It was small and more than they thought they could afford but the Real Estate agent assured them that with the tax write-off and some creative financing they could do it. Bank fudged some numbers and did some creative financing and they were in.

It was a financial struggle but it looked like they were making it until both cars broke down. They ended up buying a new car on credit. Then school was starting and they took out a school loan. It would be ok because a degree would mean a better job and more money. In a few years they would be sitting pretty. Kids were starting school too so they took advantage of the back to school sales by using their credit cards.

They limped along for the next 5 years. They always paid their bills on time, but often they resorted to buying things on credit in order to make the mortgage payment. They were piling up a ton of debt; using one credit card to make the minimum payment on another. They had to do something.

They received an offer from the bank to consolidate all of those high interest credit cards by taking out a second on their house. This was the answer! They did it.

Five years later they found that they were in the same boat; a first, a second and a mound of credit card debt. They had to do something. They called the bank and asked if they would raise the debt ceiling on the second. The bank agreed. Ahhhh some breathing room.

This time it only took two years before they were in trouble again. They called the bank but they wouldn’t raise their debt ceiling. Another bank offered a signature loan. They jumped on it even though the interest rate was high.

Quickly they realized that it wasn’t enough. Based on their current method of budgeting they would need to continue to find a new source to borrow money every year. Their credit rating was good. They always paid their bills on time (with the minimum payment), and someone was always willing to loan them money.

I am sure you can see that this cannot continue forever. At some point they need to actually reduce the debt. It will probably mean some pretty desperate cutbacks; sell the house, sell a car, stop eating out, put the kids in public school, no vacations. It may even mean they need to move in with family. The future will be tough, but it is the only thing to do.

That is what the financial counselor told them, but they just refused to accept that change in lifestyle. The counselor explained that their current lifestyle was not real. They had been living in luxury on borrowed money.

It didn’t matter. They called the bank and demanded that they raise their debt ceiling. They said they had to borrow money to meet their obligations. They told their friends that the bank and credit companies were going to ruin them if they didn’t let them borrow more money. They pointed to their stellar credit rating and that they had never missed a payment ever.

A bank officer told them flatly that either they get their spending under control or the bank will do it for them by not extending them any more credit.

This is the situation that the Federal Government is in. They have accumulated so much debt that ever increasing amounts of the budget are going to cover the interest on the debt. There are fewer and fewer dollars for actually running the Government. There is not enough money coming in, and every year they are borrowing more money to pay the bills. Years ago Congress established a cap, a debt ceiling. They determined that when we reach that point we can no longer borrow or we will never be able to pay it back. We will fall into a never ending debt spiral. Well, now it has become a regular thing to annually raise the debt ceiling. We are not dealing with reality. Just like you cannot continue to borrow money to balance your personal budget, the Federal Government cannot continue to borrow money. Someone must tell them NO!. It will either be the Congress, backed by the American people, or, at some point the nation will become such a bad credit risk that no one will loan us money.

I say that the time is now to enforce the debt ceiling.

Debt Part Two

The Spiritual Battle behind Debt
. (If you have not read them already it would be a good time to read the posts “Its Morality Stupid” and “Debt Part One”)

Ephesians 6:12 (NIV)
For our struggle is not against flesh and blood, but against the rulers, against the authorities, against the powers of this dark world and against the spiritual forces of evil in the heavenly realms.

Scripture tells us that our battles are primarily spiritual and we see the physical ramifications of those battles. So why is it that when it comes to debt that we see it as a financial battle?
Have you ever stopped to think about the spiritual battle that goes on to lead us into debt? There are some clear challenges to our faith every time we choose to borrow. Think back to the last time that you borrowed money or put a purchase on credit. Let’s take a look at a few standard scenarios. I know these because I have done them myself.

The impulsive purchase
You are in the store to buy school clothes for the kids. You see something for yourself or even extra items for the kids. They are such good prices and the sale is this week only. I will just put in on the credit card and pay it back over the next couple of months. Besides the kids need new clothes, I don’t want them to be the only kids that are wearing last year’s fashions.
What are the spiritual battles here?

A lack of contentment with what God has provided (Philippians 4:11 “… I have learned in whatever state I am, to be content.”)

Pride (I want to be proud of how my children look. I want the world to believe I am capable of providing well for my kids). Psalm 138:6 “Though the LORD is on high, Yet He regards the lowly; But the proud He knows from afar.”

Covetousness (I want to have the same things as others). Exodus 20:17 “You shall not covet…”

A focus on outward appearance rather than inward character 1 Samuel 16:7 “… man looks at the outward appearance, but the LORD looks at the heart.”

A people pleaser rather than a God pleaser
Ephesians 6:6 (NKJV)
6 not with eyeservice, as men-pleasers, but as bondservants of Christ, doing the will of God from the heart,

Impatience (The “I want it now” attitude does not demonstrate the fruit of the Spirit)
Galatians 5:22 (NASB)
22 But the fruit of the Spirit is love, joy, peace, patience, kindness, goodness, faithfulness,

Ecclesiastes 7:8 (NKJV)
8 The end of a thing is better than its beginning;
The patient in spirit is better than the proud in spirit.
A lack of prayer (You have not because you ask not)

James 4 (NKJV)
4 Where do wars and fights come from among you? Do they not come from your desires for pleasure that war in your members? 2 You lust and do not have. You murder and covet and cannot obtain. You fight and war. Yet you do not have because you do not ask. 3 You ask and do not receive, because you ask amiss, that you may spend it on your pleasures. Adulterers and adulteresses! Do you not know that friendship with the world is enmity with God? Whoever therefore wants to be a friend of the world makes himself an enemy of God. 5 Or do you think that the Scripture says in vain, “The Spirit who dwells in us yearns jealously”?
6 But He gives more grace. Therefore He says:
“God resists the proud,
But gives grace to the humble.”

Matthew 7
Keep Asking, Seeking, Knocking
7 “Ask, and it will be given to you; seek, and you will find; knock, and it will be opened to you. 8 For everyone who asks receive, and he who seeks finds, and to him who knocks it will be opened. 9 Or what man is there among you who, if his son asks for bread, will give him a stone? 10 Or if he asks for a fish, will he give him a serpent? 11 If you then, being evil, know how to give good gifts to your children, how much more will your Father who is in heaven give good things to those who ask Him!

Note that individuals are not the only ones that make impulsive purchases. Businesses do the same thing and so does the government. We in California continue to be unable to balance our budget but a few years ago we voted to borrow billions of dollars to build a high speed rail line. Now we have spent all of the money and haven’t built anything at all.

The emergency purchase
Not every debt based purchase is impulsive. I have often experienced an emergency arises when I am short on money and I have resorted to borrowing. Examples have been car breakdowns and appliance breakdowns. What are you supposed to do if your car breaks down and you don’t have the money to fix it? Do you just not go to work? That doesn’t solve anything if you don’t go to work you will never have any money to do anything. How could borrowing money in this situation be a spiritual battle? First let’s look at the battles above and see if any of them apply.

A lack of contentment with what God has provided.
This probably doesn’t apply but it could. We live in a world of luxuries that we view as necessities. Often we believe that two cars are necessary when we could get by with one car, public transportation, carpooling, or a bicycle. Maybe God wants you to change to one of these modes of transportation because it will force you into relationships that can work to His glory. Maybe Satan has been winning a battle by isolating Christians to private transportation.

Pride
This may not apply either but it could. It could be that pride forces you to borrow rather than to humble yourself by asking for assistance.

Years ago my Uncle Robert’s hardware store had a fire and experienced extensive damage. He tells of the many Christian friends that came out to help with the clean-up. At first he resisted their help. Then one of his friends pulled him aside to straighten him out. He explained that God had called him to help out and that if my Uncle resisted the help he was resisting God and denying them the opportunity to serve God, by serving him. That conversation changed my Uncles perspective. The next few weeks were a wonderful time of Christian community and sharing.
How many opportunities do we miss because of personal pride?

Covetousness
Getting a car repaired would not be in the realm of covetousness but often we don’t settle for just getting it repaired. Instead we use it as an opportunity to buy a new car and keep up with the Jones.
A people pleaser rather than a God pleaser.
I think this one does not apply.

Impatience
This one also doesn’t apply much as impatience but there is some application. Recently our dryer broke down. At first it started acting up; sometimes it would heat up and other times it would not. Then it stopped heating up altogether. The first response would be to call a repair man, but we didn’t have the money on hand. Of course we could have borrowed. I know enough about dryers to fix it myself but it was a matter of setting aside the time especially through the holiday season. So we spent quite a bit of time hanging up clothes outside to dry. It brought back some memories of my childhood and a renewed appreciation of what my mother went through in the early years before we had a dryer. Eventually Donnie and I got around to looking at the dryer. We watched U-tube videos on how to fix a dryer. We prayed for God’s guidance. We identified the suspect parts and I sent Donnie to buy new ones. Even the replacement parts cost more money than we had. So Donnie went on line and found the parts for half the price. Another week of patient waiting and the parts arrived. Donnie and I worked together to put them in and, Praise the Lord, our dryer is working again. Patients gave us some good experiences, it taught us something about shopping around for good prices, it taught us some new skills, it lead us to pray, and it gave us some good times of fellowship. I think the Kingdom of God was advanced on this one and the Kingdom of Satan shrunk again.
This morning Lacie came in and told me how much she was enjoying washing clothes today now that the dryer is working again. I think there was a new joy in what could be a normal drudgery.

Longsuffering
Some translations of the Bible will use the term longsuffering, others will use the term patience. The terms mean basically the same thing but there is a slightly different connotation. Patience places the emphasis on waiting where as longsuffering adds the idea of continuing to endure an unpleasant situation. I think both imply a hope of something better in the future.
In my experience most “emergencies” don’t suddenly come upon us. Cars don’t suddenly breakdown. Cars are machines that require regular maintenance and replacement of worn parts. You can check your owner’s manual and it will tell you when maintenance is required and when parts are expected to wear out. These events become “emergencies” when we don’t plan for them. For people that plan ahead they are called regularly scheduled maintenance. For those who don’t plan ahead they are called breakdowns and emergencies, and they typically cost more. The key here is that in order to afford regularly scheduled maintenance or to plan for emergencies takes a little bit of longsuffering. You need to do without some things in order to save. Often you need to live in less than ideal situations, but that type of longsuffering makes all of life a little smoother and it pays off in the long run.

A lack of prayer
I think prayer applies to this situation in two ways. The first is that sometimes God uses circumstances to get our attention. If He already has our attention as demonstrated by a life of daily prayer there is much less of a need to get our attention.

The second is that sometimes God has already prepared a remedy for our “emergency” but we borrow money to save ourselves instead of seeking God for the salvation He has prepared. I have heard stories of people that had broken down cars and borrowed to buy a beat-up used car. Only to find out later that God had already laid on someone’s heart that they should give them a car. An opportunity lost and a victory for the Kingdom of Satan. One person has entered into the bondage of debt. Another begins to question whether he is hearing the promptings of the Lord correctly and doesn’t experience the joy of giving. An opportunity was lost to glorify God and for Him to show His power, provision and love.

Once again this type of emergency borrowing is not limited to individuals; it also applies to businesses and government. A few years ago we had a local ballot measure to sell bonds for needed storm water system repair work. We had record storms and we were experiencing flooding in many areas because of debris that had built up in the system through the preceding years. Major cleaning and repairs were required. But the truth was that this wasn’t an emergency that crept up on them all of the sudden. We had a drought for the preceding eleven years. The tasks that should have been done were not because there was not a strain on the system. All of the monies were spent on increased salaries and other things. Now the maintenance and repairs had piled up and we were in trouble. If they used the money to clean up the system during the 11 years of drought they wouldn’t have had flooding on the storm year.

Leveraged Borrowing
Leveraged borrowing is borrowing money for investment purposes. The idea is that I will borrow money at a low interest rate and I will make a much better return and then pay back the money. This could apply to a speculative investment, a business expansion or a host of other things. Typically this is driven by a love of money and impatience, both of which are warned about repeatedly in scripture. There is also this idea that we are going to make it big. It is not just making it big but we have cut God out of the equation. We make it big through our own efforts. This leads to pride and independence from God; another victory for Satan.

I have heard people say things like, ‘No, you don’t understand. I am doing it for the Lord. When I make it big I will be able to give more to the Church and God will get all of the glory.” That sounds nice but there are a few things that are wrong. Where was God in the situation? How does God get glory for something that there is no evidence that He participated in. Another is that you really don’t need to make money for God. God is not poor. He doesn’t need your money. You need to give to God for your benefit not His. God doesn’t need you to borrow money for Him. If your venture would fail would you give God all of the blame?

James warns against this type of reasoning. It is arrogant presumption and it is called evil.

James 4
Do Not Boast About Tomorrow
13 Come now, you who say, “Today or tomorrow we will go to such and such a city, spend a year there, buy and sell, and make a profit”; 14 whereas you do not know what will happen tomorrow. For what is your life? It is even a vapor that appears for a little time and then vanishes away. 15 Instead you ought to say, “If the Lord wills, we shall live and do this or that.” 16 But now you boast in your arrogance. All such boasting is evil.

A life dependent on the mercy and constant provision of God is the righteous life of faith that honors God and advances His kingdom. An independent self-sufficient life is an unrighteous life that lacks faith and helps to empower the Kingdom of Satan.

Individuals, businesses, and government all participate in this type of speculative borrowing. It has become embedded into our economic system. The Government is constantly talking about borrowing as part of creating an economic stimulus. In a few weeks congress will once again get together and vote to raise the debt ceiling. I wonder if they would do it if they understood it as a spiritual battle. If the question was posed as, “All who want to raise the debt ceiling and advance the Kingdom of Satan raise your hand and answer Yea. Those who are opposed and think we should turn to God and seek His salvation answer Nay”.

Conclusion
We are involved in a continuous spiritual battle. I use to think that the battle raged in the heavenlies and affected us here. Now I am growing in my understanding that everything I do either advances the Kingdom of God or the Kingdom of Satan.

Debt Part One

A Biblical understanding of debt part one
If you talk to a modern economist he will tell you that if you have good credit you should leverage your money. That is you should use your good credit; borrow a bunch of money. Invest in something that is appreciating in value and you will end up rich. The idea is that you can do your investing using someone else’s money. In that way you can accelerate your rate of return. There is no way that you are going to get rich just by working and saving money.
The Government takes a similar approach. The theory is, when the economy slows down we should borrow money, invest in sectors of the economy that will grow. In practice the government will invest in anything as long as it spends money. The measure of success in our economy is the exchange of money. That means that any time money changes hands for any reason then the economy is growing. The belief is that once the economy has some momentum it will continue to grow.
That is the way the economist, bankers and politicians see it, they work with other people’s money. How do the successful business owners view it? I am talking about the small to medium business owners; the ones that the economists say drive the economy and create the most jobs. Well in the book The Millionaire Mind the author studied a great number of millionaires to see how they think and behave. One of the key factors that they agreed on was, don’t borrow money. They tended to not have any personal debt, and most of them did not have any debt in their business.
So we have a difference here between theory and practice. Those that are writing the theory say one thing but those that are actually running the businesses are doing something totally different.
What does God say about borrowing money?
Money is only borrowed by the poor, never the rich.
Deuteronomy 15:7-8
7 “If there is among you a poor man of your brethren, within any of the gates in your land which the Lord your God is giving you, you shall not harden your heart nor shut your hand from your poor brother, 8 but you shall open your hand wide to him and willingly lend him sufficient for his need, whatever he needs.
Money is only borrowed for survival. When a person runs short on funds they sell their belongings, then when there is nothing reasonable left to sell, then they borrow for basic needs only.
Debt is associated with the disadvantaged and discontented.
1 Samuel 22:2
And everyone who was in distress, everyone who was in debt, and everyone who was discontented gathered to him. So he became captain over them. And there were about four hundred men with him.
Debt is always viewed as a form of bondage.
Proverbs 22:7
The rich rules over the poor, And the borrower is servant to the lender.
Abusive lending practices which take advantage of the poor will be severely punished by God
“Lending” to those who cannot repay will be blessed by God.
Proverbs 19:17
He who has pity on the poor lends to the LORD, And He will pay back what he has given.
The ability of a nation to loan money to other nations is an indication of God’s blessing. It is the direct result of being a nation that honors God and follows His laws.
Deuteronomy 15:6
For the LORD your God will bless you just as He promised you; you shall lend to many nations, but you shall not borrow; you shall reign over many nations, but they shall not reign over you.

Being in debt as a nation is an indication of God’s judgment. It is a direct result of not honoring God and rebelling against His commandments.
Deuteronomy 28:43-45
43 “The alien who is among you shall rise higher and higher above you, and you shall come down lower and lower. 44 He shall lend to you, but you shall not lend to him; he shall be the head, and you shall be the tail.45 “Moreover all these curses shall come upon you and pursue and overtake you, until you are destroyed, because you did not obey the voice of the LORD your God, to keep His commandments and His statutes which He commanded you.
There are many more passages that deal with the specifics of lending, borrowing, holding collateral and charging interest but the one I listed above do a good job of summarizing the Bibles attitude toward debt. Debt is always viewed as a negative. It is even used in the “Lord’s Prayer” as the equivalent of sin.
“… and forgive us our debts as we forgive our debtors”
Personal debt and national debt have become a big topic in the media, but we tend to view it in fairly positive terms. When it comes to personal debt we are concern with questions like, “How is my credit rating”. As if one of being able to borrow is a good thing. Or we ask, “How much available credit do I have on my credit card”, or “How much debt can I carry before I am in financial trouble.”
The questions we ask as a nation aren’t much different. We ask, “Should we raise the debt ceiling?” “How much debt should we carry compared to the Gross Domestic Product?” “Will America be able to maintain its positive credit rating?” “Should we borrow more money to stimulate the economy?”
We have it all wrong. Debt is bad. Not just a little bag it is real bad. We need to view it as such and seek to eliminate it. Deuteronomy chapters 27 and 28 explain how this is done. It is not by stimulating the economy. It is not by taxing the rich. It is not even by cutting spending. I am sure that these are all tools that can be used but they will not work until we deal with the root problem. We must turn to God, acknowledge His as Lord and humbly follow His laws. Who knows He may choose to forgive us our debts.