Jack and Jill have been married for 15 years. They have two kids. They both have jobs, and they pool their money for household expenses. This works fine for the normal daily costs: food, utilities, household things, etc.
They also have a mortgage. It’s a known amount that comes out of their joint bank account every month. It’s a big number, but manageable. One car loan. Again, manageable.
There are lots of kid-related expenses like clothing, activities, and entertainment. Sometimes the Jack and Jill family decide to go to Hilton Head on a vacation and pay for it after they come home. They work hard to be sure that these expenses don’t exceed what they can afford.
Sound familiar? This is, with some wrinkles here and there, your financial life.
Now, imagine that Jack becomes concerned that they are spending too much on vacations. You see, Jack has a habit of overspending on his golf game; new clubs, balls, lessons, trips to famous courses. Jill has also been spending a ton of money on Taylor Swift concerts, themed-clothing and souvenirs. Their credit card balances have been rising for years, so they just keep rolling it over and over.
Jack and Jill had agreed to take the kids to Hilton Head, and they had a great time while there. However, when they are checking out of the hotel, Jack decides he’s going to take a stand:
“We aren’t going to pay the hotel bill until we get a handle on our out-of-control spending!” Jack declares to the hotel desk clerk. Jill is mortified.
The desk clerk is unmoved: “Sir, you already stayed here. Besides, we have your credit card on file, so we are just going to charge it to your card.”
Jack, as he is walking out with his livid wife and befuddled kids, shouts: “Nope, I just cancelled the credit card! We must discuss this as a family and then we’ll let you know if or when you will get paid.”
This, my friends, is the “Debt Ceiling Debate” in a nutshell.
Jack spends too much money on golf. Jill spends too much money as a mega-Swifty. They are the adults and oversee the budget for the household. In our story, they represent our elected politicians.
The hotel provided a service and expected to get paid. The hotel represents anybody who receives government money, from road contractors to those who loan money to the US Government in the form of Treasury Bills, Notes and Bonds.
The kids are us, the Citizens. We have gotten lots of cool stuff from our parents, Jack and Jill, and now we are puzzled by this whole thing. We assumed Jack and Jill were responsible, and they mostly were, but they kept giving us things like vacations that they can’t afford without more income.
Jack and Jill could reduce spending on things like golf and concert tickets, or they could go get second jobs to bring in more money. However, even we kids know that what Jack and Jill cannot do is walk out of the hotel and refuse to pay the bill.
But here we are.
We already took the vacation. We already bought the house, ate the food, wore the clothing and went to the Taylor Swift concert. The bill is here and now our leaders won’t agree on whether they should pay it or not.
The Debt Ceiling debate is not about what the country should buy in the future. Rational, good-hearted people can disagree about whether we need to cut spending or raise taxes. Those debates happen all the time and are difficult but get resolved.
However, what doesn’t work for very long is to stiff those who already did what you asked them to do.
To use a different example, you can’t go to a restaurant, eat the food, and then declare you won’t pay because you go to restaurants too often. At least you can’t if you don’t want to wash dishes or get arrested for theft.
You may empathize with Jack and Jill’s plight. Maybe the hotel over-charged them. Maybe they blame each other for the overspending. Maybe Jack foolishly thinks making a scene is the only way he can get Jill to listen to him about it.
Maybe you think the kids need to learn the lesson that both parents aren’t doing a good job.
But regardless of who you think is the real culprit in this scenario, know this:
It is the kids who will suffer the consequences.
Jack and Jill’s kids can’t get new parents easily, but maybe we need new parents.