Seeing kids heading off to college always stirs fond memories of my freshman year at Auburn. How exciting it is to live on your own, tethered to a support system to catch you when you make mistakes. I can’t really say I “roughed it” my first semester, mostly because I had a roommate with a generous monthly allowance from his parents and the naivety to apply for those credit cards they dangle in front of kids barely out of high school.
Not that I took advantage. I worked at the alumni newspaper and the War Eagle Cafeteria throughout college. I did without a lot of the fun stuff the frat boys enjoyed, but I lived. And I was the one in Mike’s ear warning him about the compound interest accumulating on the credit card statements he ignored. Mike enjoyed being a big shot, especially when entertaining those pretty sorority girls. Folks were content letting him pay for the pizzas and party favors. The most valuable lesson he learned that fall was the concept of exponential growth, as in the snowballing interest from what those credit card companies charged him for not completely paying off what he owed each month. With his credit exhausted but those dollar amounts continuing to grow, Mike was so terrified of facing his father that I seriously worried the guy might kill himself just to avoid facing reality. I’m sure it was humiliating for him.
Mike’s own kid is headed to college now, and I can only imagine what lessons he’s sharing from the other side of life’s potholes.
Mike’s a good guy and an even better illustration of how our economy has been managed. Remember those “too big to fail” days when U.S. taxpayers had to bail out huge companies that behaved recklessly? Supposedly because if they went down, we all did? Uncle Sam had to take on a lot of debt to stimulate economic activity. For all of the talk lately about socialism, Wall Street loves how we’ve subsidized risk while keeping corporate profits privatized when there’s some financial crisis every few years.
The powers-that-be knew that eventually our 2011 anger would taper off, just like Mike’s parents eventually forgave him.
Everything seemed awesome just a few months ago. We got a ginormous tax break and ballooned the national debt while interest rate cuts and ill-advised use of bailout stimulus tools juiced the economy. This allowed some politicians to create the illusion that times were better than ever due to their masterful deal-making or through sheer force of their personalities. Nope. You don’t run up your credit card when times are good, you pay off your debts so you can reluctantly take on debt to get you through a rough patch or invest in improving your skillset to earn more.
Before COVID-19 was on anyone’s radar, this economy was already showing the cracks. Loan defaults were up. Small businesses were unable to service their debts. There were declines in manufacturing. You could see shaky signs. Meanwhile, those tax cuts failed to pay for themselves because investments in the real economy weren’t made. Rather, the money went to things like stock buy-backs that produced a lot of profit for a handful of folks at the top and corporate executives, but didn’t create more goods or services. Along comes the coronavirus hitting the supply chain and halting manufacturing, causing companies to be unable to make their loan payments. As more defaults on loans stack up (without Uncle Sam’s help), even the banks may be in big trouble.
Like Mike, we don’t have a lot of coping mechanisms left in our toolkit.
This is the time to invest in keeping our economy afloat rather than scapegoating desperate families as being too lazy to go back to work. Once we collectively dig ourselves out of this hole, then we pay the bill. First step is dealing with reality and modifying our behavior to flatten the curve so people can feel safe returning to work and going shopping again -- not magical thinking that our problems will just vanish or stunts to distract from the exponential growth of a public health crisis our leaders should never have allowed to get this far.
— Steven Stiefel is a staff writer at the Times-Journal. His column appears in Saturday editions. Email: firstname.lastname@example.org.