Since becoming your Kansas State Treasurer, I have worked hard to encourage financial literacy in Kansans of all ages. The ABCs of Credit Cards is one of the programs we teach. It is geared specifically to high school seniors and college freshmen as they will soon be bombarded with credit card offers when they enter the "real" world. One of the essential facts we focus on is: When you use credit, you are BORROWING money to make the purchases. It is a loan and must be repaid.
This is a lesson that our federal government would do well to remember and follow. Government debt has grown at an alarming rate in the past 10 years. We have literally mortgaged our future to foreign governments and more troubling, potentially damaged our national security. Prior to this recent debt explosion, most of our debt holders were our own people who invested in government bonds and Treasury securities, but now we owe foreign entities, governments like China and Saudi Arabia, nearly a quarter of our national debt. The money generated from the selling of these bonds and securities holds value and must be paid back.
Another key point that we teach our young adults with the ABCs of Credit Cards seminar is: Never, ever use one line of credit to pay another. Those who do, enter a credit nightmare! We are quickly arriving at a point where there is an over-abundance of credit in the American commerce system. We are often borrowing from Peter to pay Paul. In other words, we are infusing too much credit into the market through lines of credit (mortgages, home equity loans, and other personal loans) with low interest rates, credit cards and other bad spending strategies. If we continue down this road, the value of the dollar will be worth much less than our country is prepared to handle.
From 1996 to 2008, our national debt almost doubled from about $5 trillion to an astounding $9.7 trillion as of last month. That's so huge, most of us cannot even fathom a number that big, so here's an example: In the time it has taken you to read this article, our national debt has grown by $5 million. That's $1 million a minute!
It's plain and simple: Deficit spending has ballooned. As my dad always says, "You can't spend money you don't have." And when you try, the results are never very good. Just as we explain to the students the harmful consequences of irresponsible credit use, there are also destructive consequences to what our government is doing. Unfortunately we, the citizens, our children and grandchildren, are going to be responsible for making the payments and feeling the crunch if things turn bad.
