Suze Orman Doesn’t Seem to Know How Credit Cards Work

Suze OrmanBestselling author and TV host Suze Orman borrowed $50,000 from friends in 1980 to start a restaurant.  That’s about six times as much money as I owed in student loans after getting my Princeton degree the same year. Her bio makes reference to bouncing checks in those years, so at some point she had experience living close to the edge, although those days are several bestsellers and TV contracts ago.

So it’s surprising that she doesn’t know how credit cards work.  From her CNN column:

As we all know, if you run up a balance on your credit card and then decide not to pay the bill, there’s a huge price to pay. Your interest rate goes up, your credit score goes down and that triggers all sorts of costly dominoes to start falling. To not raise the debt ceiling is akin to refusing to pay your credit card bill.

Nope.  It’s akin to making minimum monthly payments on the credit card, while applying for an increase in your credit limit.  Tea Party Republicans are saying, this is it — no more increases in credit limits, you’re too far in debt already.

The debt ceiling has nothing to do with future spending. It’s simply a mechanism that allows the U.S. government to keep paying off the bills it has already run up.

Nonsense.  If the debt ceiling is increased by $2.4 trillion — the amount that Democrats and Republicans appear to be “close” to agreeing on — the government will be allowed to go $2.4 trillion deeper into debt.  Some of  that money will be used to pay existing obligations, and some of it will be used to pay new obligations that otherwise would have to be eliminated or deferred.  If you find yourself deep in a hole, the first thing to do is stop digging.

Let’s look at what happens when a family has maxed out its credit cards and can’t pay all its current bills.  (How do I know about this?  Um… I read about it in a book.)

Years ago, in the hit show “Roseanne,” the cheeky title character was arguing about money with her husband, who told her “don’t mess up my system” for dealing with the stack of monthly bills. “What system?” she said. “Pay the ones marked ‘final notice,’ and throw the rest away.”

Despite sounding somewhat decadent, that is, in fact, pretty good advice.  It’s essentially the system I used. (I’m happy to report that despite my modest current income, those days are long in my past.) It’s a system that needs to be coupled with ongoing debt-reduction efforts — the family needs to spend less, and/or someone needs to get a second job.  But when faced with the monthly emergency of not having enough cash to pay all your bills, while being maxed out on your credit lines, it makes sense to pay the bills where deferral will have the worst consequences.

All of this may sound like an argument against raising the debt ceiling — but in fact, I hope the ceiling gets raised, the sooner the better.  That’s because the stakes right now are higher than whether the arbitrary line in the sand gets drawn at $14.3 trillion or $16.7 trillion.  It would be very disruptive, in unpredictable ways, to bounce off an unmoving debt ceiling — and I fear the Republicans would get the blame for the disruption.

Let’s give Obama  the $2.4 trillion debt ceiling increase to get him past the election — that’s at least less than the $3.1 trillion debt increase that already has happened on his watch.  The GOP should not let the perfect be the enemy of the good — they’ve already succeeded in changing the context from “no” spending cuts to “how much” in spending cuts.  The single most important thing Republicans can do right now to improve the financial situation is to vote the most free-spending president in history out of office.  Let the election be about Obamacare — we know who to blame for that.

(Photo of Suze Orman by David Shankbone, via Wikipedia)

Obama’s “I Blame George Bush” Act Is Growing Old

To enlarge the graphic, click on it, then click on it again

More than 30 months into the era of Obamanomics, the administration is still desperately seeking to blame all of the nation’s woes on George W. Bush. They’re getting less and less traction with that argument — Obama’s approval rating just hit a new low of 40%, according to Gallup’s tracking poll.

But Bush has been the go-to guy in Obama’s blame game since the beginning, and the administration keeps trying.  Megan McArdle, a consistently insightful economics columnist for the Atlantic, dissects a chart published by the White House this week that purports to show that of the $12.7 trillion added to the national debt over the past decade, $7 trillion is attributable to the Bush administration, with only $1.4 trillion attributable to Obamanomics.

[T]his graph attributes decisions made by Obama and an all-Democratic Congress–like doubling down in Afghanistan–to Bush, while taking responsibility for basically nothing except the stimulus.  When Obama extends the Bush tax cuts for the rich under pressure from Congressional Republicans, that disappears from his side of the ledger, because after all, he didn’t want to do it.  When Bush enacts Medicare Part D under pressure from Congressional Democrats, the full cost is charged against his presidency.  The list of such silliness goes on.  Our president seems set to coin another presidential motto: “The duck starts here.”

McArdle answers with charts of her own, showing that the deficit, which never reached more than about 3% of GDP during the eight years of the Bush administration, has ballooned to 10% of GDP after less than three years of the Obama administration.

Nor is it exactly obvious to look at the $2.4 trillion in additional debt incurred during Bush’s eight-year presidency, and say that he is nonetheless actually responsible for $7 trillion of our current debt load–and then turn to the $3.1 trillion of debt incurred during Barack Obama’s three-year presidency, and declare that his policies are actually responsible for only $1.4 trillion.

Obama needs a new scapegoat, and the administration has been fitting the House Republicans for that suit.  I worried three weeks ago that the Republicans — having forced Obama to concede that entitlement cuts are on the table — would hold out for no debt increase and get blamed for a government shutdown.

The GOP still could get blamed, of course — Newt Gingrich & Co. were blamed in 1994 even though Bill Clinton’s veto actually triggered the shutdown.  But now the House Republicans have voted not once but twice to raise the debt ceiling, overruling the Tea Partiers among them.

K-Lo describes the path forward from here:

So what does the new path look like? This tweaked Budget Control Act will pass the House. The Senate will strip out the BBA language. It will pass the Senate. When it goes back to the House, Boehner loses some of his caucus again, but Pelosi will have to get some of her members on board. If this is such a crisis moment, Democrats are the party in power. Boehner negotiated with his caucus and got an imperfect bill that the Democratic Senate could work with — with a statement of principles in it including the BBA. Then the Democrats, who do run Washington, after all, will have to step up to the plate.

Ball’s in your court, Harry Reid and Barack Obama, in other words.

The Senate already has tabled the Boehner bill, but pressure to accept one of the two House plans may rise over the weekend, leading to the scenario K-Lo describes.  Let’s hope so.  Then the election can go back to being about the phony stimulus and the wildly unpopular Obamacare.  Everybody knows who to blame for that.


So what does the new path look like? This tweaked Budget Control Act will pass the House. The Senate will strip out the BBA language. It will pass the Senate. When it goes back to the House, Boehner loses some of his caucus again, but Pelosi will have to get some of her members on board. If this is such a crisis moment, Democrats are the party in power. Boehner negotiated with his caucus and got an imperfect bill that the Democratic Senate could work with — with a statement of principles in it including the BBA. Then the Democrats, who do run Washington, after all, will have to step up to the plate.

Ball’s in your court, Harry Reid and Barack Obama, in other words.

Enough on the Debt Ceiling, Let’s Talk Bicycles

Once or twice each mile on the Cape Cod Rail Trail, the bike path crosses a road.  Nothing too intimidating, but some of them are busyish two-lane county highways.  The drivers see a sign that says “Bike Xing,” but they don’t see a Stop or Yield sign.  The bikers have the Stop sign.

But I was struck by how the drivers routinely would pull to a stop and wave the bicycles through the intersection.  Routinely as in every. single. time.  Finally near the end of the 19-mile ride I saw a driver buzz through the intersection as I approached — he would have had to slam on his brakes to stop.  The driver behind him stopped.

On reflection, I have mixed feelings about this.  Part of me is grateful to the gentle souls who took a moment out of their day to defer to a more-vulnerable bicycle.  But from a public safety standpoint, the person who has the legal right of way generally should exercise the right of way.  It’s safer that way because it’s what people expect.

By the end of the ride, we fully expected every driver to defer to us, and we started to get sloppy.  While breezing through one intersection, a bus driver who had stopped for us yelled out, “you have a Stop sign, you know.”  A good thing to remember for the person who has more at stake.

It was a beautiful day for a ride, sunny, breezy, highs in the 70s.  It’s actually a bit cold for water activities, but we’re enjoying the weather.

Cranky political commentary will resume soon enough.  For this afternoon, there’s ribeye, shrimp and corn on the cob for the grill.  I’m on vacation with a beautiful blonde who just spontaneously felt moved to tell me how much she loves me.  Life is good.

(Photo by the Web Goddess, of course)


Surprise! New Jersey Has the Highest Tax Burden

Out of 50 states, it turns out 49 of them have lower taxes than New Jersey:

As a percent of their income, taxes in the Garden State were 12.2% in 2009, nearly double that of Alaska. Like Connecticut, much of this tax burden comes from state residents who commute to New York City and pay taxes there as well. This illustrates how a state resident contributes to the tax base of multiple states. Although not reflected in the percent of income residents pay in state and local taxes, it is nonetheless an additional burden commuters have to bear. According to Tax Foundation, the state has the third-worst environment for business in the country, with a corporate tax rate of 9%. It also has an above-average sales tax, as well as one of the highest rates in the country for cigarettes and liquor.

Kudos to Governor Christie for resisting class-warfare rhetoric and vetoing the so-called “millionaire’s tax.” My one-time boss, former Home News City Editor Tom Hester Sr., has the scoop on what can happen if you raise taxes on “the rich”:  They take their money elsewhere.

Gov. Chris Christie vetoed the so-called “millionaires’ tax”—a state income tax hike on residents who earn over $1 million annually—sent to him last week by the Democratic-controlled Legislature for fear the 16,000 wage earners it would affect would bailout of the state and hurt the economy.

It turns out that 6-in-10 New Jerseyans who earn more than $75,000 annually say they would like to leave the state, compared to nearly half of those who earn less.

Econ 101: Investment supports job formation.  Raising taxes on anyone deters job formation.  In particular, tax increases on “the rich” should be thought of as coming dollar for dollar out of a pool of money that otherwise would be invested.

If you envy the wealth of others, work toward building your own wealth.  In the meantime, recognize that people with more money have more options than you do.  And get over it.

(Anybody who thinks these are the words of a plutocrat is invited to read my riches-to-rags story…)

Update: Tigerhawk has his own take on NJ taxes.  I point this out primarily as an excuse to boast that I posted 32 minutes before he did.

Glenn Greenwald on Norway: It Must Be America’s Fault

Photo from Wikipedia

While the world waits patiently to see if Norway will join Oklahoma City [Whoops! and Virginia Tech! and Columbine!] in the modest panorama of non-Islamic terrorist atrocities (thereby doubling the size of the panorama), Glenn Greenwald is getting out in front with a predictable gambit: Blame America First.

Still, I can’t help noticing, and being quite bothered by, the vast difference in reaction to the violence visited on Western nations such as Norway and the violence visited by Western nations (particularly our own) on non-Western nations.  The violence and indiscriminate death brought today to Oslo is routinely and constantly imposed by the U.S. and its closest allies in a large and growing list of Muslim nations.  On a weekly basis — literally — the U.S. and its Western allies explode homes, mangle children, extinguish the lives of innocent people, disrupt communities, kill community and government leaders, and bring violence and terror to large numbers of people — those are just facts.  And yet a tiny, tiny fraction of attention, interest and anger is generated by such violence as compared to that generated by the violence in Oslo today.  What explains that mammoth discrepancy in interest, discussion, and media coverage?

What explains the discrepancy? The false premise explains it.  The difference between “collateral damage” — an ugly but accurate term — and the deliberate targeting of random innocents explains it.  The other thing that explains it is that unlike Greenwald, most people in our society are, ya know, on our side.

It’s also interesting to note that Greenwald implicitly assumes that the attack is probably “jihadi” related.  Why else go into detail about Norway’s participation in the wars in Afghanistan and Libya?  He’s less interested in giving Islamists the benefit of the doubt than he is in saying “we’re just as bad.”

(Photo of Glenn Greenwald from Wikipedia — I totally can’t be bothered to figure out all their licensing blather, but I think that means it’s in the public domain.)


In the Budget Battle, GOP Should Not Let the Perfect Be the Enemy of the Good

Who would have predicted that Obama — or any Democratic president — would inspire a headline like this one in the Washington Post: “In debt talks, Obama offers Social Security cuts“? Isn’t Social Security supposed to be the third rail of politics?  Isn’t it the Democratic party that has inspired 249,000 Google hits on  the phrase “balancing the budget on the backs of the poor”?

As near as I can tell, Obama has expressed nothing more than a willingness to tinker with the formulas for calculating inflation for Social Security and other entitlement programs.  Only in Washington is slowing the growth of something considered a “cut”.

But it’s a huge step nonetheless. Kathleen Parker urges Republicans not to overlook

the enormous opportunity for conservatives that has taken shape since the beginning of the year. Just a few months ago, Obama was asking for a “clean” debt-limit increase. That is, an unconditional hike without spending cuts or reforms.Republicans responded by making clear that there would be no increase to the $14.3 trillion debt limit without fundamental reforms, including to entitlements, and without spending cuts larger than the debt-limit hike, enforceable limits on future spending, and no tax increases.

Fast-forward through a few months of intransigence — and a few friendly rounds of golf — and the conversation has become something much different. The president’s proposal for a deal that would save $4 trillion over the next 10 years through cuts to all major spending areas, including entitlements and the Pentagon, is otherwise known as a “sea change.”

Entitlement reform is essential not because of any rich-versus-poor calculus, but because the programs are unsustainable in their current form.  By signaling that some change in entitlements is inevitable, Obama is giving Republicans a bit of protective cover against toxic class-warfare rhetoric.

Republicans have gotten to this point by digging in their heels against tax increases and against raising the debt ceiling — but at the end of the day any budget deal is going to include tax increases, a higher debt ceiling, or most likely both.

If purists force a government shutdown in August to avoid exceeding the debt ceiling, each side will of course point fingers at the other.  But Republicans have seen this movie before.  In 1995, Bill Clinton triggered a government shutdown by vetoing budget bills — yet Republicans ended up shouldering the blame, and Clinton was re-elected.

Happy Independence Day to You;
Happy Blogiversary to Me

Three years ago today I posted my first substantive blog post, about Senator Obama, the Democratic nominee for president.  Here’s how it began:

From the start, my take on Obama has been that he’s a talented and charismatic politician who some day could become an important senator.

We know now, of course, that Obama will never be an important senator.  But I think the post holds up pretty well.

There have been 443 posts since then (some of them more substantive than others). They’ve attracted more than 1,000 legitimate comments.  There also have been more than 93,000 spam comments, blocked by my Akismet plug-in.

Since I added Google AdSense advertising to my site in May 2009, the ads have earned me $93.16, or an average of 12 cents a day. Once that total reaches $100, the Google people will send me a check. (Ca-ching!)  I’ve had more than 47,000 unique visitors from 150 countries, and I’m grateful to everyone who has taken a look.

These stats don’t exactly make me a titan of the blogosphere, but I enjoy having an outlet for writing. My heaviest traffic came from my one and only Instalanche, in a post noting that Treasury Secretary nominee Timothy Geithner’s tax problems got less attention from the media than Joe the Plumber’s.  The one post I’d like you to read if you haven’t already is “Honest Labor: From Mach 2 to Muenster to Madison.”

I was going to do  this as two posts, but between entertaining, the sunshine, fireworks and various pressing chores, I didn’t get my July 4 post up in time.  Let me end with a favorite quotation from the Collect for Independence Day in the Episcopal Book of Common Prayer (page 242).  Regardless of your faith tradition, I hope you’ll join me in giving thanks for the Founders of America, who “lit the torch of freedom for nations then unborn.”  And to my favorite sailor, thank you for your service, son.

Happy 5th of July!