Monday, July 16, 2012

Ignoring Reality

I recently bought a new phone and re-upped my contract with AT&T for 2 more years, and I have to say, I'm completely disheartened by the American consumer. I would have no problem buying a phone at full price in exchange for a lower monthly service bill. But none of the major carriers have a reduced fee month-to-month service plan for smartphones.

 Have people become so terrible at saving money that they can't pay an additional 400-450 dollars per phone in exchange for saving money over the long run? Everybody knows that all the carriers charge higher prices for their service plans because they subsidize the upfront cost of the phone purchase. Why there hasn't been greater demand for an unsubsidized phone plan eludes my understanding.

One of my best friends refused to get a credit card for the longest time, because he was afraid that he'd max it out, make the minimum monthly payments, and ultimately pay more money in the long run due to credit card interest payments. Almost a year ago, he finally got a credit card, quickly maxed it out, and is currently making minimum monthly payments. His 0% interest offer expires in a few more months, and I'm not sure if he has a plan to pay off the complete balance before the account starts accruing interest.

I know I keep going on and on about how terrible people are with their money, but how did it come to this? Why are people so terrible with managing their finances? My friend is not a dumb person. On the contrary, he's very intelligent. But when it comes to the issue of money, he just can't seem to control himself. I have to wonder whether our politicians are the exact same.

Every year, Federal spending grows. That's a given. The only question is at what rate does the spending grow. Will it be 3% this year or 5%? We never seem to be able to cut spending. And lately, it seems to be completely impossible to even think about balancing the budget within a reasonable time frame.

Going back to what I said earlier, "the most predictable fiscal crisis in history" is going to eventually happen. Whether we decide to deal with the country's debt burden and spending problem now or later will determine how painful the prescription will be. This year's projected deficit is 1.33 trillion dollars. To put that in perspective, that's larger than what Social Security pays out in a year. It's double what we spend on our military. It's Medicare, Medicaid and unemployment benefits spending combined.

All of those things are sacred cows to some constituency or another. Even moderate cuts are immediately met with anger and panic. At the same time, everybody knows that the Federal government's finances are in deep trouble.

Has the country, as a collective whole, shut their eyes and covered their hands over their ears screaming "lalalalalalala" hoping that the problem eventually goes away? Because it sure seems like it.

I've talked about our country's fiscal problems at considerable length. But I plan on addressing the consequences pretty soon. So stay tuned.

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