The Myth of the Magic Checkbook

I grew up in a large family that lived off one income, and money was usually tight. There were many months where grocery shopping was put on hold and our big Chevy van's gasoline tank crept towards empty while we waited for the new month, and a new paycheck, to roll around. We never went hungry or anything, but there were times when our school lunches would get especially bland around the 28th of the month.

On one such occasion, when I was about seven years old, I remember asking my mom why we didn't have any more Little Debbie snacks or something similar. She said that there wasn't any more money until Dad's next paycheck came. Unfazed, I remember asking, "Well, why don't you just write a check?"

In my seven-year-old mind, checks were like free money. Sometimes my mom bought things with cash, and sometimes she bought things with a check. At the time I didn't understand why she didn't just use her checkbook all the time. After all, if a store accepted a check instead of actual money, then you could use your money for something else, right?

Although my understanding of economics as a child was obviously lacking, apparently I'm not the only one who's bought into the Myth of the Magic Checkbook. Since last year, much of the news has been dominated by talk of bailouts. First there was the bailout for Bear Stearns, an investment bank. Then AIG insurance. Then other banks. Then lots of other banks. Then Fannie Mae and Freddie Mac. Then the auto industry. Now individual states, including the economic and cultural cesspool that is California, are requesting bailouts. And perhaps most alarmingly, even the adult entertainment industry has now asked for government help (as if politicians like former NY governor Eliot Spitzer weren't already doing enough to keep that industry afloat).

So if the federal government is bailing out all of these banks and industries, where does that money actually come from? Let's go through this carefully. (As Michael Scott from The Office puts it, "Explain it to me like I'm five.") We Americans pay taxes to the government. The government is supposed to use that money to provide essential services that we can't provide ourselves, such as national defense and highways and food inspections and the like. But now the government wants to "bail out" failing companies and industries. Unfortunately, they don't have that kind of cash on hand. Instead, they're using a "magic checkbook" like the one I thought my mom had.

There's only one problem with this logic: there is no such thing as a magic checkbook. There is no free money. Money that our country borrows now will have to be repaid later. And this is the part that really ticks me off. Obama's generation may not have to pay those bills. Indeed, he has already said that we should expect "trillion dollar deficits" for years to come. By borrowing huge amounts of money, Obama and his friends in Congress can continue to fund pet projects, expand social services, and give bailouts to failing industries--all of which keep people voting for them--while ignoring the fact that now, more than ever before, we don't have the national income to pay for it. And he can keep putting the tab on the national debt, postponing the "day of reckoning" until he and his friends are out of office.

But that tab will come due. And my generation is going to be hit the hardest trying to pay for it, since the people who got us into this mess (namely, those of my parents' generation) will be retiring by the time the bills come due. In short, Obama and his friends are borrowing against my future earnings to essentially buy votes to keep themselves in office. And it is grossly unfair.

After all, people my age are already inheriting quite a mess. We're entering the workforce at a time when the U.S. is on the economic decline, the domestic industrial base has withered away or gone overseas, and illegal immigration is swamping states like California with people who demand expensive social services like schools, hospitals, and police protection although they contribute precious little to the state's coffers through taxable income. In addition, the government is likely to raise my social security taxes dramatically for most of my working life in order to pay for the retirements of the very people who got us into this mess. And we are already paying hundreds of billions of dollars a year to finance the existing national debt--money that could otherwise fix our highways, modernize our military, or go back into our wallets to stimulate the economy. Adding a few trillion dollars to that load is only going to increase my tax burden at a time when we can ill-afford it. And we can't count on another dot-com boom or real estate bubble to gloss over our economic troubles this time.

So to Obama I say, "Get your thieving hands off my money!" And to everyone else who's 40 or over and wants to use a Magic Checkbook to expand government handouts now and have me pay for it later, I say, "You got us into this mess--pay for it yourself!" Almost 250 years ago, taxation without representation was the reason that a bunch of American colonists decided to rid themselves of their oppressors at the point of the sword. If the baby boomer generation continues to blow my money without my consent, I'm about ready to do a little "house cleaning" of my own.