Michelle Singletary Says We Need a Get Away from Excessive Borrowing

Washington Post commentator Michelle Singletary was on Meet the Press just before the New Year. Here are some of her comments:

I love that [Jeff Immelt] said "reset," because--I am actually glad that we had this recession because we were on a path that we couldn't get off, and we did need that reset. We need, we needed people to step back and stop taking on so much debt and really go back to the basics. The basics are the basics because they always work no matter what the economy is. Live below your means, don't take on so much debt and save.

This is the first time I recall hearing on Meet the Press the idea that the solution to our crisis caused by excessive debt is not more debt. We need to hear more of this.

Trying to get back to the world of maximum consumption balanced on a wire is the wrong policy. Our goal should be that by the next time our economy cycles into recession, it has little impact on people's ability to get basic needs. The goal should not be to smooth out the economic cycle completely.

We are at a critical time. The US government has a one-time offer to borrow money at very low rates. If we don’t spend the money on things that increase structural GDP (not just things that make the recession end sooner), we will have a hard time funding the government when rates rise. For this “stimulus” to work, the borrowed money needs to be invested in things that literally change the world. The government doesn’t have a great record of excellent long-term investments, so this is a huge challenge. We should exercise moderation in any stimulus package. Otherwise if rates rise, we could see a much larger portion of our tax dollars going to service debt.