Don't Ignore Economic
by Larry Burkett
I just finished reading an article about how well the economy is doing.
"The best in decades, it said. "Nothing wrong." "A state
of perfect economic bliss."
This sort of thing amazes me, but I guess economists are like quarterbacks
and weather forecasters: they get paid for being right about 30 percent
of the time. The fact is, several storm clouds are on the economic horizon.
Cloud one: Consumer debt. The average consumer owes about 17 percent
of disposable (i.e. after-tax) income to creditors. Typically, housing,
food, transportation, and insurance claim about 80 per cent.
Understand what this means: the average consumer is spending 97 percent
of his or her disposable income before taking into account such items as
out-of-pocket health costs, clothing expenses, gifts, dental care, and
As for savings, well, this is why many families have no savings. What
they should be saving and investing is going to pay creditors. A recent
report estimated that, as of January 1997, as many as 25 percent of credit
card holders were still paying off credit card charges from Christmas 1995!
Another report?this one from a congressional committee estimated
that Americans, on average, are spending $1.10 for every $1.00 they earn
in wages. In other words, many of us are living beyond our means.
Sooner or later that overspending will have to stop, as it always does.
When that happens, and it could happen soon, the probability of recession
is high since consumer spending drives so much of our economy.
Cloud two: Bankruptcies. According to preliminary numbers, about 1.1
million personal bankruptcies were filed in 1996, a new record. That works
out to roughly one bankruptcy for every 100 house holds in America. (In
some states, there was one bankruptcy for every 45 to 55 households.)
These numbers suggest that, for people in financial trouble, bankruptcy
has become the first option rather than a last resort. This change in mindset
and practice is causing banks to tighten lending standards, which will
have ripple effects through the economy.
The result could be a "credit crunch" that stalls economic expansion
and leads to layoffs. A recent survey showed that up to 40 percent of respondents
said they were unprepared to cope financially if thrown out of work. Some
didn't have enough re serves to handle missing a single paycheck.
Cloud three: Government "entitlement" programs. The rate of spending
growth for Medicare, Social Security, and other entitlement programs is
unsustainable. Already, Medicare spending out paces revenue. Within 15
years, the same will be true for Social Security. Based on current projections,
over the next several decades these programs will be underfunded by tens
of trillions of dollars. The impact on our economy will be severe if government
tries to deal with these problems by squeezing more tax revenue out of
individuals and business.
Cloud four: An oppressive tax and regulatory system. Trying to have
a prosperous economy under the current system of federal taxes and regulations
is like trying to row a boat against a 15-mile an-hour head wind. You can
make progress, but it's slow going. Indeed, taxes and regulations are the
main reasons why the economy is stuck in such a slow-grow mode (2.3 percent
growth for '96; an estimated 2.2 percent for '97).
Here's the good news: if you apply yourself to following God's
will for your finances, a storm in our economy need not be a cause for
fear. Instead, if you commit your way to Him, you will find He will "supply
all your needs according to His riches in glory in Christ Jesus" (Philippians