In defence of thrift

Can our financial problems really be so bad Jim Flaherty can help? The thought inspires panic.

So do the statistics. Apparently Canadian families took recent hard times as the ideal opportunity to make their own situation dramatically worse in the belief that ... that ... OK, what was the belief? Will someone tell me?

I'll tell you the stats, courtesy of the Vanier Institute on the Family. The average Canadian family's debt rose to $96,100 in 2009, setting a record debt-to-income ratio of 145 per cent. "Faster, Higher, Stronger" is the Olympic motto, not a debt strategy, people. The Institute study sociologized that "some 1.3 million households could have a vulnerable or dangerously high debt service load by 2011."

At the risk of speaking plainly about an important topic, I'd like to quote noted social commentator J.R. "Johnny" Cash: "The county will haul my belongings away, 'cuz I'm busted." Indeed, the Vanier study quoted a recent Canadian Payroll Association study that "59 per cent of Canadian employees report that they would have trouble making ends meet if their pay cheque was delayed by even one week."

I beg to differ. You're having trouble now. Hence the 50 per cent increase in the number of people three months or more behind on their mortgages last year, and 40 percent in those that far behind on their credit cards. And for what?

What is it everyone needs so badly they're putting their future and Canada's in hideous peril? Remember, these are families averaging $66,275 a year and convinced money will buy them happiness if only they can get, or even rent, a bit more.

Our ancestors had candles and homemade clothes and somehow found satisfaction in life. Fifty years ago they had one car running on low-test gas and a black and white TV and when they were bored they read a book. Today we have two incomes, special low-calorie energy drinks and Facebook and Google Buzz and Twitter and MySpace and YouTube and more than 100,000 iPhone apps and we're desperately convinced the next one will transform us into genuinely radiant beings.

A recent MSNBC story asked if we were getting gadget fatigue. I hope so. If the parade of dazzling breakthroughs we've endured in the last 60 years hasn't given us things worth having, it never will. And if not gadget fatigue, how about debt fatigue? Just how atrocious does your balance sheet have to look before you don't need energy drinks because you're completely jittery from swallowing all that red ink?

Heck, you're making me jittery because I just know what's going to happen here. People will ruin their own finances, then insist on a public bailout. And they'll get it, too, even though so many people are going to be so broke that plundering the rest of us won't yield enough booty. We really seem to trust politicians' prudence more than our own. We're that doomed.

People are now cheering because Finance Minister Jim Flaherty slapped tighter controls on mortgages to save us from our own recklessness. So who's going to save us from his? He's running a $55.9 billion deficit on projected revenue of $216.6 billion. Forget a 145 per cent debt-to-income ratio. The feds are already at 236 per cent and his idea of prudence is to pump it up by 25 percentage points a year. And he says you're too stupid to go into the bank by yourself.

Of course he claims his mortgage crackdown "will not affect the ability of a Canadian family to buy a house. It will affect those who are speculating." But he knows his real problem is that someone deliberately lowered the cost of borrowing to stimulate the economy by getting people to buy things they can't afford, including houses. Who was it again? Oh yeah, his government. Dang.

In a blog post the Citizen's Leonard Stern cited the libertarian argument that people's stupid borrowing is their own fault and admitted "Flaherty is trying to legislate virtue," but said "The transaction between a borrower and a lender ceases to be a purely private one when public money is needed to bail out the lender when the borrower walks away." It's not "needed," it's just inevitable, as politicians troll for votes by socializing risk: You get the nice house and taxpayers get the bill if you can't pay.

As usual, politicians created the crisis. But the bigger problem is cultural and we have to fix it by being less greedy. You may not want to imitate my great grandfather's drawer of "bits of string too short to be saved." But they were all paid for. And my father was a tenured university professor whose office desk, to the end of his days, was a door sitting on two filing cabinets. Also fully paid for.

What are you buying on the installment plan? Misery, ruin and bankruptcy all round, with a side of pandering political pontification.

[First published in the Ottawa Citizen]

ColumnsJohn Robson