The Curse of the New

 

Is our need for new and different a major contributing factor to our debt hole? Or put differently, how do we wean ourselves off such easy money that we’re almost all guilty of enjoying?  I’m not talking about the big debt that threatens to rip apart at the seams like Dockers on a fat kid. I’m talking about smaller debts like student loans and municipal debts.

People will pay for new stuff. A customer told me this a few years ago. He was a builder and as such, familiar with the psychology of newness. He told me that building projects for schools always got the funding. He meant the money was approved through referendums. The school down the road had just added a new addition to their already impressive football stadium.  

I can’t say his theory holds up every time. In my experience tax increases on a ballot are pretty much a 50/50 bet. But I’m sure it’s true that new buildings projects are more popular than old building restorations. Anyone who’s watched a college football game on TV has seen 100,000 seat stadiums with 100 foot TV screens and 5 star chef level concessions. People want new and better. There is something in our brain that craves novelty and it shows up in our spending habits.

New buildings get approval while repairs to existing ones have to wait. That’s the theory at least. Infrastructure is boring. Boilers are expensive and out of sight. Same for new electric wiring and plumbing, roofs and siding. When shown a blueprint for a new heat and air system we sound like Shania Twain “that don’t impress me much”.

 I don’t mean to say these upgrades don’t happen, but it’s easier to sell a new vision than a retrofit. We seek out the new (novel) because it feels like progress.

Why is new more exciting than upgrade? It’s probably tied to a culture that rewards growing, doing and moving forward. New projects feel more like progress than does replacing old parts. When someone gets a new job we say “Congratulations!” New jobs are thought to be an improvement. We assume their move is upward, even if it’s not. How many people are frustrated in every position and career they enter? Quite a few go job to job like they’re shopping for groceries.

But a lot of this debate comes down to your opinion of money too. Conservatives on one side believe in saving while liberals want to spend. I’m describing accounting principles and not political motivations here. Varieties from both camps are found in government.

There used to be such a thing as a fiscal conservative but no one can claim that anymore with a straight face.

Whatever culture has to say about it, the debt is overwhelming and I think we are going to regret all the profligate spending. Not just at the national level either. It’s probably a combination of Fed policy and our insatiable need for new stuff. If politics is downstream from culture, which I think it is, than it’s our ‘wants’ driving the bus. We elect them after all. Irresponsible behavior and poor governance lie at the feet of those making the decisions. But voters get some blame too.

Reckless financial decisions don’t ensure a loss at the ballot box. If they did than Chicago wouldn’t keep electing Democrats, but they can’t help it. Corruption and indifference blow through the city like the wind across Lake Michigan. Insolvency towers over future spending decisions like a skyscraper ruining the view.

But is Chicago really an outlier? They sit on the one end of the spectrum for overspending while cities like Stockton and Boise fill out the opposite end. It’s not a perfect comparison I understand, but most of the overspending in the big cities is for payoffs. It’s not really overspending but overpromising. Union retirement packages for city employees take the largest chunk of liabilities.

Our addiction to debt isn’t new, but our ease with borrowing at every level makes me nervous about the future. How many empty stores, houses and commercial buildings will sit vacant when the bottom falls out?  The very same new buildings we voted to fund will be a millstone around our necks. There is too much worthless cash in the economy that needs to be sucked out. It’s artificial and it’s propping up our way of life.

And yes, I understand new building projects often pay for themselves through the revenue they bring. But we are in an excessive debt cycle. The last time that happened was in the early 2000s. Lenders starting packaging all the excess debt (mortgages) into financial instruments and selling them off. Then it all fell apart.

If we don’t make serious changes we’ll see another Great Depression.  

This has to begin on a personal level. Pay off debts and reject that urge to buy new when possible. If you really want it, find a way to fund it that doesn’t tie you up for years. We’ve all been too careless in this regard. The only way to come back is through personal responsibility. It’s possible to do this and still enjoy life. We need to get over our lust for the new.

If we aren’t careful the problem won’t be no new buildings for schools but no lenders to offer the loans. This debt hole affects us all.