On this week’s Meet the Press, the issue of continuing high unemployment arose, and that inevitably led to a broader discussion of the economy and of the possibility of another stimulus package. New York Times columnist David Brooks immediately pooh-poohed the idea, exclaiming, “How are we going to pay for it?” –the battle cry of the economically obtuse. He then expressed the opinion that the recession was caused by overspending, by both government and individuals.

The idea that overspending caused the recession won’t go away, partly because it’s sort of true and partly because it appeals to the Protestant logic of most Americans. We are all profligate spenders in the hands of an angry God. The problem with this logic is that it makes no economic sense. If everyone is spending money, the economy is doing fine. The problem, more accurately, is over-leveraged debt by firms and individuals. Certainly, we should all live within our means, but hardly anyone does and our use of credit can range from prudent to absurd. So we could cluck our tongues at people who borrow more than they can pay back thus make a bollocks of their own finances, or we could look for a systemic problem that is hazardous to all of us.

For the sake of discussion, let’s leave aside bankruptcies caused by healthcare expenses, which can range from 30% to 60% of all bankruptcies, depending on whether you factor in things like overdue medical bills and lost income resulting from illness. Let’s then say that those left over are irresponsible borrowers. If they spend more than they make, where do they get the money? Someone must give it to them. And while the private overspender imperils only his own finances, his lender bears a portion of the responsibility for imperiling his entire firm, which may be very, very large. What’s more, lenders can hike interest rates, shifting more of the burden to actually do pay their bills. And last May, a Senate bill to limit credit card rate hikes to 15% only garnered 33 votes.

The economy is still in trouble and there will be more discussion about it in the coming weeks and months. We should not let morality obscure that discussion. Certainly we should strive for economic reforms that reward hard work and innovation rather than Wall St. coin clipping. We should also do what we can to make sure everyone has a fair chance at economic prosperity. But we shouldn’t let ourselves be led into the trap of believing that prudent spending is a sin or that our economy should go to hell.

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