The Financial Seminary
"Fear Not" This Election and Economy; A Modern Parable
By Gary Moore
for Christianity Today
"The election campaign encourages America to feel worse about itself than it needs to....America of all countries still has plenty of grounds to hope for a better future, despite its underperforming politics, and no matter who triumphs in November."
“"The greatest threat to America right now is that people are becoming and have become disheartened...Only love makes great political movements. Movements based on resentments, anger and public rage always fade, they rise and fall, they never stay. If you came to play, get serious.”
To mimic a biblical parable, America's political stalemate is like unto this: An affluent couple approaches their pastor for marriage counseling. Like most feuding couples, they cite money as a major source of stress. Both are particularly worried that the mortgage on their home has grown to seven hundred thousand dollars during their decades of marriage.
Everything they read and hear says a mortgage of that size is a huge threat to their future. He feels it is preventing them from investing in his business. Ironically, that worry keeps him awake at night so he doesn't always feel like going to work. Nor does he invest the large amount of cash the company has in creative activities. She feels his worries are preventing them from investing in their kids' educations, as well as their retirement. So despite living in her dream home, she feels anxious rather than grateful. She feels even more conflicted as her pastor has said Jesus taught to have faith rather than anxiety over the economic future.
Yet when it comes to practical financial matters, the pastor is typical. During college, he had as much interest in financial matters as finance students had in theology. Despite money being a favorite topic of Moses, Jesus, Calvin and Wesley, the pastor’s seminary provided virtually no training in helping people with their finances. In fact, seminary left him even more conflicted over money as it had briefly mentioned the love of money as the root of all evil without telling him money would play a crucial role in his ministry. He feels the pain of the mortgage debt as the pastor’s accumulated educational debt and modest income is burdensome. He also dreaded begging each year just to get his salary paid. He tried to ignore that nagging reality that he was telling people to give to God but much was coming to him. So all he can offer about finances is the assurance that things will work out if the couple only has enough faith.
Unfortunately, the couple keeps coming back, forever fighting over the mortgage. The pastor finally realizes the mortgage is a spiritual issue and the affluent couple is seeking the God of truth as well as the God of faith. He also read recently that surveys say economic worry, regardless of actual circumstances, may be the largest deterrent to charitable giving. So out of concern for the couple's spiritual well-being and marriage, the increasing concentration of wealth in America, as well as his pragmatic concern for his own family's income, he finally asks a respected old mortgage banker in their church to join him in their counseling sessions. The banker is quite honored but surprised to use his God-given talents this way.
As in most churches, laity in his church are usually just asked to give money or give temple talks about giving money. He occasionally wonders about that self-centered financial witness of the church but says nothing. He's read Basilica, the story of medieval popes building St. Peter's in Rome. So the banker understands it's usually taken a financial crisis for church leaders to imitate Jesus by asking the laity to do more ministry than simply give money. Several popes generally made a mess of things until they let Michelangelo, who seemed as anti-clerical as Luther, take charge. Of course, the popes particularly detested Luther for his biblical theology of money expressed in his Ninety Five Theses. They preferred the pragmatism of indulgences that financed St. Peters.
Most experienced financial types understand how insecurities and egos distort the way spiritual beings see things. So the old banker begins by asking the couple what they see when he holds up a blank sheet of paper. They both reply, "a piece of paper." He then puts a dot in the middle of the paper and asks what they see. They reply, "a dot." He responds, "No, what you really see is a large piece of paper with a small dot. It's just human nature to fearfully focus on small negatives rather than much larger positives. That's why the media only tell us about plane crashes. So in a society saturated by negatives, the key is to keep them in context. Then you can see flying is the safest way to travel. It's the same with money issues."
To demonstrate, he asks the couple: "What is the value of your home?" Neither the husband, wife or pastor had thought about that. But the banker had done some on-line research. It estimated the couple's home has soared in value the past few decades until it is worth five million dollars. That means the dispiriting mortgage is only fourteen percent of the home's value. The banker then asks if they own any other assets. The husband replies his company is sitting on the most cash it's ever had, though he's been too worried about the mortgage to employ it in job and wealth-creating endeavors. The wife then remembers they own a vacation home abroad that has been paid for. It is worth half as much as the mortgage.
The banker then asks to whom they owe their mortgage. He learns that half the mortgage has been borrowed from a bank and half from his wife's trust fund. Her trust receives half their interest and principal payments each month, so much of that is accumulating for the couple's future. The banker then asks what interest rate they are paying. He learns that while the couple's mortgage has indeed soared during recent decades along with the value of the home, the rate they pay has fallen so sharply their mortgage payments have actually fallen as a percentage of their incomes. The banker then asks if they've included any value for the church they are sitting in, the roads that brought them to church, or the value of their Social Security accounts. They reply they hadn't thought of those very large investments. The banker explains that it would cost $400,000 just to buy an annuity that would provide future income equal to the typical American's social security.
In essence, the banker helps the couple to finally see the truth that the dispiriting mortgage that threatened the family's marriage and business, as well as the future of their children, was actually a small dot on a very large piece of paper. To put it so pastors can understand it, the layman helped the couple check their fearful emotions by rationally creating their own "book of numbers," just as God had the despairing Moses number the Hebrews' assets in the desert.
Few financial writers like myself could even imagine a scenario so absurd. But truth is often stranger than fiction. That's particularly true in politics where there has long been the principle of "the big lie." It says that if a politician is going to tell a lie--and it’s been said that you can always tell when a politician is lying as it's when he or she is moving his or her lips--he or she should tell a really big lie as they're harder for people to question. Then politicians should tell the really big lie so often that people continue to believe it without question. That big lie usually involves really big numbers that are incomprehensible to the average human.
So during twenty-five years of trying to teach true Christian thinking about stewardship, meaning thinking that is based on gratitude for God's manifold blessings, I've always felt like the boy saying "the king has no clothes" when saying America's multi-trillion dollar debt has been quite manageable. I've never found a single Democratic or Republican politician feuding over the debt, much less a voter or pastor, who has ever read or heard the size of America's assets. Those assets are the paper that the dot of the federal debt prevents us from seeing. But those assets have long been estimated, conservatively at that, by the same people who estimate the federal debt.
Yet the debt is updated on a billboard in Times Square each second and can be found all over the media each day. It was even the focus of the book-of-the-year in conservative Christianity in 1992. Its perspective continues to influence the way conservative Christians see the American economy as it predicted imminent earthshaking economic problems due to the federal debt. Written by a typically negative media personality who was a good friend until I tried to help him see things in perspective, the book never put the debt into the context of our assets.
The Gingrich revolution of the "angry white man" was short-lived. My friend despondently wrote in his newsletter that had every spending cut sought by the revolutionaries been enacted, by 2012 Americans would be paying 80% of their incomes in taxes. The typical American now pay 8% to Washington. So he only saw the dot more than ten times too large. That's fairly typical of celebrities who write more economic books than they read. Even Robert Schuller, a proponent of positive thinking on whose board I once served in better times, once co-authored a book about the negatives of the federal debt. Those have been debated since America's capitol moved from New York to Washington to keep Jefferson and Hamilton from further feuding over the matter.
We all should have read Seven Fat Years by Robert Bartley, the very politically conservative editor of The Wall Street Journal. Also published in 1992, that true economics book called the federal debt a "great national myth conjured by politicians" in order to frighten themselves and voters. At the very least, Christian leaders writing about the debt might have first read Safe and Sound by Professor Bruce Howard, then the chair of the economics department at Wheaton College. This book professed much the same as Bartley's book. But Bruce added the subject of debt might be the most confusing of all issues to Christians who listen to debt counseling ministries that demonize debt. Bruce wrote "debt is entirely compatible with traditional Christianity." He knows why Jesus used valuable time on the Mount to tell us to lend to anyone in need, albeit without expectation of return. Lending can meet as many temporary needs as charity does permanent needs. That's why Jesus borrowed a donkey, upper room and tomb during Holy Week alone.
Conservative Christians don't always see that reality. Most simply read what the conservative Christian media suggests they read and it rarely suggests they read anything of a differing perspective. Progressives have their own media that encourage the same myopic perspectives. Hence America's increasing polarity...and number of independents despairing of political stalemate. So as they've never heard anything different about the federal debt, I still have conservative clients bunkered down in treasury securities. The irony is that fears of the second coming of the Great Depression cause them to avoid financing true wealth and job creation. They are also unwittingly financing the federal debt they so fear and detest as treasury bills are simple evidence of lending to Washington to finance its deficit.
By the year 2000 however, the stock market had soared as Washington was running budget surpluses. The Economist was predicting the federal debt would be nearly paid off by 2012. Sadly, tax cuts during a time of two wars turned that hope into false prophecy. Still, the 2009 budget prepared by the Office of Management and Budget (OMB) in President "W's" White House was the last to make an estimate of America's assets. It said our total assets were $125.5 trillion. The OMB subtracted the $7.2 trillion more that we owe foreigners than they owe us and said America's net wealth, after all debts were paid to those outside our family, was $118.3 trillion. The OMB concluded: "The size of the net foreign debt is relatively small compared with the total stock of U.S. assets." An accompanying chart, which I include in my new book, showed that at 7%, the net debt as a percentage of our assets, was actually lower than when President Kennedy took office in 1960. How skeptical of counting our blessings we are, and reluctant our leaders can be to admit they may have been wrong, was demonstrated when I explained those assets when I appeared on Dr. Schuller's Hour of Power. My explanation was edited out. Yet they left in the part where I called the tithe the best investment anyone can make.
Of course, political cynics will dismiss any good economic news from Washington. But they might note that Donald Trump is quite conservative politically. He very recently made an estimate of America's estimates for a Discovery Channel special. He said they are actually worth $280 trillion, or one million dollars per American. Being The Donald, he claimed no one had ever estimated those assets before. We might overlook his ego as the Bible cautions "as a man thinketh so is he." It could be that The Donald is financially rich as he looks at the dot in context of the paper while the rest of us focus on the dot. I happen to believe that's a major reason "the 1%," which is skeptical of politicians and pundits, has grown so rich while the net worth of the middle class has fallen sharply. As any investment advisor knows, once created, money is never lost. It simply changes pockets.
That doesn't always work for America's middle class and needy but it does often work for America's affluent. For example, remember when the Japanese were the fear of the day as they were going to buy America? They grossly overpaid for Rockefeller Plaza, the Pebble Beach golf course and other assets. The Chinese may be doing the same by buying our government bonds. Our bonds are as expensive as they've been in history. And note the trillion dollars worth owned by China are actually less than 1% of America's assets. Meanwhile, like the couple's home abroad, American pension and mutual funds own as many foreign stocks and properties as all foreigners own of our government bonds. Professor Jeremy Siegel of Wharton has calculated that: "Every dollar of US international indebtedness is matched by a dollar of assets abroad." Read that sentence again.
Of course, the banker would also ask about the couple's annual income. It would be about one million dollars, meaning the mortgage is around 70% of annual income while most bankers will lend 200% or more. Similarly, the more sophisticated put the dot of the federal debt into the paper of our assets, or compare the debt to America's GDP. That context also dispels the political fear that America is "the next Greece." The most recent World Factbook from the CIA says Greece's debt-to-GDP ratio is 165.5% while America's is 69.4%. That is why foreign money has flooded to America as a "safe haven" while we worry. America’s ratio was actually over 120% and Great Britain’s was 240% at the end of World War Two. Both nations survived. America even thrived. Even Japan's public debt is over 210% of GDP today.
Contrary to the fears of the husband, or conservative political leaders, it was actually business debt, not the mortgage of our federal debt, that pushed America into the Great Recession in 2008. The debt incurred by America's financial institutions peaked at 120% of GDP before the banking panic leading up to the recession. Yet very few conservative leaders seemed concerned that the debt on a single American industry was considerably greater than the mortgage Washington had put on our entire nation. Again, the irony is the federal debt has exploded since 2008 due to bailouts, recapitalization of the banking system and Washington trying to stimulate us out of depression. Such ironies are why the Bible, which is considerably more holistic than partisan politics, tells us to be on guard against all forms of greed.
The Wall Street Journal editorial page tends to be not only conservative but downright libertarian. Yet it confessed on June 6, 2012 that, "Inside of a decade, the country will have a debt-to-GDP ratio well into the 90% to 100% danger zone where economists say the economy begins to slow and risks mount" (emphases mine.) The Economist recently affirmed that when the economists at the IMF considered both our income and assets, they estimated America can handle 73.6% more debt-to-GDP, or ten trillion additional dollars of federal debt. My libertarian friends who have despondently hoarded treasury bills and gold coins the past two decades rather than invest in job and wealth- creating ventures can only wish that they'd have listened to economists. They said all along that we had at least three decades before the economy would even begin to slow due to the debt. Voters who've focused on "the economy stupid" rather than our morals and spirits might wish the same.
It would obviously be better to avoid that additional debt. Like alcohol, debt can be fine in moderation but leave a nasty hangover in excess. So we might make relatively easy adjustments over the next three years to avoid the much feared "taxageddon"of forced budget balancing just after the election. All it would require is modest spending restraints of 3% of GDP, modest tax increases of 3% of GDP, modest deficits of 3% and growth of 3%, the norm since World War II. Of course, our problem is with dogmatic Democrats who spread fear over any cuts to entitlements. But federal spending today is 3% above the norm since WWII. Meanwhile, "recalcitrant Republicans," to use the words of The Economist, have signed Grover Norquist's pledge to never increase taxes.
Mr. Norquist has stated publicly that he wants to shrink government until he can drown it in his bathtub. But federal taxes are only consuming 15% of GDP, the lowest since WWII and among the very lowest of the major nations in the OECD. To make matters even worse, a few libertarian politicians like Ron Paul spread fear of any deficit spending and stimulation by the Federal Reserve. But economists usually consider deficits of up to 3% of GDP to be prudent, and even a short-time stimulant to an economy, just as if you drew down your savings during a time of unemployment or illness. No one wants to do that. But adults differ from children in that they know there are times when one has to do what he or she may not want to do.
True economists know that contrary to the fear and hopelessness spread by politicians and pundits, Washington can indeed spend more than it takes in without our nation doing so. The politically paranoid who can't see the large paper for the small dot simply can't see that. It's like your checking account being overdrawn while the value of your home and IRA have increased even more. You are wealthier but you can't see it as you're focused on the negative. Similarly, America's assets have soared even faster than the federal debt, causing America's per capita wealth to triple since President Reagan took office. Yet that wealth is concentrated among the 10% so the 90% can't see it.
The irony is that the inability of the 90% to see our nation's wealth makes us want to further grow the economic pie by giving more "dough" to the economic bakers, or 10%. That distracts us from assuring everyone has an adequate, if not equal, piece of the pie and that the ingredients are edible, or moral. Legalizing prostitution and dealing black jack may create jobs and add to the GDP but are they true wealth? The true question for our grandchildren may therefore be whether political paranoia over the debt will cause us to waste another decade before the debt begins to become a true economic problem.
Jeremiah showed us by buying a field during challenging times and saying crops will grow here again that prudent economics is often a matter of faith. In more religious times, FDR encouraged more religious voters that: "The only thing we have to fear is fear itself." The voters of FDR's America better understood "seek first," or that economies are built on spiritual foundations. They remembered the early Bible says the Hebrews were afraid to enter the land promised by God for centuries. Even their religious leaders who spied out the future thought our omniscient God surely must not have been aware of the giants. It took a shepherd boy to slay the fearsome giant of their day with simple stones provided by God.
Each time the Divine approaches humanity thereafter, the encounter begins with the words "fear not." The Christian scriptures therefore conclude: "There is no fear in love." In short, our faith has since tried to remind the world, usually most unsuccessfully, that fear prompts excessive self-protection and that prevents our living the "self-interest rightly understood," that Tocqueville observed in the kinder, gentler America of colonial times. Such love for neighbor as self is the essence of the God of both faith and truth. It may be the latter that we most need today.
During another time of great political and economic uncertainty for our nation, President Lincoln said the people can be trusted as long as they are given the "real facts." Unfortunately, President Nixon, one of the first media candidates, famously said Sunday Schools may not teach it but more people are motivated by fear than love. So President Clinton, who mastered the media as few politicians have, said America's problem was "the economy stupid." Such economic cynicism on the part of both feuding parties will only end with a spiritual reawakening. Our Sunday Schools must again explain why C.S. Lewis said a sick society must focus on politics the way a sick man must focus on his stomach. Lincoln and Lewis might suggest it's time to heal the economic fears of our nation with massive doses of love.
Gary Moore studied political science in Lexington, Kentucky, the home of "the great compromiser" Henry Clay. Gary has a thirty years of Wall Street experience and has founded The Financial Seminary (www.financialseminary.org.) He has just authored his sixth book on morality and political-economy. It is entitled Look Up America! Financial Insights for Tea Partiers Looking Right; Occupiers Looking Left; and All Americans Looking At A Lower Standard of Living for Their Children. (See www.lookupamericabook.com or go to Amazon.com.)