Published On: Tue, Jul 26th, 2011

Family Feuds

by Russell Halley

You’ve got Credit. A Visa, a MasterCard, that Home Equity Line of Credit you’ve had for years.

Obama has credit too.  His is called the debt ceiling.

You’ve got a perfect credit score of 800, although you know it doesn’t deserve to be that high

The USA has a triple A Bond rating, deserved or not.

A few things have come up. You need a new roof, your wife’s car is three years old and she wants a new one, the kids never stop asking for more and you realize you’ll be little tight when it comes to renting that beach house on Martha’s Vineyard this year.

But you’re not really worried. Although times have been tough, you’re still making money, if not as much as you had been.  It’s just that your expenses go up every month.

So you call friendly John the banker to ask him to raise your HELOC credit limit. Since Reagan took office in 1981, he’s raised your limit a total of 40 times, and why wouldn’t he?  Sure, the last few times you’ve called him he’s been a little concerned and mumbled something about your debt to asset ratio, but you’re not worried: you’ve got that golden credit score.

You know what he’s going to ask for and so you put the package of financial information together that he’ll need and send it off.  Should be routine. It’s really just a formality, but you’ll’ be looking for enough money to get you through January 2013, so you try to make sure everything is there.

A few days later you get a call.  It’s John.  He’s as friendly as ever, but the news is not what you’d expected.  No, no, no – the bank will give you the money, it’s not that. John just wants to point out that over the forty years that he’s approved these requests, your total debt has gotten larger and larger. In fact, back in 1980 your debt was only about a third of your income, but it’s now over 80% and the bank projects that it will soon climb above 100%.  His board of directors took a vote:  they’ll give you the money, but there are conditions.  They want you to start cutting your expenses and they only want to give you enough to get through the end of the year, and then they’ll review things again. He emails you a chart to explain what he’s talking about.

Your wife had been listening while you were on the phone, and seems unhappy.  She wants to know what’s going on.  You explain. She doesn’t take it well.

“Are you telling me that I can’t take the girls on the spring trip to Europe next year?  Why, that’s just unfair.  And what about the renovations you promised for the kitchen?  Why is he being so mean spirited? Call him again.  Surely he’ll compromise”

You decide to call Barry, the new, progressive accountant that you hired back in 2008.  He’s a smooth talker and gave you a warm, tingly feeling down your leg when you hired him, but in the back of your mind you’d wondered about his qualifications, but got caught up in the moments and  dismissed all that. After all, you had high hopes, and it was clearly time for a change.

Barry’s not in.  “Out on the links again” his office tells you.  You start running the numbers yourself, to project your cash flow over the next 18 months

You don’t like what you see. If you’re got the math right, soon you won’t have enough cash to make all your payments.  If you miss one, that perfect credit score will slip and your interest rates will go up, making it even more difficult to make the payments.  Maybe John is right.  No matter how many times you go over the numbers it just doesn’t seem to work unless you cut spending

The phone rings.  It’s your youngest daughter.

“Daddy, I’ve made a decision.  I want the SLK.  A red one”.

It will be her 16th birthday next week, and you’d promised her a car.  Lately, you’d been dropping hints about the Ford Focus, which seems kind of cute and goes out the door for around  $20k.  The SLK runs about $60 grand at the low end.

“Honey, you know, we’re trying to cut back, and I’m not sure that right now is the best time for us to…”

The phone drops.  You can hear her loud footsteps stomping around in the background, doors slamming, glass breaking, outbursts of sobbing, pitiful whimpering. This may be tougher than you’d thought.

Your wife interrupts your thoughts.

“We have to rent the house on the Vineyard, or else Bobby will lose his job!”

Clearly, she sees this as a tragedy.  You’re not so sure.  There is no job.  The “job” is an unpaid internship that has something to do with windmills and green energy.  But there is no energy, and you’re not even sure there are windmills, but you’re committed to make a handsome five figure donation to the foundation that runs the project.  It’s important that you do this soon so Bobby can go on the big summer trip the interns have scheduled to the Villa Padierna on the Spanish Mediterranean, which sounds vaguely familiar. Your suggestion about a weekend on the Florida Gulf Coast had been widely panned.

Your wife picks up the phone and calls John.

“That’s not right.  It’s not fair” you hear her say. “We all want to live within our means, but there are still things we need to pay for, and a six month extension doesn’t solve the problem.  I won’t sign it”

Really?  Won’t sign it?

You run the numbers again. It’s clear that you don’t get the credit line increase, it could be a meltdown:  some bills won’t get paid, your interest rates will go up, and you’ll fall further behind.  It will take a while, but if you take the deal and start cutting back on spending, before long everything will start to come back into focus.

You’re wife hangs up.

“We’re left with a stalemate” she says, and walks out.

John calls.

“The bank will not accept an increase in the debt limit without significant spending cuts and reforms”, he says. “The sad truth is that your wife wants a blank check. That is just not going to happen.  The solution to this crisis is not complicated: if you’re spending more money than you’re taking in, you need to spend less of it.”

You pour yourself a drink and think it over. You know how it’s going to end up.  It won’t be pretty, but because John is holding the cards, one way or the other you know your wife will eventually surrender and agree to the bank’s terms. The credit line will increase, spending will go down, and as a family you’ll begin the hard but necessary work of dealing with the tough challenges.

You go online and start looking for cars, wondering what a used Ford Focus would sell for.

One wonders when Obama will tell his family when they finally take the deal. You know it won’t be pretty.

About the Author

- Russell Halley is a lifelong political voyeur. Halley started writing for weekly newspapers in the early 70's, and advanced to a successful career as a freelancer, having been published in several national magazines. Eventually, however, the call of commerce lured him away and he switched to circulation, working with many of the largest publishers around the world to increase readership. As an avocation, Russell has always followed and participated in the minutia of the political world, and migrated from a severe left wing point of view to conservatism. He was flattered when the San Jose Mercury News once described his style as “Republican Punk”, and prides himself on a certain expertise in this arena, with a perspective that he hopes sheds light on the issues of the day. Read more of Halley's clips here.