A Loan Is, Well, Still A Loan

Recently I’ve been struck by how often President Obama talks about loans being a solution to problems.  Small businesses aren’t growing?  The federal government will help them get loans.  People can’t afford college?  The federal government will help them get loans.

If the federal government wants small businesses to hire more people, why not just cut the minimum wage?  And wouldn’t it be better if the federal government cut taxes (or refrained from raising them come January 1, 2011) so that small business owners could use their own money to expand their businesses, or families could use their own incomes to pay for their children’s college?  If people kept more of their own money they wouldn’t need to borrow (or at least not as much), and therefore could avoid adding a liability to their personal balance sheets, avoid having to make interest payments, and avoid having a debt hanging over their heads for years into the future.

What the President doesn’t seem to get is that many people are very leery about taking out loans — indeed, the would-be borrowers appear to be at least as skittish as the would-be lenders.  Many people have friends and acquaintances who have gotten overextended and had the roof fall in when times got tough.  They don’t believe the “credit relief” ads that seem to dominate the airwaves are a realistic solution to crushing debt problems, either.  As a result, they conclude that it would be foolhardy to borrow a lot of money when the economy is in the dumper and no one knows what Congress might do next.

Can anyone really blame them for being conservative about their personal finances in these difficult times, and for not lining up to incur more debt?