Is America Broke?

We all know what it means to go broke.  I have been there a couple of times, and I imagine most of you have.  It means you do not have enough money to pay what you owe and have no prospects of getting enough.  When it gets beyond a certain point, one may have to declare bankruptcy, a legal tool to hold off creditors until suitable arrangements can be made.

Being broke is not always an indication of stupidity, laziness, or irresponsibility.  Life happens.  Sometimes investments go bad, medical emergencies arise, or our jobs fade away.  When things like that happen, responsible people do their best to honor their obligations and get back on track.  I know of a case where someone’s business failed and investors were able to get only 40% of their money returned.  Most of us would not judge such a person too harshly, and indeed the investors did not, offering to fund this person’s next business.  They knew he was honest because he could have just walked away.

What about the profligate?  A fellow I once knew went out and bought a Cadillac one afternoon.  The next day, he declared bankruptcy.  Doesn’t sound like a responsible guy to me.  How about you?  Or the roommate I had who took my part of the rent money and pocketed it while telling me he had paid the landlord.  Imagine my surprise when we were thrown out one afternoon.

It’s all a matter of character.  Being a good person does not mean everything always works out.  It means that you are dedicated to doing your best to make things right, even when it is painful or inconvenient.  It also means not getting so hung up on your past failures that you quit taking chances.  It means letting go of the shame and accepting the fact that doing a lot of good usually comes with enduring a lot of bad, sometimes to the detriment of others.

In a society based on the free market, reputation soon corrects those individuals who are in the latter category.  While creditors may forgive someone who fails honestly, they rarely do business a second time with a habitual cheat.  Cheaters have to shape up or ship out.  What about governments?  What mechanism keeps them honest?

If you answered taxpayers, you are only partially right.  Much as we’d like to think that we can hold them accountable, we can’t seem to get it done when it comes to money.  Take a quick look at the following video (it is only a minute or so long).  The United States is broke.  Tomorrow we will look at why.

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About Terry Noel

I am an Associate Professor of Management and Quantitative Methods at Illinois State University. My specialty is entrepreneurship.
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