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Credit Card Debt Helps Define Political Issue

September 1, 2009

As the nation struggles to pare down its personal credit card debt, individual families are learning a lesson that may have huge political consequences in 2010 and beyond.

History tells us that voters pay attention to simple campaign messages and President Barrack Obama and congressional Democrats are providing the GOP with plenty of potential themes for the next election.

In 1980, voters took to heart a simple summary question asked by then-Republican Presidential candidate Ronald Reagan in the only televised debate between him and President Jimmy Carter, held just one week before the November election.

In his closing argument candidate Reagan asked voters if they thought they were better off then after four years with President Carter. If they were, Reagan reasoned, they should vote for the President - but if they were not - they should look for a change and cast their vote for Reagan.

Voters overwhelmingly decided that they were not better off and elected Reagan President.

In the 1992 presidential election, the campaign of Arkansas Governor Bill Clinton made famous a simple campaign mantra: "It’s the economy, stupid."

The Clinton campaign repeated this theme over and over, stating the economy was in such dire straits under the stewardship of President George H.W. Bush that only under new leadership (aka Bill Clinton) could the country get back on a firm economic footing. Voters agreed and sent President Bush packing after just one term.

In both campaigns the public embraced a simple proposition and were able to decide for themselves if they were better or worse off (as in the case of Reagan-Carter) or if the economy was underperforming (as in the case of Bush-Clinton).

These are examples of what the political roadmap may look like in 2010 and beyond - with the ultimate Republican goal being to add a third name to the modern day list of one-term Presidents: President Obama.

Politicians have been talking about deficit spending for years - but voters historically paid little attention. The fact is they couldn’t personally relate to it. Things have changed now and voters do have a clear understanding of deficit spending - and it’s based on their own experience.

The Congressional Budget Office now says the federal deficit (the difference between government receipts and spending) will rise to $9 trillion in 10 years which would make the national debt (the amount the government owes to its creditors) 68% of the total U.S. economy. That means 68 cents of every dollar will be used to pay the interest on the national debt.

This hits home. As the government piled on massive debt over the past 10 years through uncontrolled spending - so did the average American household in the form of outstanding credit card balances.

In the simplest of political terms - the American people have been living as the government has - spending more than it is taking in. The public has been cutting its debt - but voters see the President continuing the spending spree and it has taken a toll on his job approval ratings.

The average credit card debt is $10,000 per family - which creates about $160 per month in interest charges alone - money that must be paid first before any other amount is attributed toward paying down the principal on the card.

This is exactly what the federal government must do - spend hundreds of billions of taxpayer dollars on the interest of the debt - before one dollar can be spent on actual government programs. Without a slowing down of spending there’s no way for the government to catch up (although politicians like to say they’ll do it through growth).

Voters know how insurmountable it is to pay off credit card debt while continuing to spend freely and understand it is no different for the federal government.

Don’t be surprised if the Republicans dust off an old Democratic message with an up-to-date lyric: "It’s the deficit, stupid."