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Key To Prosperous Economic Future Is Financial Literacy

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By Lowell L. Kalapa
(Released on 12/21/08)

Although there is much to be glum about in this economic downturn, we should also look upon this set back as a golden opportunity to renew the values that our parents, or perhaps grandparents, learned the hard way as Depression-era victims.

We have become a society of instant gratification. If we want something, we have to have it now. Forget about those wistful faces reflected in a store window wishing for a new toy or perhaps a little puppy, knowing his or her parents cannot afford to purchase it. Now it is merely a matter of laying that credit card on the store counter regardless of whether you have the money or not. What started out as a convenience has become a “normal” way to secure the gratification that we, as humans, constantly seem to seek.

Until this latest economic crisis, consumers seemed to be happy to have the ability to acquire whatever they desired with no thought that eventually they will really have to pay cold hard cash for these items when their credit card bill arrives. As a result, despite warnings from financial advisors, many consumers ran up credit card debt well beyond what they could pay off in a reasonable amount of time. With interest accruing on balances, consumers carrying those balances saw their credit card bills mushroom, making it even more challenging to rid themselves of this debt.

While all this consumerism may have driven economic growth in recent years, it also comes with a very heavy price with which we are now confronted. Because credit is no longer easily available as a result of consumers not being able to pay for the goods and services they “bought” with their credit cards, the businesses that made or delivered those goods and services, as well as financial institutions, are squeezed for available capital which is at the root of the current economic problem.

Why is this a golden opportunity? This crisis is underscoring the value of good money management, techniques and skills. Hopefully, it will remind this generation of consumers of the value of saving and earning what they want. It will force many consumers to weigh their needs and set priorities for their wants versus their needs. Having the means to put food on the table will be measured against getting that new iPod or video game.

To a large degree, this is what needs to happen in government. As the president-elect pointed out after his election, “government cannot be all things to all people.” While on one hand constituents make numerous demands on government be it federal, state or county – as taxpayers they are not willing to foot the bill for all of those services. Of course, they don’t mind having those services as long as some else pays for them.

In these austere times as tax revenues decline, elected officials will have to make some hard decisions. They can either raise taxes – not the best thing to do in a struggling economy – or they can prioritize the spending of what limited tax dollars there are.

Will elected officials refrain from funding some fancy new program to the detriment of core services like education, welfare, and health which are vital to the community at large? At the county level, will elected officials insure that police and fire protection are fully funded to insure the safety of our communities? Will they place health and sanitation concerns as a high priority before more politically popular programs like recreation activities or perhaps parades or movies on the beach?

While the federal government can spend endless sums of money because they can just print more leaving the debt to future generations, thankfully, the state and local governments in Hawaii have constitutional limits on how much debt can be issued. Thus, state and local governments can use this tool to help stimulate the economy with capital improvements. But it is the operating programs that must be prioritized as they are paid with cash that is either raised by taxes or by the fees government charges. In other words, the lesson here for both consumers and elected officials is that we must live within our means or ability to meet the essential needs of our families or in the case of government our communities.

As consumers, we must decide between what we want and what we truly need to survive. For elected officials, they must decide between what constituents demand and what is truly needed to maintain our health and safety as a community.

Lowell L. Kalapa is the president of the Tax Foundation of Hawaii. Mr. Kalapa’s commentary is printed each week in the Maui News, West Hawaii Today, Garden Isle News, and the HawaiiReporter.com.


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