ECONOMY'S BROKE, TIME TO FIX IT. ONE SMALL IDEA:

Guns don't kill, people do. Just like credit - and the ever-present availability of it until now - didn't do anyone wrong, we did wrong by abusing it. Just like bad drinking habits, we as consumers and as a nation, didn't know when to say when; and we must take responsibility for our fiscal behavior. But there is something to say for (gulp) regulation. Make guns too available and easy to acquire and that's not a good thing. Lowering the legal drinking age is likely not going to yield positive results either. Extension of revolving credit seems to have no boundaries though, and that has had dire results for households nationwide. Encouraging people to spend money they don't have and to save less to pay for it over time is bad financial policy. This has to change, but how do we change it?

Exactly how we got here is answered by your daily trip to the mailbox. Let me test my clairvoyant skills as to what was in your box today: postcard from auto dealership, bill, credit card solicitation, bill, valpak, bill, credit card solicitation, another credit card solicitation, etc. Okay, so you get the point. I don't know about you but there are usually at least two credit card solicitations daily in my mailbox. Just how many could I apply for and how many would approve me? A few? All of 'em?? I wonder just how many a person could be approved for until the credit companies would finally shut off the valve?

Credit card companies and banks that issue cards have a for-profit goal in mind when issuing all those solicitations. They don't regulate each other and don't know about each other's solicitations. Exactly how much credit a person can be extended is a mystery, but one thing is for sure - everyone and anyone with nearly any credit rating can obtain some credit. So how do you limit instances of over-extention leading to potential abuse? Here's one idea:

What if every person was designated a credit threshold based on their capacity to pay first and foremost. This threshold would be, say, a percentage of your annual income. In other words, the metric would be the ratio of revolving credit to income. Lets consider a revolving credit threshold of 15%. If you make $50,000 per year, your persoal revolving credit threshold would be $7,500. Considering that a $7,500 credit balance would carry monthly payments in the neighborhood of $250-$400 depending on the rate & terms, this would seem to make sense; given that same person will also likely have rent/mortgage, car payment, utilities, etc. Certainly this is a very hypothetical scenario, but one that lends thought to the idea. Remember we are talking about revolving debt which is only credit cards or unsecured debt; NOT auto loans, student loans, mortgages, etc; although those items could be considered for the same treatment...

If you advocate a flat income tax or flat sales tax, which seemingly most conservatives and/or republicans seem to support, then why not a flat revolving credit threshold for everyone? Is it a perfect scenario? Probably not. But would it prevent the over-extension of credit to those without the true capacity to repay? Most of the time, yes. And over-extension of credit (and the abuse of it) for the past several years has proven to have been a silent epidemic - one that went unnoticed and without consequence - until now.