One of my uncles was a farmer who hit on hard times and had to declare bankruptcy. I well remember the night he and his wife came to my parents' home, sat down at our kitchen table and spread out their financial papers. They had some paperwork to accomplish and file with the court before they left town. Their eldest son had found factory work out of state, and they were traveling north to join him, in hopes that they too would find hourly work to enable them to get a fresh start in life.

My uncle was a small farmer, and too many bad years finally caught up with him. I remember the hushed talk that night in our home as he and my parents went over their plight and what that would mean for the family. Sound financial management is vital to the family unit—and to society at large. It makes the difference between stability and chaos—for both households and entire nations.

The United States is bankrupt

The United States of America is facing a defining moment in its history. On April 18, 2011, as CNNMoney reports, "S&P [Standard & Poor's], one of the three main agencies that rate the ability of companies and sovereign nations to repay their debts, lowered its outlook for America's long-term credit rating to 'negative' from 'stable.' The change means that there is a one-in-three chance that S&P could downgrade the nation's 'AAA' credit rating within two years. That would make it harder for the U.S. government to borrow money to fund its activities" (April 19, 2011).

The sad reality is that the country is fiscally bankrupt, and unless it makes some fundamental changes it will decline as a great power. Other countries will not only take America's place in the world but will also dictate much of its future.

Anyone who honestly looks at the amount of debt we owe and the obligations coming due in the future can see that we don't have the money in hand and currently owe more than we can pay. President Barack Obama's proposed budget for the next fiscal year nearly doubles the current debt position.

No one with an ounce of fiscal sanity can stand by and watch this train wreck about to happen without asking serious questions about the future of the country. Entitlement programs such as Social Security, Medicare and Medicaid are unsustainable. Promises made to a generation of Americans cannot be met without the United States government going deeper in debt to other nations who are willing to finance our profligate spending patterns.

China, Japan and Saudi Arabia have been willing to buy our bonds and treasury bills, in effect loaning us money to finance what we cannot afford. They hold our future in their hands. Like any bank or lending institution, they can call that debt by demanding payment. If you cannot pay you have to return the goods or declare insolvency. For an individual this is bankruptcy. For a nation it could mean economic servitude.

Grasping the scope of the problem

When we speak of trillions of dollars of national debt it's hard to really picture what that means. The Wall Street Journal recently carried a story with an illustration that brings this subject home to the kitchen table. Freshman Republican Congressman Mick Mul-vaney of South Carolina explained to a group of his constituents just how serious America's debt problems are. "It's much, much worse than I had expected," he stated.

"Picture, he suggested, a family of four with an income of $46,000, annual costs of $78,000, and a credit-card debt of $281,000. That drew a gasp from the audience of mostly older voters. The figures are roughly proportionate to federal government revenue, annual outlays and the accumulated national debt, he said" (April 1, 2011).

I think we all know what that would mean if you were sitting around your kitchen table. The answer would be to file for bankruptcy, sell your assets to pay what you could to creditors and hope for a new start.

When we hear figures of billions and trillions of dollars of national debt we instantly glaze over. No one really understands how much money a trillion dollars is. Mention that America's debt could reach $14 trillion and we tune out. But bring it down to what that means for a family of four and we begin to get the picture.

The United States has been able to avoid the consequences of massive debt for a number of reasons. Macroeconomics works a bit differently than microeconomics, the level where the average person functions. Because of its size, power and scale of population, a large nation can go a long time without paying back outstanding debt to the rest of the world. America has been running budget deficits for decades, and because other nations have reason to accept and enable this behavior the situation continues.

Enabling factors

One reason is that America is the world's largest consumer nation. China's rise in recent decades has been tied to America's demand for cheap labor to produce things it wanted. Japan's earlier rise was based on this to some degree as well. It has been to these nations' advantage to see America remain in this position. If financing U.S. debt is perceived as good for business, then that's what is done.

Arab nations like Saudi Arabia produce oil that fuels America's, and much of the world's, economy. Petro dollars are good for the region and its ruling governments.

Factor in the military might of America. It protected Europe from the Soviets during the Cold War, sheltered Japan from encroachment by other Asian powers and kept the sea lanes of global commerce free and open for the world economy. The desire to maintain America in its protective role is part of why key nations have been willing partners in its descent into debtor status.

Could this come to change?

It could through any number of ways. Imagine one scenario: To finance America's debt the U.S. Federal Reserve prints more and more dollars. Since many of the basic commodities like food and fuel are denominated in dollars, this flooding of markets creates a rise in costs, called inflation. More dollars chasing fewer goods, or goods in greater demand, create a problem. (See "A Note About Inflation".)

When a person in Damascus or Cairo can't afford the rise in food costs and has to go without, it causes unrest. This leads to food riots and the potential for other instability. A commentator recently wrote, "When the Fed sneezes money, the weak economies of the world, and the poor masses who are highly vulnerable to price rises in the necessities of life, catch pneumonia."

The Middle East is already seeing massive instability. Unrest is leading to change in governments, some of which may not be as friendly to American interests in the region. They will not be able to withstand domestic upheaval. If such unrest is linked to American fiscal policy, you have another reason for some to turn from old alliances to pursue their own self-interest.

Back to the kitchen table

Prices are rising in America as well. Food prices are going up, and gasoline is approaching (and in some places now over) $4 per gallon. While this is catching up with the rest of the world, it can't help but have an impact on the American consumer. When jobs and incomes do not keep up with inflation, cuts in lifestyle will be dictated. Those prepared can manage. Those who aren't will face constricting challenges.

Lawmakers in the U.S. Congress have been making proposals to begin to deal with the budget deficits. Proposals introduced in early April target the nation's health care and social entitlement programs. Changes to the tax structure are also on the table. If such changes are enacted, and if other world factors remain stable, there is some hope that America could pull out of the decline and return to fiscal stability.

Which brings me back to the kitchen table.

My uncle's bankruptcy taught him a big lesson. He moved out of a farming career to which he was not suited. The day of the small farmer was passing, and he needed to move on to other work. He found it in a factory and went on to make a living wage and another life. He later retired and moved back to our home area and died at a good age. He never again filed for bankruptcy.

You and I live in a highly challenging period, with the opportunity to learn deep and enduring lessons. Massive, uncontrollable debt is not good. As we watch large nations struggle with crippling debt loads, we are offered the chance to change our own immediate behavior regarding money. It's as if God is giving you and me the chance to prioritize our values and bring our spending habits in line with our income—to live a realistic life with the income we have.

Perhaps this is the one opportunity you will have to break old habits and begin to get control of your personal finances. If you choose to do so, we can help. We have a free booklet, Managing Your Personal Finances, that presents a biblical foundation for financial management. It offers practical advice along with budgeting tools to help you turn around this part of your life. You can read or download it at our website or request a copy from the address on the inside cover of this magazine.

Sit down at your kitchen table. Take a completely honest look at your income and expenses. Do something today's lawmakers find difficult to do, and get control of your financial life.