Weekend Reading: Spender's Remorse

Apr 19, 2021 | Andrew Dunn


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Hi everybody,

          Roughly seven years ago my wife and I purchased our first home, a 1980’s BC box in the Brookswood area. We bought during a period where everything went for asking price or higher, and it was all we could do to get an inspection as a subject of the purchase. They only agreed to an inspection because, as first time homebuyers, we did not need to be subject to sale. I can vividly remember standing in the empty living room of that home on the day we took possession, all our stuff sitting in a moving truck outside ready to be brought in, and thinking I had called the very top of the market. You know that feeling as buyer’s remorse. What have I done? I paid how much for this place, and my mortgage payment is what per month? Thankfully I was very wrong, and 5 years later we sold the home for almost 70% more when we moved to our current home just a few blocks away (but not on a 30 year old sceptic field).

            I also have another vivid memory from that home, and it happened shortly after the birth of my daughter Scarlett. I was standing in the garage wondering where I was going to find room for all the stuff that had to come out of the house to make room for the baby stuff that would be coming in. I was staring at golf clubs that had not been used in a year. A bike that had not been ridden in two years, and had been ridden less than a handful of times in total. A snowboard that had now made 3 moves since the last time it was ridden, with each move incrementally farther from the closest mountain it could be ridden on. Sporting equipment, niche kitchen gadgets, task specific clothing for tasks I no longer had any time to do… all of this stuff had cost money, and much of it was still worth something, but I was getting zero use or enjoyment out of it. I had just recently read the book “The Millionaire Next Door” and I thought of the sum total value of this stuff and what else I could have done with that money. That feeling was something I started to call spender’s remorse.

            Spender’s remorse is the idea that you are going to spend a certain amount of money no matter what, so you should make sure it is spent only on the things you care about the most. There is only so much time and money, and as a new parent there was less of each than ever before. Did I want to divide that time and money between 4 things, or focus them all on my favorite activities and let the rest go? For me, the answer was clear. I sold the bike and the clubs and bought an inflatable pontoon boat to fish out of. Going forward I vowed to always ask myself “what else could I get for this money” before making any major purchases. If I was about to foolishly spend $2000 on a bike I wouldn’t ride again, my hope is that I would think about how much fishing gear $2000 could get me, and then decide against the bike. I probably wouldn’t then go spend $2000 on fishing gear, but the idea is not savings and austerity, but instead to spend money wisely and more thoughtfully on only my top priorities. By doing so, enjoyment of the things I do purchase would be at a peak and savings would probably be realized over the long term.

            I have thought about “spender’s remorse” a lot since then, and in the past few years I have expanded the idea to the really big picture as a thought experiment. I’ve wondered about how to write this email for a while, and then they passed a $1.9 trillion dollar stimulus bill in the States and I thought…what better time than now.

            Many of you would probably agree that we seem to be in a cycle of spending that is difficult if not impossible to get out of. The government stepped in and bailed the markets, businesses, and citizens out in incrementally larger amounts, culminating in the recent stimulus package which I’m sure will look small in comparison to what gets spent into the future. Like someone with an injury who takes pain meds and then develops an addiction, our financial system is to some degree now addicted to the cure. Imagine very briefly what would be required to remove large government spending, or what would happen if it simply stopped or even dropped by 50%, and the problem becomes clear. So let’s leave any discussion of spending more or less money aside for the moment and think just about avoiding spender’s remorse on what is already being (and perhaps has to be) spent currently.

            To date, we (I will say we in this email, even though I don’t remember you are I being consulted about it.) have mostly spent money in reaction to a problem. This has forced a lot of money to go to what could be considered unproductive assets… think mortgages that were no good and other toxic assets in 2008, or the disaster control that took place last year in the bond markets and with interest and loan deferral for businesses and individuals. It’s important to save the world when it almost comes to an end, but a lot of the money can kind of get lost into the abyss that has opened up. It stops making things worse for everyone, but does it start to make things better? What if we spent all this money before a disaster on improving our ability as a nation to weather a storm, on making ourselves more competitive and increasing the ratio of “winners to losers”, to steal a phrase from a popular podcast host. Again, for this thought experiment the option of spending less money isn’t on the table, and it really isn’t on the table in the real world either. You can cut and trim spending here and there, but our decisions of the past have created holes in the ship that simply need to be plugged, and in some cases (like certain state pensions) not spending the money now is PROBABLY just saying we will spend it later when it becomes an actual disaster. Some of those pensions have a snowball’s chance in hell of staying solvent without government help. For all the talk about balancing budgets and controlling spending, here we are, with each successive leader racking up more and larger debt that dwarfs what we thought was large by the last guy. We are now spending trillions. It will take a lot to get back to spending ONLY billions or hundreds of millions. The spending is here to stay, so let’s think about the remorse.

            If the only income a government has is tax revenue, and the government is democratic and “owned” by the people, then to avoid spenders remorse we need to think of a way to spend money that benefits the people as a whole. Easier said than done, but let’s start our little thought experiment from the perspective that we are trying to raise the standard of living for everyone and make the entire system more robust. Remember, if we can’t agree now, then this money is not being saved, it is just going to get shoveled onto the banks or pensions or airlines or cruise ships or car makers or whoever is hit hardest by the next disaster. Doing this properly would require thinking long term, not just on a 2 or 4 year election cycle, and that’s a real roadblock. Luckily I’m not standing for election, so let’s begin.

            I think an easy spot to start is children. A lot of people have them, and anyone reading this was one at some point, so we can probably all agree that healthy, well-educated children are a good idea long term. Churning out generation after generation of skilled Brainiac’s would be a real boost to our society, so what if we spent some of the money on making schools, education, and children’s health the best in the world. For this thought experiment stop there…the how isn’t the question. Do we raise teacher’s pay? Do we hire and rank teachers on performance and outcome? Do we build more schools? Do we provide 3 meals a day for all children in attendance? Do we rethink education and curriculum entirely? Do we do away with private universities and their strange tax status? Do we mandate extracurricular activities or public service at a certain age? Doesn’t matter. The point of spenders remorse is that by the end of this year they will have spent trillions of dollars. In 2019 would you have been ok voting for someone who said they were going to cut a blank cheque for education in perpetuity if you knew that trillions was going to be racked up anyways? We’re in the process of spending it, and improving our children’s lives and future potential sounds better to me than some of the pork attached to the bills passed so far.

            Another obvious benefit for everyone would be for “have nots” , however you want to define that, to “have more”. This even benefits the rich because we know that if you give those in the bottom half of earners an extra dollar it usually gets spent in the economy, not saved. More consumers is good for local and multinational business alike, and I’m sure there are also arguments for offsetting savings on things like crime, addiction, assistance programs etc. Currently the winning idea for this is to just send them the money, but remember that we have a blank cheque here. What if we planned something like a giant infrastructure build out, which would benefit every citizen via better roads, more reliable and cheaper energy, faster internet, more local services, less congestion, so on and so forth. And what if with that plan came a training program to create the labor we need to execute it. You would need everything from scientists and engineers to someone to swing a hammer and push a broom, and that training program would be available into the future for any training or retraining required for future growth plans. What if, instead of saying times are tough so we are sending you some free money, we said times are tough so we are going to build new schools and hospitals and roads and bridges… we’re going to clean up the shoreline, plant trees, wash of graffiti, build more housing, grow more food, renovate run down areas of the city… we’re going to tackle big problems like green energy and cybersecurity and dread diseases…and we’re going to cut the check required to pay you while you train for one of the jobs we need and then you’ll be paid to perform that task while we build all the actual stuff. Tax payers will get something for their money (both a better standard of living and an actual return on investment via the GDP increase) and the “have nots” will not only have more in terms of dollars now, but a portable skill and greater future earnings potential. In some cases they may even have multiple skills…the ones they had for the job they lost, and the new ones they learned for the job they needed. In my garage I was spending the money anyways, on unused bikes and golf clubs and the twice a year greens fees, so why not spend it on my preferred activity of fishing and enjoy that more? Likewise, we are spending trillions anyways, so why not say we are spending trillions to pay people money to build better roads and faster internet and everything in-between for you to use. The money is still spent, but maybe there is less remorse if it’s spent on something that benefits a wider number of people?

To blend the two together…give a man a fish and he eats for a day, teach a man to fish and he sells his unused bikes and fishes more often and is happier for it because he never liked that stupid bike and its thin little tires in the first place. Or something like that.

            Lots of holes, I know, but remember…it’s not the how I’m thinking about. It’s the excuse of “budget” that we are doing away with. There is no budget. When things go wrong, we throw the budget out the window. Raising the debt ceiling is more a ceremony than a discussion these days, and they should probably just agree to do away with the nonsense in the first place. We all know what happens…the debt ceiling goes up to infinity. It’s a parade of old men and women beating their brows about debt that pales in comparison to the numbers they are going to approve a few years later. There would be all sorts of screw ups but we would spend what was needed to figure it out, because the end goal was a healthier, smarter, more advanced and more financially secure society that could better weather any recession. The farthest I have made it in my own head with this idea is frustration with a hospital experience I heard, so ill close with an abbreviated version of my soapbox rant on that topic. The idea here is to show how a lot of this “pre disaster spending” would co-mingle many goals together and feed value back into society, both in terms of goods and services available to tax payers, and dollars generated back into the system.

            Most of us have probably been in a hospital. In Canada, it’s great that we get free health care. This will not be a discussion of public vs private, it will just be a discussion of what could be done with the “public” if you took a “whatever it takes” approach to it, no matter how the larger system was run. Some of the easily identifiable problems that are common in lots of hospitals…not enough space, not enough nurses, and not enough doctors which results in long wait times, overworked health care providers and unhappy “customers”. Easy… we build more hospitals and all the other health care infrastructure (outpatient centers, specialty medical centers, local clinics etc.) and then train and hire the care aids, nurses and doctors we need to staff it. I personally would rather have more nurses available when I need something than send UBI to someone who could have been trained as a nurse or care aid but instead is out of the workforce. In each case the cost to the tax payer is roughly the same. In the former, everyone wins, including the recipient of the income. So now I’m in the hospital and not sitting in the hallway, and I’ve been seen faster by someone who is not overworked. I’m here for a while, so I need some food. Next problem, hospital food sucks.

            Now I don’t believe that eating a kale salad will allow you to get up and walk out of the ICU, but a proper healthy meal certainly won’t make matters worse. It would not take trillions or billions to build and staff a proper commercial kitchen in each hospital that could deliver healthy meals to patients. It could also provide a set menu meal at cost to staff working there, a benefit to them and net zero cost to tax payers. Food could be sourced locally, as much as possible, providing subsidy for farmers and providers. At the very least the menu could be “Canadian” so that 100% of the tax dollars were flowing back to our country. Who is cooking the meals? Trainees in the government sponsored program for food service and culinary school. Learn to be a chef, line cook, or train for the service or hospitality industry while providing a service to your local community hospital. Attend the business program where you run the restaurants and managed the purchasing, logistics, bookkeeping and accounting. And if we have a restaurant, why not make it a good one, and offer a public facing portion for folks to come in and have a nice meal out and a glass of wine with the knowledge that the profits from their meal are going towards a skills training program and support of the local hospital. You can go out for date night and at the same time help insure that if you ever get sick or injured you’ll experience world class health care, complete with proper food prepared by the chefs you supported. Patients and visitors to the hospital could also opt to eat at the public restaurant, encouraging them to basically subsidize their own stay a little. Who among you wouldn’t have opted for a better meal if you could, or brought one up to your loved one in their room instead of the wrapped sandwich or vending machine muffin you had to settle for. I’m not suggesting it would pay for the entire endeavor, but I’m suggesting that we may get more from something like this over the long run than we will from the spending we are already doing now.

            Sounds expensive doesn’t it. But we’re already spending the money. Expensive doesn’t even begin to describe the last decade, and to a large degree all we have to show for it are averted disasters rather than improved resiliency. The how is messy, and you can’t make all the people happy all the time, but if we are on this road to UBI and MMT and other seemingly infinite spending programs (for clarity, I am not a fan) can we not stop and think for a moment about how best to spend the money to benefit the most people? Can we not acknowledge that this money is not the government’s, it’s ours? Can we not all walk around like Jeff Bezos or Elon Musk (who btw is the richest man in the world and yet has never run a profitable company…that’s another email) and proclaim “I spend millions/billions/trillions a year and this is what I get for it? A 4 hour wait in the emergency room and a stale muffin to see an exhausted Doctor who is run off their feet?” Can we not look at the things that would improve life for all of us, rich or poor, and demand our leaders say the same thing about those budgets that they will say when they run into a recession that threatens their re-election or when want to pass spending that buys them votes…

“Whatever it takes”.

Maybe we can’t. Maybe our only hope is to find a way to wean the economy off its stimulus “addiction”. The only thing I do know is that I, for one, feel some spender’s remorse coming on.

Have a great weekend everybody.

-Andrew