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Jay Evensen: If we followed this Bible story, how would the economy be different?

Trader Peter Tuchman works on the floor of the New York Stock Exchange, Tuesday, May 14, 2019. Stocks are opening broadly higher on Wall Street as the market claws back some of the ground it lost in a big slide a day earlier.
Trader Peter Tuchman works on the floor of the New York Stock Exchange, Tuesday, May 14, 2019. Stocks are opening broadly higher on Wall Street as the market claws back some of the ground it lost in a big slide a day earlier.
Richard Drew, AP

Here’s an Old Testament story you probably never heard in Sunday School.

Pharaoh has a troubling dream, so he eventually pulls Joseph out of prison to interpret it. Joseph tells him the dream means Egypt is about to have seven years of plenty, followed by seven years of famine.

But, he adds, he has a plan. If Pharaoh cuts taxes, greatly increases the national debt and gets people to max out their credit cards on useless consumer items, he says, Egypt might be able to keep the good times rolling for awhile — at least until Pharaoh and the other political leaders of the day no longer are in office. After all, let the young leaders of tomorrow take the blame for the famine!

If this had happened, the Good Book wouldn’t be quite as good. And yet this is the advice many seem to be following today.

In a recent webcast to investors, Jeffrey Gundlach, the chief executive of DoubleLine Capital and overseer of about $130 billion in assets, said today’s economic growth in the United States seems to be “exclusively” the result of debt — government, corporate and consumer (primarily mortgage) debt.

According to Reuters and various other news accounts of his presentation, Gundlach said the economy would have shrunk already if Washington hadn’t added trillions of dollars to the national debt. The economy grew by 4.3 percen over the past five years, but public debt grew by 4.7 percent, he said.

And while Gundlach isn’t predicting a recession any time soon, he warned that the current conditions present "very, very dangerous times" for that recession, when it comes.

That’s one person’s opinion, of course. You might go broke making investments right before a downturn, but you’ll almost certainly go broke by gambling on when that downturn will occur.

And yet it certainly will occur. When it does, as in previous recessions, a lot of people with debt will wish they didn’t have it.

A new survey from Charles Schwab found that 62 percent of the millennial generation (defined as people between 23 and 38 years of age) live paycheck to paycheck. This is higher than the next older generation, Generation X, for which the figure was 60 percent, and baby boomers, at 53 percent.

All of these figures are dreadful, especially for aging boomers who ought to be gliding comfortably into retirement, and whose health care needs would become acute if they lost their income during a slowdown.

Writing for, Leon LaBrecque, the chief growth officer of Sequoia Financial Group, noted, “We are awash in debt, more so than in all other post-WWII recessions. Gross public debt is nearly 105 percent of GDP, in contrast with about 68 percent of GDP at the start of the 2008 recession. Add to that an $800 billion dollar budget deficit, and we have a debt tsunami.”

When recessions come, the government typically tries to stimulate growth by spending more money it doesn’t have. “Is the answer to just keep borrowing?” LaBrecque asks.

Of course, some voices say things aren’t all that bad. A Wall Street Journal story at the beginning of the year cited figures showing how Americans seem to be managing their debt well, paying 5.6 percent of their disposable income to keep current on payments. The average credit card balance was $4,293 as of the third quarter of last year, according to Experian.

An increase in debt, an economist at Citigroup told the Journal, “is (a) sign of a strong economy.”

But debt is growing right along with the economy which, common sense might tell you, doesn’t seem right. If people are doing well, why do they need to spend more than the cash they have at hand? Where will the debt-laden government, which also is racking up debt during good times, get the money to stimulate the economy during the next recession?

If Joseph of the Old Testament really had told Pharaoh to rack up debt, which in those days probably would have meant eating like there was no tomorrow, he probably would have ended up back in the dungeon when the famine came. The wisdom of that story, of course, is that he urged Pharaoh to begin storing excess food during the good times, in order to survive when the bad times hit. Because of that, a lot of good things followed.

That strategy is remarkable because it goes against human nature. Despite the hard lessons learned a decade ago, human nature apparently remains strong.