Is it that hard to understand?

There has been lots of talk the last few days about finances, budgets and the markets. Wall Street melted down, then rose again. Here in California we had a budget 80 days late, then the Governor was going to veto it, then he didn't.
What seems to run through all of these issues is how little common sense has applied to financial matters in both the public and private sector.
Let's start with the private sector. I don't pretend to understand all of the ins and outs of the mortgage crisis. What seems clear however is a lot of people borrowed more money than they could ever pay back and a lot of banks lent money to people they should have known were not going to be able to pay them back.
If you are a borrower, does it really make sense to believe you can afford a loan for ten times your annual income? Sure the payments were low at first, but the reckoning was in the fine print. If it sounds too good to be true: it is.
If you are a lender, what are you thinking? When the rate adjusts the payments are going to be equal to the borrower's monthly income. How will they sustain that?
Where was the common sense in all of this: you do not borrow for more than you can afford.
Well, maybe they got the idea from the government. We hear a lot about deficits. California has a whopper: approximately $15 billion. Our government has funded programs, projects, and agencies without ever asking: can we afford it? Once a program, project or agency is opened, it seems as though it can never be stopped. We simply reduce the amount of the increase in spending every year. Wanting to cut a program means you favor reducing its growth to 5% rather than 10%.
Then they wake up one day and the money to support the spending isn't there. Sound familiar?
It seems so simple: if you can't afford it, don't buy it. If you are still behind, cut back more. We don't need to form committees, commissions or panels to figure this out, we just need to use common sense.