Save! (But Not Too Much.)
Source Jim Devine
Date 08/10/25/09:41
Save! (But Not Too Much.)
Americans are getting thrifty just when we should be spending more.
By Daniel Gross

THRIFT, LIKE THE repossession business, is a classic counter-cyclical
industry. When the gross domestic product shrinks and the bulls are
stricken, Americans are called to rouse themselves from a
consumption-induced daze and start saving and investing rather than
borrowing and splurging. At about this time in the economic cycle, we
hear a lot more from Warren Buffett and a lot less from Donald Trump.
[good! the latter is execrable. BTW, I'm guessing that he'll bankrupt
soon. -- JD] Coupon-clippers are exalted, and high-flyers are laid
low. Of course, once the good times begin to roll again, the calls for
thrift subside.

Back in 1994—I know I'm dating myself here—I wrote a piece of
juvenilia on the hot new cheapskate trend (The Tightwad Gazette,
sluggish charitable donations) that grew out of the wave of corporate
restructurings. But penny-pinching went out of style once the dot-com
boom started, never to return.

During the last recession, which coincided with the 9/11 attacks, we
didn't even try to cut back. [What do you mean "we," Gross-man?]
President Bush went on television and urged people to go on trips. For
New Yorkers, patronizing a restaurant in the afflicted downtown area
became something akin to a civic duty. "Our leaders in recent years
seem increasingly determined to insist, as a response to such
challenges, on the importance of high and continued consumer
spending," writes historian Barbara Dafoe Whitehead, in the newly
released "For a New Thrift," a report sponsored by an array of think
tanks, left [??], right, and center.

Whitehead writes eloquently about the powerful array of anti-thrift
institutions that have made it difficult for middle- and lower-income
Americans to save: aggressive credit-card solicitations, ubiquitous
casinos, state lotteries, and payday lenders, which "outnumber
McDonald's franchises in four out of five of the nation's most
populous states." The nation's biggest banks dole out loans with
abandon, yet my bank doesn't offer passbook savings accounts.

More powerful still may be the macroeconomic barriers to saving. The
income of a typical family hasn't risen in real terms since 1999,
while the costs of basics such as health care, energy, food, and
housing have soared. "Surveys show that much of the rising credit-card
debt is related to job loss, home repair or health care," said Tamara
Draut, vice president of policy and programs at the New York think
tank Demos and author of Strapped: Why America's 20- and 30-Somethings
Can't Get Ahead.

[payday lenders and the like are also a result of this stagnation of incomes.]

In addition, during asset bubbles and booms, we [or at least those of
"us" with assets] tend to let buoyant markets do the saving for us.
According to the Federal Reserve, the net worth of households and
nonprofit organizations soared from $39.2 trillion at the end of 2002
to $58.7 trillion in the third quarter of 2007, a 50 percent increase.
This came at a time when real personal savings were miniuscule: $174.9
billion in 2003 and just $57.4 billion last year—the rise in net worth
was attributed to the rise in real estate prices, and thus was a
mirage. Those who live by paper gains also die by them. [good line!]
Between September 2007 and June 2008, according to the Fed, the
nation's net worth fell by $2.7 trillion. And it has likely fallen
much further since.

Clearly, we need to save more. But as John Maynard Keynes taught us,
thrift can be counterproductive in times of weak demand. Consumer
activity accounts for about 70 percent of economic activity. Spending
money heedlessly—traveling, redecorating, eating out—keeps our friends
and neighbors employed. The great concern about the stimulus package
was that Americans would squirrel away those $300 checks for a rainy
day rather than put them into circulation immediately. Self-described
global citizens have also had reason to eschew thrift. The prodigious
appetites of U.S. consumers for imported goods enabled tens of
millions of peasants in China to escape subsistence living and find
factory work each year.

Time was, national crises stimulated saving. Whitehead notes that
during World War II, the savings rate soared to 25 percent, as the
government, "partnering with the leaders of civil society, actively
stressed the importance of saving for the war effort while also
providing a specific new savings tool, in the form of war bonds."

[rationing and shortages also implied that there was often a dearth of
currently-produced goods to purchase, encouraging saving.]

But thrift today has a negative connotation—miserly, penny-pinching,
no fun. Here, too, we need to go back to the future. "The goal of
thrift is not to cut back or scrimp and save, but rather to enjoy the
good things in life," said David Blankenhorn, president of the
Institute for American Values and author of Thrift: A Cyclopedia, a
charming compendium of musings and quotes on the many virtues of
thrift, going back to Benjamin Franklin's "The Way to Wealth."

Is there any reason to think we'll recover our lost sense of thrift in
this economic crisis? Perhaps. The baby boomers, champion consumers
who had counted on appreciation of their homes and 401(k)s to ensure a
golden retirement, will have to start saving more. Policy changes—a
program in which the government matches savings accounts, or lottery
offices where people can purchase savings tickets—might help. But
profligacy and spendthriftness is also part of our cultural
inheritance. The most compelling character in the greatest American
novel, The Great Gatsby, makes a pile of money and then squanders it
in spectacular fashion. For every Buffett, patiently building a
down-to-earth fortune by purchasing stocks with hard-earned money,
there's a Trump, impatiently building glitzy over-the-top towers with
cash borrowed from others.

[okay article. But one thing I don't like about liberals is their
tendency to use the word "we" to refer to the entire country, as a
synechdote. There! I've finally used that word in a sentence.]

Daniel Gross is the Moneybox columnist for Slate and the business
columnist for Newsweek. You can e-mail him at He
is the author of Pop! Why Bubbles Are Great for the Economy.

Copyright 2008 Washingtonpost.Newsweek Interactive Co. LLC

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