Friday, August 05, 2005

press herald and national savings

If you want a good laugh, read this editorial from my old hometown newspaper.......
http://pressherald.mainetoday.com/viewpoints/editorials/050805savings.shtml

I think that it is great that the portland press herald decided to write an article on the horrible savings rate of Americans. The savings rate is probably one of the trickier things to determine in economics, and as an econ major, I remember having debates about the necessity of a strong savings rate. What I find interesting is that the editorial starts by stating that there could be three reasons behind the lack of savings: bling bling culture, demographics, and tax policies. The editorial tries to explain the reasons to worry and a future problem (boomers retiring). Then it goes on to say maybe Congress needs to come up with a plan to solve this problem.

First, demographics, hunh, are you kidding me? I don't think I can talk about that reference without getting angry. They threw that word out there and did not say why it affects savings.

I've got a problem with this because the editorial does not discuss any reason for the low savings rate. It states three and gives no backing to them. Then the solution is Congress should do something because individuals are too weak to do anything on their own. Does anyone want to bet that if Congress proposed eliminating the federal income tax and moving to a consumption tax the Press Herald would scream bloody murder? It is a regressive tax, blah blah blah. Maybe if Congress created another tax deduction for a type of savings account the Press Herald could claim it is a help only to the Americans rich enough to afford another savings account. I personally think government mandated savings would be horrible in a scary 'Big Government' way.

I think an aggressive and thought provoking editorial may have stated the first possible cause of the poor savings rate and run with it: America's out of control consumer culture. Of course, a newspaper that exists because of advertising revenue will never write an editorial attacking the consumerism that has infected our nation. It would look odd to rail against conspicuous consumption and then have inserts for cars, 2nd homes, etc. Our consumer culture has grown to the point where the average credit card debt for Americans is $8562 (almost $2 trillion in total). Keeping up with the Joneses has become a destructive force financially in households. Money paid to put this debt down is money that does not go towards a child's college education, retirement, charities or other constructive endeavours.

I usually like to end my rails against consumerism with 2 examples. One is the phenomenom of SUVs in metropolitan or suburban areas without significant snowfall. Do you need an SUV to drive around Westchester County, Orange County, etc? The other is the Ipod. I love the idea of an Ipod; its look, its capabilities, its tie to legal downloads. I also think that 40 GBs is so much music that by the time you load it up they will have released the newest, "coolest" version of it. I love music, but I don't think I can rationalize something that costs as much as the 40 GB Ipods to listen to music. When are you really going to listen to 10,000 songs?

That's all. I am pretty disappointed in the Press Herald's editorial. It discusses a problem poorly and offers only government intervention as the solution. It never asks the reader to think about their own spending habits. It does not get creative. It is important to note here that the paper does not have faith in people making their own decisions. I'm going to end with a quote from a favorite movie of mine.....

"You're not your job. You're not how much money you have in the bank. You're not the car you drive. You're not the contents of your wallet. You're not your f**king khakis." - Tyler Durden, Fight Club

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