Do we save too much?
Just a few years ago, before the Great Recession hit, economists were reporting a “negative savings rate” among Americans. That meant many of us were spending even more than we earned each year.
How could that be? At the time, hard as it may be to remember now, the rising stock market and booming housing prices gave many Americans such a sense of wealth and optimism about the future that they felt comfortable spending everything they earned and borrowing to spend yet more. (Sort of like the federal government.)
The result was that, not only were we not saving for a rainy day, we were borrowing against or spending what little rainy day fund we already had, believing it would never be needed.
So when the recession had the gall to rain on our parade — causing stock prices to fall by half, slashing value from houses so that millions of homeowners were “underwater” on their mortgages, throwing millions out of work and keeping young people from finding employment — there was little to cushion the blow.
The Great Recession officially ended five years ago, believe it or not. But we are still clawing our way out of it. Most of us are doing better, some are doing great, but many are still just hanging on, waiting for their turn.
So what’s happening with our national savings rate today? Well, it’s actually pretty strong. About 5.5 percent.
That’s good, right? No?
Well, I guess some economists are never satisfied. The latest word is that our failure as consumers to spend our rising incomes more generously is responsible for the tepid nature of the recovery.
We’re described as “sitting on our money,” having the gall to exhibit “newfound prudence,” and exhibiting a “deep psychological trauma” that keeps us from spending our hard-earned dollars as freely as we used to. Even millennials have become cautious spenders, having been shaped by high student debt, a dearth of jobs and low pay.
The result of all this, it appears, is a slow economic recovery, fewer new jobs and — oh, the pain — rising savings.
Excuse me, but I find it difficult to be upset that American consumers have learned an important lesson from the recession (and from the banking crisis, the housing crisis, the national debt crisis, etc.).
In fact, I’m rather in shock and awe that Americans of all ages have developed at least some of the self-restraint and appreciation for savings that once characterized the Greatest Generation — those who lived through the Great Depression and were never quite able to shake the feeling that the best of times could come crashing down in a day.
Those of us who lived through 9/11 also have a taste of how quickly things can change for the worse.
Holding onto savings doesn’t mean we have lost faith. It doesn’t mean we don’t think we can trust in the future.
On the contrary, I think it shows exactly the opposite: It takes faith in the future to hold back some of today’s largesse to invest in that future.
We know we are strong, that we can bounce back from adversity. But we also know it’s wise to keep some resources in reserve. It’s how a sensible family acts. It’s how a sensible country acts.
So if you’ve been saving a bit more lately, I say pat yourself on the back. It might lead to a somewhat slower national recovery overall, and that is sort of a shame.
But in the long run — especially given how much longer most of us will live than any generation before us — its seems to me to be a smart move and a sound philosophy.
If you disagree, or even if you don’t, please write and share your thoughts. Opinions don’t need to be saved for a rainy day!