Thursday, February 01, 2007

Spending more than we earn?

I can't believe that for the second year in a row Americans are spending more than we earn. Our savings rate is at -1% for 2006, shown here in this article. In 2005 the savings rate was a -0.4% also bad. Only two other years has the savings rate been negative in the US, 1932 and 1933, during the Great Depression.

Can you imagine that we as a country are spending more than we're earning? Of course this does have positive effects because it appears that consumer spending is up 0.7% and driving the economy. This helps people in general.

But the truth is that this will hurt us long term. Long term that means people are not saving for retirement, not saving for an emergency. Instead they are spending tomorrows savings today. Betting on having more money when there could be none.

I'm not sure what the answer is. I would love to have higher retirement contribution limits. That would really help us. But that may not be the answer. The answer could lie in automatically enrolling people in 401k and IRA. And making SS private and letting all contributions go back to the people who contributed. I'm not sure because a lot of people will suffer, however as a nation we are a capitalist society, so why is there SS at all?

I mean everyone wants to pay less taxes, have less government intrusion, then why even pay for SS or expect anything in return? It comes down to personal responsibility. If all these americans are crying about taxes and SS, then they should step up and say they want to take of savings by THEMSELVES.

However it appears that as a nation we are incapable of doing so. How else do you explain a negative savings rate?


Anonymous said...

The negative savings rate is a misleading statistic, because it doesn't count most investment as a form of savings.

Living Almost Large said...

Do you have a link for that? I'd love to see it. Thanks.