Monday, January 5, 2009
Is a Penny Saved a Penny Earned?
If you're wondering why this recession is going to be a doozy, read this article in today's Wall Street Journal (no password required for this article) and a related sidebar on what a penny saved really costs.
It looks like American families are finally doing what they should have been for a long time: spending less and saving more. Paying down debt. Being thrifty, like our grandparents were. All of this with some help from tighter reins on credit by banks and others.
The problem: a large chunk of our economy is built on unsustainable consumerism. Remember Bush's suggestion for how we could "sacrifice" in the wake of 9/11 -- "Go shopping." Perhaps the worst move of his presidency.
But what happens if consumers (and businesses) aren't spending? It means consumer spending will not lead us out of this recession in the short term. Or hopefully it won't, because if it does, it means we will not have learned a thing from our borrowing binge. Government and consumers (and in some cases, business) have been spending more than they are earning. Never a good combination.
To move the needle away from our consumerist addiction, we need investments in real innovation and infrastructure in this country. Mass transit, high speed and strong cargo rail on the transportation side (to help alleviate business killing congestion), and research, science and math education on the education side. The sort of things that create jobs but just as importantly spur new ideas that can take our economy in new directions and solve the challenges that are facing us (social security, medicare, medicaid, etc.). Our investments must help us take advantage of the direction that the world is moving in.
How does this translate locally? In my opinion, it means retailers are going to have to work harder than ever for the consumer dollar, and that new retail won't be built any time soon, no matter what my fellow bloggers believe. The feds and local governments should think bigger than simply applying money for "ready to go" highway projects that have minimal impact and focus on infrastructure projects with true region-changing potential. Banks will be helping consumers save, invest wisely, and borrow. It means that local leaders must continue to advocate for investments in secondary and higher education, especially at UGA, Athens Tech and Gainesville College where innovation and ideas emerge. Homes will be built to live in, not for short-term monetary gain.
What do you think?