Thursday, May 05, 2005
The Thrift Imperative -- and Private Accounts
I wonderhow this -- The Thrift Imperative, pointing out (again) arguing that America's the anemic savings rate is threatening our economic well being -- relates to the issue of private accounts for social security. The article argues that the biggest cause of the low net savings rate is the Bush Administration's deficits, which the article claims, alomost completely offset the economy's net private savings. If that is the case, then private accounts by themsleves won't help much since re-directing even a portion of FICA taxes to private accounts will eventually require increases in federal borrowing to pay benefits. But, it does seem that private accounts, coupled with tax increases, could be a part of the answer. My point really is this: private accounts have some significant benefits and we should not reject them simply becuase they are being pushed by George Bush.
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3 comments:
certainly I agree with you that something should not just be dismissed because of the originator. Although I almost hope that the times will be smart enough not to publish this author again. He or she completely misses the concept that fixing the problem must start at home.
Americans savings rate is abismal at best. I think the statistic is that the average yearly American household savings is $80. Don't forget that include Buffet, Gates and the Walton's, which means that the average real savings is negative. This should be the first focus, as opposed to starting with Bush and his policies.
We should be skittish about the economy but for different and additional reasons than this guy or girl wants us to focus on. I think "the perfect storm that could drown the economy" in todays (5/8) NY times week in review section is a good read.
Secondly we should really focus on how Americans are financing their homes.
forgot the signature.
Jesse
Jesse --
Didn't need a signature. The thoughts are signature enough. I would have recognized them anywhere. LOL
I may be a little out of my depth on this topic, but let me take a stab at it anyway. I think it is possible that one of the reasons (not the only one and maybe not the most important one, but one nonetheless) that Americans' individual savings rates are so low is that many of them think that they actually ARE saving 6.2% of their earnings and that their employeers are saving another 6.2% for them by way of social security contributions. The fact that they believe this is hardly surprising, since that's the way Social Security has been pitched to them for some 70 years. In fact, though, the Government is spending that money as fast as it comes in, and all the beneficiaries actually have is a promise that the government will pay them back. If all of this money were "credited" to the people who actually paid it rather than being used to artificially reduce the federal deficit, the individual savings rate would would be much higher than it is today (>12.4%?)and it would be much more obvious that the abysmally low overall national savings rate is much more the result of government profligacy that is is of individual shortsightedness. One of the (many) attracations of private accounts is that it makes it much more obvious where the blame for the low national savings rate actually lies.
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