May 10, 2016

TAX WHAT YOU DON'T WANT:

The economy's real drag -- us (Robert J. Samuelson, 5/08/16, Washington Post)

There's an Old Consumer and a New Consumer, divided by the Great Recession. The Old Consumer borrowed eagerly and spent freely. The New Consumer saves soberly and spends prudently. Of course, there are millions of exceptions to these generalizations. Before the recession, not everyone was a credit addict; now, not everyone is a disciplined saver. Still, vast changes in beliefs and habits have occurred.

A Gallup poll shows just how vast. In 2001, Gallup began asking: "Are you the type of person who more enjoys spending money or who more enjoys saving money?" Early responses were almost evenly split; in 2006, 50 percent preferred saving and 45 percent favored spending. After the 2008-09 financial crisis, the gap widened spectacularly. In 2016, 65 percent said saving and only 33 percent spending.

What's happening is the opposite of the credit boom that caused the financial crisis. Then, Americans skimped on saving and binged on borrowing. This stimulated the economy. Now, the reverse is happening. Americans are repaying old debt, avoiding new debt and saving more. 

Our Third Way/Neoconomic future depends on accelerating/encouraging this dynamic--the less people consume (in paid goods and services) the less wealth we have to transfer and the more they save the sooner they hit means-test limits.

Posted by at May 10, 2016 1:17 PM

  

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