Savings, good for me, bad for you. Economics 101

George W. Bush famously said after 9/11 that Americans should go out and spend.  To many this seemed like a dumb idea – when in a recession, we should hunker down, save, not spend.  But he was partially right.  While savings is good for the individual, it is not for the economy.  We need people to go out and spend during a recession.  Savings, the friend of the individual, is the enemy of the many.

We can see this by looking at today’s economy.  The U.S. has a record high debt.  We know that U.S. Gov debt equals Private sector savings.  So, if the Government has record high debts, it means the private sector has record high savings.  And herein lies the problem with our economy – only a small group of people and corporations have any savings, and they have a LOT of it.

It isn’t the U.S. debt that is the problem.  It is the makeup of the private sector’s savings and what they are (not) doing with it.  As long as the big savers save, the only other choice is for the U.S. Gov to continue to pile up the debt.

For those of you who are so afraid of the size of the U.S. debt, you might want to know who has all that US Government debt.  China and Japan are sitting on a combined $2 trillion.  Good luck figuring out how to tackle that one.  Millionaires and billionaires are probably sitting on another $2 trillion.  And corporations have locked up another $2 trillion in cash.  Yet the GOP says these last two groups are untouchable – in fact they need even more cash via tax cuts so they’ll have an incentive to work (I mean create jobs).

Bush had a point that spending was needed for the recessionary economy.  But egging on the little guy to shop, especially when they are in debt up to their ears and 65% have no savings at all, is the wrong focus.  The current GOP and the Ryan budget is similarly misguided – trying to cut money that goes to people who will actually spend it, while giving more tax breaks to the biggest savers.  The bank robber Willie Sutton would tell us to go where the money is… and that’s our trade deficit, and the savings of our biggest domestic savers, the wealthy and large corporation.  The ONLY other choices are 2) take it from the future paychecks and services of the middle class and poor, or 3) the Government must spend more (go deeper into debt).

I’m personally in favor of option 3.  Let the rich keep their money – they (stole) earned it.  Definitely do not take future money from anyone who will actually put it to use – I mean food stamps get spent IMMEDIATELY and end up keeping the grocer, the truck driver and the farmer in business.  So my proposal is to stop collecting all taxes from those in the bottom 95%, and start Government spending on education, infrastructure, and green technology.  Keep doing all of these until unemployment hits 5%.  Only then should we raise taxes or reduce government spending.  But if you do want to raise taxes…. raise it on the biggest savers.  They’ve got the money, and they are the enemy of the many right now.

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