Sunday, October 17, 2004

Save--but just not until I get re-elected

Daniel Gross discusses President Bush's "Ownership Society" and his call for Americans to save more through personal retirement accounts and health savings accounts, even as he has pointedly refused to ask them to make war time sacrifices:

Historically, in wartime the government has promoted national thrift and sacrifice for the greater good. In the Civil War and the two World Wars, hugely successful war-bond drives helped finance victory. More importantly, they laid the groundwork for postwar booms. "People scrimped and patriotically accumulated a lot of bond assets to help the war effort," said Richard Sylla, a historian at New York University's Stern School of Business. "So when peace returned, they suddenly had the wherewithal to spend."

But the message since the Sept. 11 attacks has been the opposite, a strange and occasionally dissonant conflation of patriotism and consumption. As New Yorkers flocked to Ground Zero to volunteer, Mayor Rudolph Giuliani exhorted Gothamites to patronize TriBeCa restaurants. President Bush appeared in ads urging Americans to fly and stay in hotels. These days, it seems, they also serve who only spend like there's no tomorrow.

In other words, Bush asks Americans to spend for their country's good, then tells them they have to save in anticipation of the day when Social Security and employee-provided health insurance are relics of the past. And John Kerry is the flip-flopper?


Anonymous Anonymous said...

Or, perhaps what we're seeing is the movement of a nation into a deeper recession (three years ago) and what has transpired since (recovery).

In that case, the most classical of economists would say that SPEND! SPEND! SPEND! on Sept. 12, 2001, wasn't such a bad idea, at least in a macroeconomic sense.

Now, with a mild but continuing recovery, saving for future business cycles (accumulating the capital necessary to invest in future gains), isn't such a bad idea. So, SAVE! SAVE! SAVE!

That said, I don't think that's what this SPENDING president meant. Rather, I think he wants an "ownership" society that allows people to control parts of their Social Security accounts, payroll taxes, etc.

Perhaps because I'm youngish enough to realize that the current spending pattern for Social Security is headed for failure (much of the current sop goes to funding contemporary government operations), I'm willing to gamble on the pitiful return I have now. That's what my Roth IRA, Apple A-shares and dividend income are for, too.

Do I think SS will be "privatized" under Bush? No. But I believe large parts of it should be, and as soon as possible.

6:33 PM

Blogger Jonathan Potts said...

I don't have a problem with a partial privatization of Social Security--as long as we can find a way to afford to pay the massive transitional costs that are likely to occur as the workers whose SS taxes pay the benefits of current retires divest from the system.

I think medical savings accounts are a fine idea as a way to augment private insurance, particularly for people who chose a low-premium, low-benefit plan. My wife and I could easily afford to go without health insurance and simply pay out of our savings for doctor's visits--unless one of us becomes seriously ill or injured, and until we decide to have children. Of course, we don't have to worry about it, because both of our employers provide affordable health insurance plans.

But the larger point is that in order for Bush's broader vision to come to fruition--and I'm not necessarily saying it's a bad vision--Americans will have to drastically alter their behavior, and I don't think he's really prepared them for it.

8:12 PM

Blogger fester said...

I don't want significant privatization of Social Security for several reasons. First is the problem of moral hazard and Congressional tinkering. Next is the problem of uncertainity/volatility. Third is the problem of administrative expenses, fourth is the problem of short term transition costs, fifth is the problem of arithametic on GDP/stock growth, population growth and productivity growth. I was going to drop a 1,100 word essay here, but that is over at my blog instead.

8:37 PM


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