Sunday, May 24, 2009

We should buy more, a little more

It's time for Americans to buy more, but not a lot more. David Smick, in a 5/24 Op-Ed, says improvements in the economy depend on consumers, especially wealthy ones, starting to spend again. Excessive spending is part of what got us in trouble.

The past two decades or so, we have gone from about 60% of the non-military economy being consumer buying, to about 67%. We did this while dropping our average savings rate a tad below zero. That is, we borrowed, buying plasma TVs, SUVs and stuff like that. Now we have flipped to a savings mode.

That is a reaction to current financial troubles, but the stock market bottomed in early March, a measure of how we feel generally. We will start to spend, but we should go back only to the 60% level, and save some money. In turn, that money can be turned by the banks into bond loans to states and cities, so over the next twenty or more years they can repair the sewers, water lines, roadways and schools which, ignored, are literally rotting.

Just like the Interstates and the school construction of the 1950s through 1970s, this construction will provide jobs, provide great infrastructure to undergird the economy, and be paid for gradually by those who in the future use the facilities. The savings will provide for retirements when needed. Just a small change in buying and saving will do the trick.

0 Comments:

Post a Comment

<< Home