Steadfast FinancesNewsweek Suggests it's Your Patriotic Duty to Stop Saving and Start Spending - Steadfast Finances

Newsweek Suggests it’s Your Patriotic Duty to Stop Saving and Start Spending

Filed in 20s , Consumer Education 11 comments

Newsweek’s cover story entitled “Stop Saving Now! has altered — more like adulterated — the classic image of Uncle Sam’s military recruitment poster “I Want You” into a spending recruitment post of “I Want You to Start Spending“.

I’m so against this type of irresponsible financial mentality that it irks me to my very core.

I realize that Newsweek is just trying to sell magazines by printing an inflammatory magazine cover — heaven forbid another publication should go out of business — but this would be almost humorous if I knew some poor fool might actually take it seriously.

The Economic Realities You Aren’t Hearing

You are indirectly helping the economy with your tax dollars.  Since you are the proud shareholder of poorly managed companies like AIG and funding the UAW’s paychecks to build cars that no one is buying, you’re doing far more than main stream media will tell you.  Without the federal government lending Corporate America your tax dollars, companies deemed “too big to fail” would be in bankruptcy court or have chains on their doors.

The U.S. economy is famous for boom & bust patterns.  There is an old adage on Wall Street that says “We’re not sure what Americans will do, but we’re sure they’ll all do it at the same time”.  We’re so plugged in to the news and constantly bombarded by cheesy advertisements that we’ve become programmed to act in herd like mentalities.  We’re human, and it’s in our nature to go along with the crowd, but the ability to create rational thoughts should help us identify when we’ve crossed over into the land of excess and stop leveraging our paychecks to the breaking point.

Americans are only saving 5% of their paycheck.  How in the world is saving money a bad thing considering we spent more than we made for multiple years.  Any economy built on spendthrift consumers who buy possessions without saving money for a rainy day is NOT a healthy economy.  Sorry guys (e.g. retailers, car companies, credit card financiers), the party’s over.

Our Economy is Built on Excess Consumption

Truth is, we’re not some sort of robotic consumer machine.  Even the most clueless of consumer drones have caught on that the economy sucks and saving some cash for a rainy day.  Americans are now looking out for themselves and the financial security of their family instead of the giving more of their money to Church of Starbucks.

If Corporate America has gotten so fat that it requires consumers to spend every dollar they make, then it’s time to help them lose the excess weight.  If they think it’s bad now, what would happen if we actually paid attention to personal finance articles like The 60% Solution (BTW one of the best personal finance articles ever written) where 60% of our annual salary goes to living expenses, only 10% goes for fun money, and the rest goes into savings.

So suck it up Corporate America.  Things could be worse.  Imagine a new cost-conscious America that rivals China’s national savings rate of 50%.

Wonder what would happen then?

What’s your take on this image?  Does it make you a little angry that Uncle Sam’s message has been changed to justify the “Paradox of Thrift” argument?  Do you think behavioral economics has gone completely astray and we’re sealing our fate by saving too much?

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Posted by CJ   @   17 March 2009 11 comments
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Mar 17, 2009
10:59 pm

I’m with you, the idea of asking us to spend to save the economy is about as myopic as it gets. Even if spending were to increase at the expense of savings, it would only be a band aid to the larger issues that will no doubt impede growth later–namely retirement savings and healthcare. The growth of funding for entitlement programs continues to loom in the distance and if a healthy savings rate reduces dependence on Social Security, I’ll take that over spending our way out of recession only to fall flat later. Think about it. If we have savings going into the markets, the market increases. If we are more prepared for retirement, we need less money from government programs. If we have an economy built on cash instead of credit, we will be stronger for it.

If anything, it’s our patriotic duty to ensure we save money so we can take care of ourselves with dignity rather than hoping Uncle Sam–err, our children’s tax dollars–will bail us out later.

Myopia is what got us here…solving the problem in kind is ludicrous. I’ll keep saving, thank you very much.

Mar 17, 2009
11:48 pm
#2 Matt :

I’d say the ultimate patriotism would include self sufficiency and not rely on foreign entities loaning us money.

Attitude reflects leadership, and if the U.S. Government would lead by example, maybe that would be a great start.

Mar 18, 2009
1:21 am
#3 SJ :

I really don’t understand how we save so little. I also don’t understand how our economy works.
If I understand properly we’re capable of producing much more than we need, so we have to be bloated. So isn’t that kind of a catch-22?
So confused…

Mar 18, 2009
10:51 am
#4 Shaun :

…I’m horrified by that cover. At first, I thought it was just photoshop. But of course, no it isn’t.

We do not have any “patriotic duty” when it comes to our personal finance — it’s not social finance, it’s personal finance.

Even then, artificially spending just creates another bubble that’s going to burst, keeping people in debt, insecure and ready to wreck economic hell the next time our economy gets bumped.

I’m a little ticked now. :P

Mar 18, 2009
11:47 am
#5 Matt :

@ SJ

It’s somewhat complicated, but there are 3 main arms of spending in the US — Government, Business, and Consumer. Now that business and consumer spending have fallen a bit, the government is stepping in.

Truth is, American business has been inflated beyond its sustainability because consumers were spending like crazy. If the consumer cuts back 10%, then business must cut back an equal or greater amount. The issue now is that we’re “unwinding” (Bernanke’s word of choice) businesses at a slower rate so the system doesn’t collapse overnight and the jobless rate skyrockets.

Hope that helps a little, and if anyone has a better way of stating it, please chime in.

Mar 18, 2009
11:53 am
#6 Matt :

@ Shaun,

My thoughts exactly. The article didn’t really push the idea you should spend more as much as I thought, but the cover was way out of line in my humble opinion. As I said, maybe they pulled a Geraldo and tried to create headlines just to get people to buy their publication.

I like that “social finance” line. That sounds so much better than my “you are indirectly helping the economy with your taxes”. haha!!!

Mar 18, 2009
12:15 pm

Sadly, it doesn’t require a call from a prominent magazine or administration officials to spend above our means. We’ve demonstrated our capacity or exhuberant spending for decades and it has finally caught up with us. The current downtrend in consumer spending is just a blip and as soon as housing bottoms within the next year or two, you’ll see a whole new round of cash refis (using your equity as a piggybank) and credit card debt increases.

The only difference this time around? Instead of wrecking our economy and burdening the destroyers with the liabilities, we’ve now taken on so much debt that our children will never be able to pay it down. They’ll be paying for it after all, since the people that did this will be the voting majority in 30 years and we all know the politicians set policy based on what provides the most benefit in the next voting cycle.

Mar 18, 2009
12:56 pm
#8 Matt :

@ Darwin

I slightly disagree in our ability to spend irrationally anytime in the near future. Maybe I’m an optimist (or pessimist depending on your point of view), but I think we’ve collectively realized that overspending is a bad thing.

Since 1 in 5 homes are underwater, and everyone has heard horror stories of foreclosures, I’m not sure anyone will be willing to bet the farm for a family vacation to Disneyland.

I do agree with you on the voting majority comment. Tapping the baby boomers anger about their halved retirement accounts will be critical in the 2012 election.

Mar 18, 2009
4:36 pm
#9 SJ :

Well, I guess my question is that isn’t our economy productive abilities outstrip our consumption normally?
If the consumer cuts back X% and the industry does the same doesn’t the consumer have to cut back more?
Are we too efficient :O! Iono… it’s odd to me

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