Saving and Spending

I found a recent op-ed in the New York Times to be very revealing as it highlighted the need for America to enact both Democratic and Republican priorities. The piece was actually about why it's difficult to save money, but the data included was very indicative of the issues our nation faces, and how if we were sensible about legislating and compromise, we could address the issues with a mix of both Democratic and Republican ideas.

Let me start by highlighting two of the statistics and points I found to be most critical to the crux of my arguement:

1) Wages and salaries have failed to keep up with inflation, meaning that consumer purchasing power is decreasing, and people are forced to spend most of their paychecks on their needs. According to the Credit Union National Association, almost half of Americans live paycheck to paycheck. This is obviously more of Democratic priority, embodied most recently by the Occupy Wall Street protests. I have repeatedly stated that the gross income inequalities that exist in America are bad for the economy as well as being morally unjust, but the data shows it is true. Unless we enact policies that empower the middle class and help grow it by bringing people out of poverty, we will never recapture the economic boom that followed World War II and solidified our status as an economic superpower.

2) The average baby boomer has only $42,000 in his savings account, but the average medical costs for a baby boomer couple is around $240,000. Put simply our country is hemorrhaging money on Medicare. This is obviously more of Republican priority (though you might not know it based on the party's recent history), we simply cannot spending $200,000 public dollars per couple on medical costs, and of course, that disparity doesn't include the other costs of living retired couples must still address.

So if we look at our individual saving and spending problems, we can get a feel for what must be done on the national level to address our fiscal woes.

For starters, we must reverse the detrimental concentration of wealth in the hands of a smaller and smaller group of individuals. I've made the point time and time again that the problem with trickle down economics is inherent in the name, the wealth trickles down meaning that more and more of it is given to the people who least need it. Consequently, the vast majority of us are only able to save enough to cover 20% of our future medical needs. Do we really find that morally equitable? Do we really find that it is fiscally responsible to foot 80% of the medical bills for most retirees? Clearly our taxing and spending priorities have been misplaced for decades.

Conversely, while our spending priorities have not necessarily been misplaced, our rate of spending certainly leaves much to be desired. It is a worthy moral and economic endeavor to provide a higher standard of living for our citizens, and the welfare state we have created is not in need of dismantling, but it is in need of reformation. Healthcare for the elderly is great, but not when taxpayers have to foot 80% of the bill. We do need to find a way to make government spending more efficient and lower costs. If any semblance of medicare is going to be there for me and my future children - not to mention if we don't want to go bankrupt - then we must find a way to lower costs and reduce spending.

You would think that something that is so obvious would be a magnet for cooperation. How can we tax equitably and spend thoughtfully so that the wealth is spread in a manner that allows everyone to save and pay for their own healthcare and other needs, while at the same time cutting spending in the right places so that our future obligations - not to mention our current ones - are affordable?

But we aren't having these conversations, we are instead caught up in trivial ideological fights, embarrassing ourselves by missing self-imposed and economically harmful deadlines, and even when we throw together a last minute bill it really doesn't address either the long-term or the short-term problems. If America can figure out how to save and how to spend in a thoughtful manner we can easily right our fiscal ship. Alas, we don't seem to be capable of doing so.