In early childhood all of us were taught to save for a rainy day: save up your pennies to get that baseball glove or hoop you always wanted. Later we were told to save those dollars earned working part time to get your first jalopy, plus enough for auto insurance. Before you could blink an eye you were contributing to your parents savings that would send you to college. When you married, savings were for a down payment on a house and education for your children.
The point is “savings” is for future liquidation through consumption. You also soon learned that savings were never enough and you had to borrow in order to further consume whether for noble purposes or for that HD-ready widescreen. The brilliance of the American economy is relentless consumption; otherwise the semblance of affluence would not exist.
True savings belong to the wealthy who are blest with the monetary cushion of consumption that cannot possibly come close to the wealth accrued and thus are able to invest the excess, which makes consumption possible for the rest of us, and simultaneously brings them further wealth. In short, the affluent save for many rainy days far into succeeding generations.
That is why personal accounts generated by a portion of payroll tax is a bad idea because it will be taken full advantage by those who already sit on the cushion of wealth from investments. To tell the little guy that he too can invest and therefore live in fat retirement and even pass the proceeds onto his progeny is an illusion; for he will always be caught up in the pit of consumption and thus will continue to his grave contributing to the great American way.
Copyright © 2005 Richard R. Kennedy All rights reserved. Revised: March 9, 2005.