WASHINGTON -- Noting that people "criticize me for harping on the obvious," Calvin Coolidge justified that practice by saying, "If all the folks in the United States would do the few simple things they know they ought to do, most of our big problems would take care of themselves." Consider what individual Americans know they ought to do, and what their government should know not to do.
The nation could subtract from its health care bill a significant portion of the costs caused by violence, vehicular accidents, AIDS, coronary artery disease, lung cancer and Type II diabetes resulting from obesity. All six problems are significantly related to known risky behavior, which can change.
Visa, the credit card company, recently reported a behavioral change that went remarkably unremarked: In the fourth quarter of 2008, for the first time ever, the dollar volume of purchases made with its debit cards -- they deduct funds immediately from checking accounts, rather than allowing card users to carry debt -- exceeded the dollar volume of its credit card transactions.
Suppose Americans begin living within their means. Will this marvel complicate the nation's biggest domestic challenge, the task of achieving and sustaining the rapid economic growth necessary for generating revenues to fund pension and medical entitlements for an aging population?
The nation now is 17 months into the demographic deluge that began in January 2008 when the leading edge of the wave of 78 million baby boomers began exercising the preposterous entitlement to collect Social Security at age 62, as most Social Security recipients do. In 1935, when Social Security was enacted, no one envisioned it supporting most retirees for a third of their adult lives. So, should Americans shop until the boomers drop?
During recent periods of strong growth, 70 percent of economic activity has been personal consumption. If Americans' new sobriety -- more saving, less spending -- survives the first tantalizing green shoots of recovery, can the recovery continue? It will not be killed by moderate thrift, because money saved does not disappear under mattresses; much of it goes into institutions that put it to work. The personal savings rate rose to 5.7 percent in April, the highest since 1995. It was 9 percent during the 1980s boom.
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