In predictable economic times, it makes sense—indeed it is essential—to put money aside and save for the coming rainy day. Trouble is brewing for each and every one of us. For some, it is just two appliances failing in the same month. For others, it is the unexpected loss of employment due to a company buyout or a changing marketplace. For some, it will be a cancer diagnosis with many expenditures, no matter how strong your insurance plan. Have you prepared for your rainy day?
In ancient Egypt, following Joseph’s dream interpretation, Pharaoh prepared for the future by establishing a safety net through storing grain that would keep people alive during the seven-year famine. We do not have inspired dreams today to help us identify coming threats, but the wise family (and the wise nation) prepares for the certainty of future storms, even without knowing the nature of those storms.
In unpredictable economic times, and in socialistic systems, saving for the rainy day makes less sense. If the entire economy is expected to go belly up, then it is logical to enjoy and consume today, for tomorrow our resources will be worthless. Enjoy an extravagant lifestyle, because your assets might be worthless next year. I’m making no dire predictions, but I have more than $19 trillion reasons to be pessimistic.
Likewise, in a growing socialistic system, there is little incentive to save. For example, the more money I save for my children’s education, the less unmet need they will have, and hence the less need-based scholarship money they will receive. There are more systemic incentives to spend than there are personal incentives to save.
In Kathryn Forbes’ classic story, “Mama’s Bank Account,” mother calmed her family by referencing their slush fund. If they were to run out of money, they always had a Plan B. We later learn, however, that their Plan B was actually a myth; there was no bank account. In today’s society, we not only have no savings, we have also lost our assurance from mama’s claims. There is no longer any sense that the future is secure. Indeed, recent statistics (FundReference.com) tell us that 41 percent of Americans in my age bracket (55 to 64) have no retirement assets. About 22 percent of employees currently have outstanding balances in which they owe themselves money to their retirement accounts. We save very little and then borrow that little that we have saved.
The infrastructure of America is in serious shape. Roads and bridges are deteriorating. Water and energy delivery systems are in danger. But, instead of investing in tomorrow, our governments are shortsightedly mortgaging that future. Some have argued that massive debt is not a problem, but indeed our current growing debt is not sustainable. My recent working trip to Puerto Rico revealed the serious limits imposed by massive debt levels. The commonwealth cannot invest in capital improvements because of their regular defaulting on debt payments. Although their per capita debt is considerably higher that our federal debt, our continuing borrowing rates will soon put us into similar dangers. Our multi-trillion dollar debt and our continued huge annual borrowing is not sustainable.
Granted, our economy is relatively strong, when compared to most economies around the world. However, we are falling behind in our national infrastructure. The current system of massive debts for short-term consumption is not sustainable. We have no bank account from which to draw.
I encourage individuals to save for their rainy day, because troubles do always come. I encourage our local, state, and federal leaders to do the same. We, as baby boomers, have failed to invest in the coming generations. Instead of strengthening our infrastructure, we have mortgaged our future. This is not progress, and it is not sustainable.