At Arm's Length: 09.07.04

I am pleased to report, that a good deal of my time recently has been spent signing copies of my new book, "Building Wealth in a Paycheck-to-Paycheck World" (McGraw-Hill ISBN: 0071423761). I do this knowing that perhaps the book will help them with the problems facing middle America, hoping they will change; a slow evolution from a spending nation to a savings one, one reader at a time. On the cusp of one of our country's most crucial elections, let's review where we are as investors and more importantly, savers.

How did the average American, while close to the emotional toll levied on our psyche even far away from ground zero get caught up in the economic stress afforded this country in the days following 9.11? The urgent cries from the podium for revenge in the form of spending as an economic middle finger at the terrorists who dared to disrupt the idyllic path the country was on prior to the attacks. We had surpluses as far as the eye could see and much of the country was relaxing along with our oft-vacationing President.

And when tragedy struck, we were encouraged to change the world with our enthusiasm of commerce. Spending was patriotic we were told while savings was counterproductive in the country's efforts at returning to normality, a state of being far too many people were unaware of in the first place. Our leaders were fighting terrorism with our pocket books. It was a novel approach whose cost unfortunately was yet to be revealed. Those unknown bills did show up with a change in the fiscal landscape. From an economic mountain top, we moved very swiftly into the black abyss of debt. But this cost was not borne solely in wars of retaliation. It was to take aim at our personal surpluses as well.

Monetary policy was adjusted, tax cuts were made, and the whole economic machine was set into motion on the shoulders of two-thirds of the nation. Trouble was, the forward motion was achieved by driving backwards. We quickly went from surpluses to deficits in a staggeringly short time. This surplus was the pre-Bush government's effort at staving off future problems in Social Security and Medicare by saving money to deal with them. I know the previous statement will never be proved but for the sake of example, it was this change in thinking, a fundamental shift in monetary planning that took this country down a long and foggy path, one that enabled Americans to borrow to spend.

That needs to end soon. It is, however a hard habit to break. Just ask the White House.

They have alluded to cutting spending to cover future plans to create an ownership government. But without any hens in the hen house, the promise of hens in the future does not put eggs on the table now. Giving the government to the people at a time when the government's debts are seriously impacting the GDP is hardly acceptable nor is it passable as fiscally responsible.

This nation's savings rate is at an all-time low of 0.4%. Without a healthy nest egg of domestic savings to borrow from, we have been forced to go overseas looking for depositors. The presence of these investors lessens the strength of the recovery acting more like economic kryptonite against our super sized accommodation of low interest rates and fiscal excess.

What we were offered at the end of the Republican Convention were insults to those that are trying to understand how the GOP can correct the course this nation is on, a path that was created and nurtured by their own policies. We were told that we were girlie men and small minded if we questioned these problems.

This one-two blow was delivered in the usual way: disagree with the President and his belief that we are on the verge of "Bush prosperity" and you most likely suffer from a visual flaw brought on by the ability or lack thereof to ignore the individual measures, the misguided steps on this road to recovery. We should, we are told instead to look at the big picture.

Trent Lott, the former Senate leader isn't exactly sharing in the vision of building a strong future on almost insurmountable deficits. Using the word amongst the party faithful is tantamount to insurrection. His less than enthusiastic acceptance of the current fiscal dilemma lead him to use such language during the convention as balanced budget and deficit.

It might be wiser for the Mississippi senator to address the American people on the fiscal responsibility that they have to themselves first. Changing the no-savings mentality of millions of consumers would have a short term, albeit devastating effect on the economy that would allow a realignment of sensible policies, pricing, and above all, a balanced budget on the home front.

The previous week's articles.

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