Sarah and Gwen: the Two-Headed Monster

This blog is about everything involving Lexington, KY or anything else we feel like yapping about.

Wednesday, October 01, 2008

No Incentive to Save

Trickle-down economics and deregulation made a great party atmosphere for the folks at the top. Now those at the bottom are being asked to foot the bill. It is not right. It is not fair. Most of all it is not something the voters should stand for. The question is: do enough of us understand what is happing to actually stop the insanity?

Yes. I said insanity.

The US has the lowest rate of savings among first world countries. We get no incentives to save. Interest rates are ridiculously low because the federal government has been consistently cutting rates to prop up the market for way too long. As a result, interest rates on savings accounts have not kept up with inflation. It effectively costs us money to save.

Today, the U.S. Senate is voting on their version of the bailout. They have not improved it. In fact, they placed huge tax cuts into their version at a time when the country can ill afford to cut anyone’s taxes. Aside from the tax cuts, there are a couple things we should consider before bailing out Wall Street. First of all, everyone seems to have forgotten the people who have been paying rent through the housing bubble, refusing to spend their hard earned cash on overpriced houses with crazy mortgages.

These folks have actually lost buying power by putting those dollars away instead of running up debt like their neighbors or getting involved in one of the cockamamie mortgage deals being floated by the banks. Why should we punish them further instead of letting the price correct so they can buy their dream home?

This bailout punishes anybody who has been saving and waiting for the bubble to burst so they could afford a home. Why should we artificially inflate the price of a home, while we reward the bankers who made it unaffordable in the first place? People renting while they saved up to buy their dream home didn’t get the big tax advantages the US hands out to homeowners. These folks are looking at the first buyer’s market in years and Washington wants to take it away from them. They have been waiting for this market correction to make their American dream affordable.

Instead of a big payoff for thrift, they are looking at more tax cuts for the instigators of the mess while the knife is driven deeper into the body of our nation. Economic growth fueled by loose lending and growing debt has created a giant wound. I can’t help thinking that our government is trying to place a band-aid over an open femoral artery. It will not hold. If Washington wants to do something to help in this crisis, they need to pull out the knife and use it to cut debt, cut spending, and cut out the giveaways. And if Wall Street wants to take out a loan to keep afloat, we citizens should give them one. But please, give them same sort of interest rates they charged borrowers the past decade. I am willing to invest a few tax dollars at those rates, and if they default, foreclose on them. That is the option they have given us.

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