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Uncle Sam Wants You – To Spend


Don’t blame the parents. Instead, blame Uncle Sam.

As shoppers and retailers get ready for Black Friday, a new book says Americans could learn a lesson from more prudent first-world countries like Germany. In “Beyond Our Means: Why America Spends While the World Saves,” Sheldon Garon, a professor of history at Princeton University, says Americans are actively encouraged to spend.

Americans live large – literally. Garon says that the average size of the American house has risen from 980 square feet in 1950 to around 2,500 square feet today. “There’s only so much stuff you can put in a small house,” he says. Larger homes mean higher heating bills, more cars, fuel and renovation costs. Pay Dirt spoke to Garon about America’s need to shop.

Pay Dirt: Do Americans spend more than rest of the world?

Garon: They definitely do. The U.S. even from the early 19th Century has done much less than advanced economies to serve small savers who were often turned away by commercial banks. Some 25% of lower income households have no bank accounts, according to the Federal Deposit Insurance Corporation. We are also much more generous than most countries offering relatively low-cost, amortized, long-term 25- to 30-year mortgages.

Are we a credit card-holding nation?

After 1980 there was a perfect storm in terms of the expansion of credit. We had the deregulation of the credit card industry. The credit scoring system accompanied this expansion of credit. It’s a disciplinarian regime that forces young people and lower income people to take on more credit. Some employers even access their credit scores when hiring. Nobody really understands how it works. It’s very un-transparent.

We have to do more to regulate predatory lending to the so-called subprime customers who have little chance of repaying. We have a new Consumer Financial Protection Bureau. If it’s allowed to perform as it’s supposed to, that could do a lot. We don’t need to incentivize people to buy second and third houses. I’m not sure whether we should be giving tax advantages for home equity loans. And we need more financial education in schools.

What do you think of Black Friday? In New York, it feels like we’re bracing for another Hurricane Irene.

Americans are culturally pressured to spend as their obligation to keep the economy going. They’re rarely told to save to make the economy more stable. A fairly unique moment in American history came after the terrorist attacks of 2001. In previous wars, people were told to pay taxes and save. George W Bush’s father George HW Bush also called on people to shop in the late 1980s.

What can we do?

Of course it’s good to consume, but individuals need to find a balance between saving and consumption. Otherwise, it’s bad for you and bad for the country. Germany has had very balanced and stable growth. The French also have high savings rates. The Dutch, Belgians, Austrians and Swedes all have high savings rates and some restraint in terms of credit.

As an Irishman, I assume my home country is the exception – plus, the Greeks, Spanish and Portugese.

Yes, among First World countries the Irish resemble the Americans and British in having saved little and relied heavily on credit.

View Garon’s recent talk at the Center for Public Conversation in New York:


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    • Any revenue the goernemvnt collects from nationalized entities still comes from you.For instance if you take a ride on a goernemvnt railroad, who is going to pay for the trip? The fuel, the food, the iron in the tracks, the wood in the ties .. the maid the cooks, the pillows?Who pays for that?One way or another, the goernemvnt class has to be fed, and the only place that the money comes from is the private sector.~.

About Pay Dirt

  • Pay Dirt examines the millions of consumer decisions Americans make every day: What to buy, how much to pay, whether to rave or complain. Lead written by Quentin Fottrell, the blog examines these interactions, providing readers with news, insight and tips on shopping, spending, customer service, and companies that do right – and wrong – by their customers. Send items, questions and comments to quentin.fottrell@dowjones.com or tweet @SMPayDirt.