I got your piles of cash on the sidelines right here:
Gersh on Washington
6-9-00: ZERO BALANCE
a special web column by NBR
Washington Bureau Chief Darren
Gersh
(Read his previous articles)
I believe in the new economy, but sometimes I think I believe too much. It is
tempting to think that everyone is going dot com. The economic times are as good
as they get. And, I want to believe that everyone is getting while the getting is good.
But many of us are not doing as well as we should be, and the clearest indication of
that is the lack of savings by almost half the population. Even though economic
times have never been better, 44% of American families report they are not saving.
The leading edge of the baby boom is heading into retirement, and half of those
families age 55 to 65 have piled up less than $45,000 in financial assets. Keep in
mind those savings must sustain 20 to 25 years of retirement.
In a series of stories this week I will examine why Americans aren't saving and what
can be done about it. This special series, called "Zero Balance," begins Tuesday,
June 13 and continues through Thursday. I'll talk to Treasury Secretary Lawrence
Summers, and leading economists, and examine surprisingly simple solutions to
solve the problem.
To be sure, all is not doom and gloom. As a nation, we are wealthier than we have
ever been. Homes are soaring in value, and the stock market is doing much of our
saving for us. Because official statistics don?t count our stock market wealth, our
savings seem lower than they really are.
But in important ways our rising wealth obscures the larger issue. Stock holdings
are heavily concentrated in the hands of upper income families that save anyway.
The real savings problem is for middle and moderate income Americans. Half the
population doesn't have access to a pension plan or a 401(k). For those who do
have a 401(k) account, the typical balance is now just $8,000. No wonder
economists say the booming stock market is irrelevant to two-thirds of the
population. Clearly more needs to be done to make sure middle and lower income
workers are building up the assets they need for the future.
There are signs the nation is about to get serious about saving. Both Al Gore and
George W. Bush are pushing plans to boost savings -- either through private social
security accounts in Bush's case, or Universal Savings Accounts in Gore's.
Companies are exploring creative ways to increase participation in 401(k) plans. The
Consumer Federation of America is testing what it hopes will become a national
campaign to change our buy and borrow culture to a savings culture.
The consequences are real. As a nation we now borrow close to 4% of our GDP
from abroad every year. That's over $300 billion dollars a year. Clearly this can't last
forever, and as the old saying goes, "things that can't last forever, stop."
We face a simple choice as a nation. If we don't save enough now, we will be poorer
in the future. |
