Spenders Get the Gold Mine, Savers Got the Shaft
Some of you may be old enough to remember Jerry Reed of “Smoky and the Bandit” cinematic fame. Sadly, Jerry died recently, leaving a musical legacy that includes his 1982 classic “She Got the Gold Mine, I Got the Shaft.” OK, maybe it wasn’t a true classic but it was funny.
I’ve been thinking of that song recently, as our government continues to confirm that when it comes to acts of responsible money behavior by some American consumers – the “savers” – no good deed goes unpunished.
Let’s start with a review of …
What the “savers” have done in recent months:
Avoided credit cards (and 0% credit card offers) like they carried avian flu
Driven our aging, paid-for, four wheeled chariots with pride
Diligently paid down our fixed rate mortgage on a house we could afford from payment one
Saved for retirement in 401(k) accounts and IRA’s
Put away cash for emergencies and rainy days
Paid income taxes to the federal government for the benefit of ….. the “spenders” (see below)
Paid 7.5% of our income to Social Security and Medicare programs that will be gutted and means tested before we retire
Does anyone see anything evil, sinister, or unpatriotic about any of these actions? Anyone? Surely, then, we can now assemble a list of …..
Government fiscal and monetary policies that have rewarded “savers”:
[Sorry – my mind is drawing a blank here -I guess we will have to come back to this one.]
The Government punishes savers
Moving on, let’s review the highlights of how our politicians and government have led us away from the gold mine and into the shaft:
Lowered interest rates so that yields on our savings accounts and CD’s have fallen from 5.25% in 2007 to 3% or less now in most accounts.
Overspent on numerous out of control programs, causing deficits that drive wholesale inflation to a 9.8% annual rate.
Ignored sound energy policies, causing consumer prices to ratchet up at a 5.6% annual rate.
Shaken the U.S. equity markets to the core.
Gee, thanks for all that from this grateful saver.
Switching over to the “spenders”, it seems that our
Government has been rewarding “spenders”:
In August 2008, Congress passes and the President signs the $300 billion Housing and Economic and Housing Recovery Act of 2008. This law increases to $625,500 (from $417,000) the size of home loans that Fannie Mae and Freddie Mac are allowed to buy. After all, it’s just not fair that over-spending, broke Americans could only qualify for a $417,000 government-backed mortgage. Six weeks later, government regulators seized control of Fannie Mae and Freddie Mac, wiping out shareholders. Guess who owned a lot of that now worthless stock? The savers.
By the way, the Housing and Economic Recovery Act also grants new homeowners a 15 year interest-free tax credit/loan to buy a home. We savers who already have loans? We get the bill.
And as a final slap in the face to savers, the Housing and Economic Recovery Act grants re-financing relief to borrowers on existing mortgage loans. To be eligible, you must have a mortgage payment that exceeds 31% of your income! What were Mrs. ToughMoneyLove and I thinking when we made sure we could afford our mortgage payments without refinancing?
The number of Chapter 7 bankruptcy filings-designed to give individual debtors a “fresh start” by discharging many of their debts-rises by 36%. Guess who pays more for goods and services after the spenders’ debts are discharged? The savers.
In July 2008, the FDIC seizes control of IndyMac Bank. The bank failed primarily due to questionable loans to unqualified borrowers (spenders). Now we hear that the FDIC may lower mortgage rates for delinquent IndyMac borrowers (spenders) after suspending their foreclosures. Hey, will someone please take over my bank and lower my rate if I promise to stop paying my mortgage?
Finally, let’s not forget this year’s government stimulus checks, sent out for one purpose: to get people to spend. Go spenders! It’s your patriotic duty! They didn’t send Mr. ToughMoneyLove a stimulus check. I guess they were afraid I would save it.
The Hard Truth Bottom Line
That sums up Mr. ToughMoneyLove’s feelings on the matter. I still can’t think of anything to put under the “saver rewards” column above. I’m concerned that the pattern of shafting savers to help the spenders will continue.
Maybe I should write a sequel to Jerry Reed’s song. Anyone want to contribute a verse? Or do you feel the government rewards you for being a saver?