One shutdown lesson is that Americans need to save more

That is the topic of my latest Bloomberg column, here is one excerpt:

Indeed a higher savings rate is possible, and not just for the wealthy. Most Mormons in the U.S., for example, manage to tithe at least 10 percent of their incomes. This suggests it is possible to curtail one’s consumption without losing the best things in life. Mormons also tend to have especially large families, making tithing all the more difficult. If Mormons can tithe so much, is it so impossible for the rest of us, including government employees, to save more?

There is also a new “gospel of savings” in the U.S., being led by such renowned (but non-mainstream) figures as Dave Ramsey and Mr. Money Mustache. They reach millions of Americans, imploring them to strip down their consumption to essentials and to save a much higher percentage of their incomes, sometimes 20 percent or more. Ramsey wrote a column giving advice to unpaid federal workers, including “sell stuff” and to cancel Netflix.

Do read the whole thing.

Comments

Would be surprised to learn that the affected government workers actually have zero savings - but many Americans choose to save exclusively in tax-advantaged retirement accounts that may not be liquid (at least without penalties or interest or potential investment losses) to cover unexpected expenses. As a result, they may not have much of a cushion month to month in their checking accounts.

Most of the time that makes sense - government workers normally expect to have very low income volatility and so you'd expect them to be among the least liquid American workers. Why forego returns on cash that's sitting there earning zero interest?

Aren't government employees often paid worse than in the private sector, but get tenure in exchange? I might be misled by propaganda, but government seems to me to be employing comparatively lots of "common garbagemen" with low education? It's harder to save if you need to feed your family of four on $3k a month, yes?

Google says.... "In 2014, the average federal employee salary was $84,153, approximately 50% more than the average private sector worker earned. This discrepancy increases to 78% when benefits are included. The average federal worker costs the government (aka taxpayers) $119,934."

For my field, tech pays more in the private sector than public. For my old job, finance also pays more in the private sector than public. All those Goldman Sachs people that Trump hired to *ahem* drain the swamp all took pay cuts to work there

Not anymore

Saving and budgeting is a choice one makes. Most people choose not to even make the choice.

If you choose not to decide you still have made a choice.

Exactly! It is a choice one makes.

The adverse consequences of taking funds out of an IRA or 401(k), both taxes and penalties, are intended to deter one from doing so before reaching retirement age. Sure, people should save more, but for what? An illness or injury to pay the high co-pays and deductibles? The high college tuition for one's children? Here is David Leonhardt on the fleecing of millennials: https://www.nytimes.com/2019/01/27/opinion/buttigieg-2020-millennials.html His point is that we have chosen to subsidize seniors rather than the working age. No, he is not suggesting we cut Medicare and social security, but augment benefits for the working age. That would require a tax increase, a likely non-starter. Republicans have proposed taking an advance on social security in tough times, but at the cost of reduced benefits after retirement. The "gospel of savings" sounds more like the "opportunity gospel". Or the "miracle spring water" that one televangelist will send you, "with no obligation". He offers testimonials from grateful recipients who, by the grace of God, won the lottery, got a raise, or received an inheritance as a result of the "miracle spring water".

"His point is that we have chosen to subsidize seniors rather than the working age."

Rather we have chosen to subsidize seniors with money taxed from the working age.

Replace Social Security and minimum wage with an Negative Income Tax /UBI.

Nevertheless 95% of people who have no savings now would not have savings if the made 25% more but they would live a little better, except those in big west coast cities and New York city where the landlords would live a little better..

So, by eliminating subsidizes to old people, young workers will be much better off providing free food, housing, transportation to old people?

I grew up at the tail end of the glory days of no Social Security. A number of my friends had their grandparents living in their homes, supported by their parents. That was probably a major driver of my peers to leave home by any means, join the Navy if they were too much of screw ups to go to almost free State university college and university, and then only visit their home town. Thankfully, the Federal government proviided millions of jobs for screwed up kids. The pay was low, but housing, clothing, food, transportation, and training was free thanks to high taxes. Then Reagan et al, ensured the old would be independent of their kids by hiking the flat tax while cutting off the jobs for screw ups to cut taxes on the overpaid old boomers who made much more than government workers. But then, boomer Reagan lovers cut the pay for their kids generations so government workers would become high wage workers.

So high paid that Accenture has been paid $2 million each to recruit 33 DHS border agents.

Yeah, this is kind of a terrible TC post. You have a guaranteed pension and little chance of being laid off.

That being said, you should probably have 2-3 months of savings available for an emergency, even if it has to be in not so liquid equity. Not a good idea to have literally nothing in the bank.

Little chance of being laid off, but fair chance of being furloughed due to government shutdown. This was not the first shutdown in recent history, although admittedly it was longer.

Sure, so plan for those. It is part of the job description. One of the downsides, so plan for it.

When I worked for the feds 10 yrs ago, we had a 401k (thrift savings plan), not a pension. I assume all new fed employees do as well

I think he's talking about Social Security which only Federal government workers and some State's teachers and government workers get, a program unavailable to self employed speculators creating wealth by inflating asset prices.

100% guaranteed pension? That depends on the future liquidity of the government to pay those pensions. In California we can see that this gamble doesn't always work out. What if you would have gotten a two-term Sanders presidency? Would you still be as confident in that strategy? The American government is a high-variance institution. Staking your future on it and nothing else seems rather brave.

Or somebody who actually cuts down the size of the federal goverm-.... yeah, who am I kidding here.

I mean, this is true, I just don't expect people to plan for it. A 95% guaranteed pension is like the worst possible asset to own.

Cancelling Netflix seems like the absolute worst way to save money. When I'm looking for ways to save money staying in and watching virtually free television is certainly way up the list.

Indeed, the lowest hanging fruit is probably drive a cheaper car. Modern automobiles are ultra-reliable and last for hundreds of thousands of miles over decades. Also research in hedonics reveals that upmarket cars have virtually zero impact on day-to-day happiness. Unless you're completely flush with cash, there's zero reason to buy or lease a new car instead of a three-year old certified used car.

But another week or two of the shutdown and the media would have been running sob stories of federal workers living in their cars. So they should at least have nice cars, with plenty of cup-holders.

Yes, and cooking your own food.

Buy an antenna for $20 and watch free TV broadcast OTA?

You don't live in left behind Trumpland because you have Internet with speed high enought to stream video, so you have access to ABC, CBS, NBC, FOX, CW, PBS plus several religious and shopping networks, plus several channels broadcasting studio libraries of TV and movies, like MeTV, etc.

Maybe you live suburban and would need a $50 antenna installed outside, so that will require an added $100-200 of cable and mounting hardware and signal repeaters.

The amount of OTA TV I get is ten times what we got on our TV when I was a kid in the 60s before cable, or after cable franchises were granted with prices capped at less than a telephone line, and TV stations sued cable companies to be carried free under the must carry rule, instead of TV stations cutting off feeds if not paid enough per cable customer.

Even in the Boston-Manchester metro, so much TV spectrum is available that everyone gets 10-12 dozen signals without interference each carrying 2 to 6 channels.

A one time $500-600 will buy a Tivo or Tablo OTA streaming server with lifetime service. Other less capable options exist.

We wanted to have a Super Bowl party in our HOA clubhouse without cable. I bought a tuner for $50 and we get about 20 stations, including all the networks that rotate the game. I think people were puzzled that you can get OTA TV.

Tv.fool will show you the stations you can receive in your location.

You can definitely cut the cord for cable and get OTA TV. But $20 for Netflix is an entertainment bargain compared to $60 (varies a lot) for cable TV or $20 for movies for 2 or $100 cell phones for 2.

@asdf
In Mustachian logic:
You cancel Netflix, which reduces your consumption of TV. This saves money, because the time you don't spend watching TV, you would work out, go on hikes, play with your kids, learn new and useful skills, potentially saving you or earning you more money.
It also makes you happier, because..... , which in turn...... blablabla, you see the logic or you don't.
Point basically is, time is money. And in order for spending time on the TV to be a good deal, they'd have to pay you a whole lot more than -10 dollars a month.

If $10/mo is hurting you that much and if getting back $120/yr really makes a tremendous difference in your budget, I'm 100% certain you are taking the wrong approach to your problems.

That is true, but people have lots of $10/month habits that all add up, and the spouse never wants to give any of them up because they are "only ten bucks."

I agree with Haselhuff. A $500 monthly car payment for that unnecessary, brand new, maxed out SUV greatly outweighs even a large number of $10 a month Netflix type habits.

You're not wrong, and neither is he. But I know a lot of families who have died under a thousand cuts.

Where can you get a car loan with $500 a month payment for the typical SUV/truck sold by GM, Ford, Jeep?

60 months at 0% at $500 is only $30,000, 7 years $36,000. Average sale price of US made US auto maker vehicles is over $40,000 due to average $50,000 sale price of trucks and SUVs.

The "max out" features cost a few thousand max but boost prices about ten thousand.

Clearly you took lessons in personal loan banking from Wilbur Ross. Car loans are secured personal loans. And due to hjgh actual interest rates far more profitable than making cars, leading to GM in 2007 being a bank that gave away cars and trucks to its bank loan customers. And then its bank customers couldnt repay the loans, and cars are harder to deal with than toasters returned when hyper regulated banks were dealing with out of work customers withdrawing their savings deposits made to get the free toaster back in the 60s/70s.

Feel better after your rant Mulp? I was throwing out the $500 for auto loan to make an example that cutting back on multiple $10 expenses is somewhat silly when you have a large loan for a SUV that is more than you need. The $500 was only to make a point.

No, no, no! You're doing the math wrong!
Look unflinchingly at the opportunity cost, you're neglecting the additional health care expenses, lost time due to avoidable illness, since you're unlikely to keep as fit as you should.
Watching TV doesn't exactly give you brain damage, but it wont make you smarter or better, which doing almost anything else would to a smaller or larger degreee.
But people don't notice opportunity costs. We have loss aversion, but that math to see the true price of watching TV is too hard for us to see intuitively without conditiniong ourselves.
You might 'hate' exercise and love 'TV' and argue, that those are your preferences. But those preferences don't serve you well. You serve them.
It isn't like a hard drug, it wont totally screw with your mind, but it aint good for you either.
Mustachianism is heavily inspired by Stoicism and hedonics research. His argument is, that if you learn to get joy from the useful and learn to get displeasure from the useless, your dollar spent per happyness unit gained can be much lower. If you want to be happy (or your goal is adjacent to that), then wasting time watching TV is a very inefficient way of achieving that goal.
Now MMM will definitely punch you in the face (it's an expression there, don't worry about it), if you were to buy or make payments on an SUV, if you don't for some reason need to brave rough terrain. Or ever buying something that you so very obviously do not need, you are harming yourself psychologically, because you're making yourself weak and dependent on luxury by indulging yourself so!
The Netflix addiction makes you into a weak, stupid human, who needs to be entertained (weak), because he will forget how to do something creative with his time (stupid).
Then you end up the kind of person without FU-money and/or lacking the strength of character, whose whole world breaks apart, because of something trivial, like your company having to downsize or some real estate guy insisting, that some meaningless Southern property must be developed.
Tyler would call this complacent.
You may call this "feel good"-economics, if you like.

So much TV is available cheap because too much cash is looking for investment opportunities with 90 year income streams and paying creative low wage food service workers a few thousand dollars for a few weeks of work, plus maybe ten bucks a month for the rest of their life is much lower risk than building a factory to make stuff that requires paying workers 90% of the price of every item they make is sold for.

In the US, the founding industry is so hard the government must subsidize it while the government tries to prop up the industry by buying the excess government subsidized production as part of Trump's trade war.

Note, Trump immigration policy will destroy the industry that "made America Great", agriculture, by cutting off the source of labor. Since Earl Butz, then Reagan, cutting food costs has killed off any hope of supporting a family in agriculture.

But boosted jobs making TV programs for those who barely survive in food jobs.

But hey, Reagan came from Hollywood not from agriiculture or manufacturing which became great because of what farmers demanded government promote to serve farmers. (I grew up in Indiana when the Grange, 4H, and other political community organiztions still existed and kept government teaching crop rotation and food processing integral to public school civics.)

" learn new and useful skills, potentially saving you or earning you more money."

Nah that's total,. delusional BS. You earn more money by getting credentials and not online BS credentials, real ones from real schools that cost real money.

For MMM personally it's more about learning crafts and trades. He learns about plumbing or HVAC and then has an easier time with his side business of buying and fixing up houses or with improving his own house. This is his kind of fun. He earns a lot of money on the side, because his chosen hobby happens to be lucrative. However mostly he spends his time with his family. He homeschools his son (not sure, if that's still true at the moment), because he thinks it's unnatural that children should not be raised by their parents.
I don't have any online credentials, so I don't know if they're BS.
"Real schools" don't have to cost money, if you're willing to learn German.

In my particular neighborhood, on average people seem to be much less "house-proud" than "car-proud." This never fails to puzzle me, but serves as a reality check, that the things I care about - tidiness, curb appeal, a pretty yard - are not universal and it is best, on any issue, to start from the assumption that others' interests are opposed to whatever mine might be.

It's "feel good" economics. A lot more palatable to the masses than "study a new skill improve your net worth" or "move to a metro with better wages"

Cars are a big one too. If you're looking for a laugh, drop in the SoFi Facebook group and read about kids with $200k in student debt agonizing over the choice between an Audi or a BMW. That's a crazy, totally avoidable expense.

Rule 1 of personal finance is "establish a rainy day fund".

The top 3 highest income counties in the USA surround DC.

The maudlin reaction to a temporary cash flow hardship among cosseted federal workers elicits little sympathy in the real world. And rightly so.

100% correct.

No one would care except federal, state, county, and municipal employees are massive democrat voting constituencies. Their unions make big political payments to advance their well-being.

The typical, pampered Fed has ridden this pony, now, many times. He/she should be ready for it.

Aside from savings, a homeowner (assuming equity - FMV less liens balances - in the residence) could establish a home equity line of credit, which would require interest-only payments for ten years. In a reopening of the shutdown, the advance balance (from checks cashed/written to play for Netflix, beer, and pretzels) could quickly be repaid when the Fed gets off the couch, drops the six packs of beer, and returns to being overpaid for doing nothing useful.

Can confirm we’re all Ocasio Cortez supporters.

Great point as always Dick.

How’s that wall coming amigo?

I love you, man.

Were you one of the 29 FBI heroes that raided Roger Stone?

Given government workers are so overpaid, why are you so stupid you didn't bid $250 million for a contract with Trump to easily hire Federal workers, aving taxpayer $50 million?

"SHAPIRO: The consulting firm Accenture was hired to help staff up Customs and Border Protection, Immigration and Customs Enforcement. That relationship did not work out. What went wrong?

O'TOOLE: I think the thinking was that the government has, for a long time, had trouble doing this, so let's go into private industry. Let's go outside and see if they can do it better. And so they awarded this contract in November 2017 to Accenture, which is sort of a multinational management consulting firm. It was for almost $300 million. They had pledged to hire 7,500 new officers for CBP within five years.

Instead, what we have is, from November 2017 to now, only 33 people have been hired under that contract, about 60 million has been allocated for it.

SHAPIRO: So tens of millions of dollars to hire thousands of people, and 33 were actually hired."

https://www.npr.org/2019/01/28/689473992/why-its-so-hard-to-recruit-and-retain-border-patrol-agents

Given the $2 million cost per worker recruitment cost, every border agent on the Mexican border must have the salary, bonuses, benefits of small US corporate CEOs.

So that is it. Let American public workers eat cake. As important as saving is, I wonder what happened to America that it can not even manage to keep its own government open?! I can not imagine it happening in Jefferson's America or Eisenhower's.

....so "Americans really ought to be saving more. It shouldn’t be controversial to point this out.." ?

Guess the "Americans" in the U.S. Congress are automatically exempt from such exhortations of frugality -- Congress spends trillions at a staggering, accelerating pace -- with no end in sight and no hope of honestly paying back the National Debt.

...but somehow it's average Americans who are the reckless spenders ??

US$22 Trillion [Federal Gov't deficit] &, increasing by $3B/Day

The US Congress will never pay it back

But kick households, especially those of Federal Government workers!

I'm neither a Mormon nor an economist, but the proposition that Mormons manage to save while tithing 10% seems misleading. It's not like that 10% disappears into the ether, it (probably?) substitutes for stuff non-Mormons would have to pay for otherwise (eg day care).

Indeed. And church "services" ...(your example is daycare).... would be egalitarian. There would not be a "rich baby" daycare and "poor people" daycare, like there is in the secular provider world. In addition, the spending of tithing funds would be highly watched by the community members. And different groups of parents providing addition support to the daycare on a volunteer basis... equally provided to the "rich babies" versus "poor babies"... the secular world is too quick discount church communities and the value provided.

I am Mormon (and, incidentally, an economist). *no thanks*'s suggestion is basically wrong.

The connect from my 10% to any direct material benefits I receive is hard to see. There is no day care, for example (unless you count the now one hour of church on Sunday where children attend Sunday School). I suppose it indirectly helps to pay for the church buildings and temples that we get married in. Sometimes at a Church social activity I get a bite of food that the Church may have subsidized. But basically I get nothing (material, I mean--the spiritual benefits are sublime!).

Same here. I find it amusing how people have this instant reaction (without doing any research whatsoever) to justify their life choices.

As an upright tithing Mormon do you think that if you lost your job or fell on hard times that the church or its members would help you out? I think that's true for most churches, Mormon or otherwise. I've never belonged to a church, so don't really know. 10% is a lot. I have heard from some Mormons that there's a positive cultural attitude within that church favoring hard work and money-making. Possibly with business networking thrown in. I guess Mormons also support more international outreach programs than most churches.

Religious communities (broadly defined) are among the most cost effective innovations in human history.

For instance, being a highly observant members of such a community is more effective at improving health than curing the average cancer.

Keytruda, for instance, runs around $100K/QALY. For the median American, a tithe would run around $5K/year (if paid before taxes). That is about 20 years of tithing.

Mormons in Utah, on average, live something like 7 years longer (with disability adjusted scores) than non-Mormon whites in Utah (and remember the non-Mormons in Utah aren't exactly rabid atheists on average). Strictly from a "does it make you live longer" aspect, being a practicing Mormonism, is much more cost-effective than basically any drug to fight cancer.

Even more generally, curing cancer is estimated to save anywhere from 3-7 (higher for Americans, less for people who couldn't afford cigarettes during WWII and its aftermath) years of life at the population level. The NICE prices a QALY at around $40,000 so the total expenditure. If Mormonism were a drug, a full Beaveridge, socialized system would think it cost effective to pay $280,000 over a lifetime. Or about what the median full-time worker would pay in after 56 years.

Put it another way, in any country where medical expenses are in the main paid for collectively, a person's abandonment of strict religious observance is expected to collectively cost us hundreds of thousands of dollars. A 1% increase in disbelief among the population imposes costs amounting to hundreds of billions of dollars on the future, just from the costs of medicine.

Worse still the effects of religion are greater for the poor, scale remarkedly well, and work on basically every self-reported measure of well being. The effects hold up when you control for wealth and income (unlike a remarkably large amount of other interventions) and show up in all manner of fun places.

Even more shocking is the complete of any other social institution (atheist, agnostic, or whatever) to offer even a fraction of the benefits of religious observance. Not the communists. Not American Atheists. Not the Green Party.

I know of absolutely nothing which $5000 per American can buy as much good for the public purse.

Maybe it is all some wacko selection effect that we have never been able to document or find evidence to confirm ... but I have seen billions dumped on things with far worse evidence.

Religion is the most under-valued good in society unless you place massive weight on the hedonic rewards from being irreligious.

If that's true then why are Christian countries in Latin America and Africa, still shitholes? Honduras and El Salvador take turns being the murder capital of the world. But they love Jesus so all is forgiven? The Philippines is the only Christian majority country in Asia but it is less prosperous than the atheistic communist economic juggernaut that is China and also less prosperous than China's little commie neighbor Vietnam. Also why aren't Muslim countries paradises if religious societies are so effective? I think you are cherry-picking with rose-colored glasses.

Largely because they aren't any more. The steepest rise in quality of living occurred under a heavily Christian context in exactly these places. The greatest falls in these countries quality of life occurred when the atheists took over. Be it Paraguay in the early 29th, Mexico in the early 20th century, or Ethiopia in the mid 20th somehow these countries invariably got worse when they tried to eschew religion. And of course the greatest tragedies of all time somehow all coincide with things like Pol Pot, Mao, and the like.

You call cherry picking, but let us examine the irreligious states in Asia. You have North Korea, which promptly became terrible when it went atheist. Then there was Cambodia which had the worst killing in history. Vietnam which spent decades being terrible. Let us not forgot the wonders of atheism lead to massive quality of life gains in Mongolia.

The truth is that the religious rich have better outcomes than the irreligious rich (live longer, report more happiness, have more stable marriages, etc.). The religious poor have better outcomes than the irreligious poor. When looking at individual level data, religion is pretty much always a not positive good.

So why does that not match up completely with aggregate data (e.g. countries?). Because of Simpson's Paradox. A place that for some other reason has more rich people (geography, accident of history, etc.) and fewer poor people is showing us that it is healthier to be rich than poor.

This is why scaling is so important. Plans which only work for rich, dense areas (like say London or NYC) are basically meaningless for humanity's outcomes. If part of your benefit comes from things which are not generally applicable, it all falls apart.

Religion, according to the data, is generally applicable. If you are rich, it works. If you are poor, it works. The fact that for a first order analysis every individual gains is pretty hard to hand waive away.

Maybe religion is bad at fostering wealth. Okay fine, show me the data. Appealing to differences between historical empires and island states is just not going to cut it.

"Largely because they aren't any more. "
You have a strange way of looking at the world if you just assert things without looking at the facts.

https://en.wikipedia.org/wiki/List_of_countries_by_intentional_homicide_rate

(as compiled by UNODC)
#1 El Salvador: 82.84 per 100k
#2 Honduras: 56.52 per 100k

They are literally the two most homicidal countries in the world and they are both Christian. Let's look at other parts of the globe. The one Christian majority country in Asia is, again, the Philippines and surprise, it too is also the most homicidal country in Asia at 11.02 per 100k (see a pattern here?). The most homicidal African countries are Lesotho (95% Christian) and South Africa (75% Protestant). We already talked about the Americas with Honduras and El Salvador. Europe is largely secular but Russia and Ukraine (both Orthodox Christian majority) are tops in murder.

With all that, Christians have a clean monopoly on homicide across the globe. Christians kill at a rate that Muslims, communists, atheists, Buddhists, and Hindus would find eye-popping. Who's really pro-life and who is just virtue signalling they are pro-life?

You wrote another 7-8 paragraphs on top of the previous 10 without mentioning Islam. This is remarkable. The one religion that gets so much attention, fastest growing major religion, and causing all kinds of waves in world events, but you choose to selectively ignore it like it doesn't exist. Yes, you are cherry-picking if you can't even say one sentence about it. Maybe you cannot because Islam shows the ugly side of religion full of small-minded fanaticism that can and has lead to acts of terrorism in times of relative peace and to full out wars in more fraught times. Because the Islamic fanatics of today are too similar to Christians a few hundred years back. Ready to annihilate one another for small differences in theology and doctrine and for more mundane, worldy pursuits like political power and wealth.

For the record I am not against religion at the personal/family level but mixing greater society and religion is something that Thomas Jefferson and others had the good sense to prevent with a wall of separation that would make Trump blush. They knew their history and knew well what to do and what not to do.

I suppose it is too much to ask for you to engage with the actual claims being made.

Individual religious praxis is associated with superior life outcomes in all societies that have ever been measured.

Poor and El Salvadoran? Better outcomes for the poor El Salvadoran Christians than for the poor El Salvadoran atheists. Rich and Japanes? Better outcomes for rich Japanese Christians than Rich Japanese Atheists (e.g. low suicide rate).

So why doesn't crime measure up? Because there are other things going on than just religious affiliation (let alone praxis). For instance, El Salvador experience a massive civil war before its crime rate rose. This is very typical (the US, for instance, experienced large increases in crime after the civil war, as did the UK). More interestingly as El Salvador became less religious (thanks to the FMLN), they became more violent. When ceteris isn't parabus, you can quite easily get spurious correlation. This is particularly bad when examining individual effects via aggregate data.

So here is the simple challenge: which group is expected to increase standards of living by ditching religion? Poor Americans in Applachia? Rich Japanese? The victims of war in Kongo? The average folks of Switzerland? Unless most individuals are actively worse off by adopting basic religious praxis, all you are doing is falling into Simpson's Paradox
repeatedly.

As far as Islam. Islamic fanatacism has killed far fewer than atheist fanaticism. In Cambodia, for instance, the homocide rate for a reasonably liberal standard was around 20,000/100,000. Even if we look at explicitly at small groups dedicated to killing their religious rivals, the League of the Militant Godless is still the historical champion. Or if you want to talk about small differences in "theology" driving killings, then I would submit that the divisions within Chinese atheism under Mao killed more than all the Christian religious wars combined.

Looking at the actual data, an individual is better off practicing religion within a religious community. The number needed to treat with religious practice is better than every medical drug ever sold.

As far as Jefferson, give me a break. In Virginia he authored and signed bills to set apart days for religious observance to God. As president, Jefferson signed a treaty to provide government salary to a Catholic priest from the federal purse. He further funded chaplains and supported opening Congress with prayer. In reality, Jefferson, like all of the founders, held (as he published in the Kentucky Resolutions) that the regulation of religion was a state matter. He supported Federal government "establishment" of Catholicism because the land in question was tribal land and not the domain of a state. He did so likewise for the District of Columbia (e.g. Congressional chaplaincy) and the federal military (e.g. Naval chaplains) precisely because these did not tread upon the several states individual authority to establish religion.

And this is the thing. The Thomas Jefferson myths and special bleeding regarding societies still recovering from living civil wars just shows that you are unwilling to grapple with actual data. The data is unequivocal, religious praxis is associated with longer life, better outcomes on basically every measure of well being, and lesser societal costs at the individual level. If we want to through out this sort of longitudinal data we are throwing away the vast majority of: physical therapy, most surgery, and every social program ever.

But please show us yet another attempt to throw out some anecdotal red herrings to, once again, ignore the data on individual affects.

I'm sure systematically abstaining from smoking and drinking have absolutely nothing to do with it.

Presumably you know this, but the LDS operates a large and fairy generous private welfare state for its members. Mormons in good standing who fall on hard times generally don't fall into poverty since the church helps them out.

His argument isn't that Mormons manage to save in addition to the 10% tithe. It's that if Mormons can tithe 10%, non-Mormons should be able to save that much.

Right. Every non-Mormon that has a higher income than the lowest-income tithing Mormon can save 10% of his income by adopting the lifestyle of his Mormon counterpart.

Alternatively, everyone except those with the lowest incomes can save 10% by adopting the lifestyle of those that make 10% less than oneself. It takes a pretty strong sense of entitlement to think that one is too good to adopt the lifestyle of someone else that makes 10% less.

If nothing else, tithing 10% means you can live on 90% of your income, so if Something Happens you have a smaller nut to cover.

It is funny that Tyler bring up Mormons as an example of thrift and virtue when last year a Mormon American named Kevin Mallory spied on behalf of China because of his deteriorating finances. The problem with the Trump shutdown is that it creates a geopolitical weakness that foreign governments can exploit.

There's also a lot of uncertainty on just how easily Americans can weather shocks, and though Wilbur Ross should have known better than to make that comment he is not alone in his confusion. The press (e.g., Vox and CNN) responded to Ross's comments by linking to the 2017 "Report of Economic Well-being of U.S. Households" that 40% of Americans said they couldn't cover a $400 expense. I would have liked to see some of the cleverer economics journalists pick up the Karen Pence 2011 paper (also using Fed data, but from a separate survey) that 79% of Americans have "broad savings" of at least $3,000. https://works.bepress.com/karen_pence/15/

The 40% number comes from here:

The Fed asked respondents how they would pay for a $400 emergency. The answer: 47 percent
of respondents said that either they would cover the expense by
borrowing or selling something, or they would not be able to come up
with the $400 at all. Four hundred dollars! Who knew?

Credit cards equal borrow it.

It is not a very good question and to some extent credit cards are a substitute for savings.

I'm disappointed that nowhere in the article does the word "budget" appear. It seems to me sitting down and working up a monthly budget is required before any family can plan a rainy day fund. Yet I get the feeling very few Americans do that simple exercise (witness Starbucks' success, not Netflix's).

Well, if you don't drink, it's easier to save, right?

All things in moderation.

I save and drink (not in bars or restaurants). I am drinking (a jigger a night) a bottle of single-malt Scotch that a son gifted. It's not MacAllen, I like MacAllen better.

Once each month. I buy from Costco a case of Yuengling beer at under $18. The big liquor discounter sells Dewars (I like Dewars) for $32 per 1,750 ml, buy once each month and a half.

I've been trying to be a Catholic for 60+ years. This Lent I'm giving up single malt Scotch. I'll be drinking Dewars.

You and Mormons. Jesus give it a fucking rest already.

The "I live in a high cost of living place so cannot save" argument does not hold water. If you're not earning a high enough salary to justify the higher cost of living, you need to move to lower cost of living area or at least accept the tradeoff that you've made and that financial insecurity will necessarily be a part of your life. You can make $40K as a manager at Denny's in the middle of Idaho.

Success of the FIRE movement is a testament to what's possible - a lot of these people are making $70K-90K a year (on the high side for many Americans), but achieving savings rate of 50-60%, and retiring in 10-15 years time.

Also, worth noting that the most popular cars in America are $30K-$40K cars that people are financing and/or leasing while making like $50K-$60K a year. A lot of people in the US have inexcusably obscene levels of consumption, in almost every respect (food, energy, housing), even compared to other wealthy countries.

I don't know if this has previously been discussed here, but it's interesting work from the Federal Reserve Bank of New York on student loan debt and home ownership: https://libertystreeteconomics.newyorkfed.org/2017/04/diplomas-to-doorsteps-education-student-debt-and-homeownership.html

Obviously where you live is a choice, even if people don't seem to act like it is. But there's something to be said for the idea that if you endow a young adult with a bunch of debt at the start of their career, it will affect their decisions. For example, they may delay home purchase because their cash flow needs to go elsewhere. They may start out with poor saving habits because they don't have the cash flow to think long term. They may choose to live somewhere where their initial paycheck is high, even if it negatively affects their long-term financial well-being (NYC and California come to mind).

"you need to move to lower cost of living area or at least accept the tradeoff that you've made and that financial insecurity will necessarily be a part of your life"

A lot of people age 30-50 who got jobs in the cities fresh out of college or grad school haven't yet realized why they were raised in suburbs. It wasn't that their parents were unhip and aspired to mowing lawns on weekends, it was that they accepted that there's a time at which living paycheck-to-paycheck while spending money on rent and urban entertainment is something you should move past, especially if you're starting a family.

The suburbs are only good for saving money if you can bike to productive places. Lose your job? Gas prices high? That's financial death in many American suburbs.

Maybe not in Manhattan, but in cities with lots of grocery stores and jobs in biking distance are good places to save money.

"Lose your job? Gas prices high? That's financial death in many American suburbs."

If your house is too expensive for you, or over-financed? Or your car is out of your budget? Yes, but that's not the fault of suburban living. Gas prices are never that crazy that you can't drive to work and the grocery store (and it's not like people who live in the city don't drive to work and the grocery store either, and city driving is less fuel-efficient). Biking in the suburbs is a great way to spend lots of time commuting to and fro that could be spent making money. And losing your job is a red herring, it's bad regardless of whether you live in the city, suburbs, or the country (although to be fair, there are more homeless shelters in the city, which might be where you end up once your joblessness leads to inability to afford even an apartment).

Most jobs come with employer set hours and often are paid by salary not hourly, so it's not like people could make more money by having shorter commutes and working more. Moreover some commutes are actually easier and quicker by bike due to traffic congestion. For six years I biked to work, weather permitting, across downtown Baltimore, which is a much more efficient way to go (also: free parking!) than driving that route at rush hour.

Suburbs were once (when they were building them out) considerably cheaper and considerably whiter than urban cores. Housing baby-booming families happened at a highly subsidized landgrab pace 30-70 years ago. Traffic adjusted, land values adjusted (in perhaps the greatest transfer into a pool of wealth in the history of the world), and eventually urbanity came back into vogue.

Cost of living is part of it, but what really drives flight to the suburbs, particularly among federal workers in the DC area, is school quality.

"Also, worth noting that the most popular cars in America are $30K-$40K cars that people are financing and/or leasing while making like $50K-$60K a year. " This kills me. Payments are the same or more than their house payment. Especially a family with two new cars. I talked to a plumber probably making 80k who bought a truck for 65k.

+1. My rule is it's never a good idea to buy a car for more than 30% of annual pay. If you have the money sitting around to pay for it outright, that's all well and good so long as you're not hurting your rainy day fund, but financing that isn't a bad proposition either to build credit as long as interest is low. But never finance a vehicle that's worth 40% or upwards of your annual pay. The only time that is remotely acceptable is if you're in your early-mid 20s in your first real job and you want to finally get your dream car since your other expenses are so minimal that you should be able to pay it off in 3 years and you won't need a rainy day fund, since your health should be good and your parents will probably help you out in the event of a crisis.

That's a lot of caveats.

The best time to get your dream car is when you can pay cash for it without taking money out of retirement savings or the rainy day fund.

In my early 20s I drove cars that cost a week's pay and then a week's effort trying (with my more mechanically talented friends) to get it running.

Not optimal, but how many people don't have a credit card? or a HELOC open for emergencies? Especially for the federal workers who know they'll get paid for the time anyways.

Yeah I found it hard to get too worked up about the delayed paychecks. We can hope that after this extra long shutdown, federal workers will do a better job of planning for the inevitable future ones.

Come on. Your beloved Mormonism selects for ability and willingness to pay.

People are born into their religion, so....not sure I agree.

The poor ones leave.

mormons are also born into more stable than average families

It is excellent to encourage savings, and a less consumer oriented happiness, but the flip side is the paradox of thrift.

I think the fear of talking down the economy drives more of the silence than the idea that profligacy is a valid lifestyle.

(Hiking is great, get in touch with nature, say good morning to the coyote, all for $50 investment in adequate shoes.)

That’s not how this works. That’s not how any of this works.

Hicks-Hansen wept.

Mine was an entirely conventional framing.

https://sirjohntempleton.org/2009/04/09/the-paradox-of-thrift/

And since the Hicks-Hansen wiki page does not even mention the P.O.T. I will assume you just wanted to name something unrelated but more comfortable.

Jesus Christ you have no idea what you’re taking about.

I don’t wade into debates about quantum computing. Because I don’t have the knowledge to adequately debate it.

Do the economics world the same courtesy. Stick to shouting about racism and misogyny. You have as much professional expertise as the “top xomen” in those ‘fields.’

But leave Econ out of it. Reading Paul Krugman posts on nytimes.com is not an economics degree. This is the equivalent of a retarded conservative throwing a snowball in the Senate to prove global warming is a myth.

Saving money in case the government collapses is evidence that we've lost social cohesion; it's not a good thing. We need to be able to trust in our institutions or else everything blows up.

It's more about saving money because of the inevitable bumps in the road of life. Living paycheck to paycheck isn't appropriate for a mature adult, especially one with a family. Federal workers should understand this as well as private sector workers do, who should have rainy day funds in case they lose their jobs.

Not to point out the elephant in the room, but at this point in time, government shutdowns are a known job risk to consider when applying for work with the federal civil service. How many times does a person have to be subjected to a government shutdown before they think maybe they should seek private sector work or else plan for the outage?

I said the exact same thing above. Not much sympathy from me during the next shutdown (coming Feb 15?) if they haven't prepared. It's part of the job.

An issue with "saving" is that the Fed will be happy to slowly confiscate your savings via the combination of considerable inflation in items necessary for living (energy, housing, etc.) and zero interest. So why bother, what's the point?

IRA-type accounts mitigate this only a little. (Near-) zero interest is still just that.

Tech improvements long ago ceased to mitigate it significantly at all. Nowadays, they are mainly associated with more elaborate arrangements of pixels to decorate otherwise banal entertainment, rather than with anything compelling. TVs with more pixels, and the like, don't help in the slightest with ever more confiscatory rents, ever-escalating car prices, or the fallout from politically-driven virtue-signalling schemes to drive up energy prices in the name of whatever.

So the problem isn't going away any time soon, even if it is real.

+1 for your paragraph 1. I agreee with TC’s column, but I think he ought to have mentioned a decade of zero-interest rates and other government programs that encourage debt and punish savings.

+1. I am amazed that he didn't draw the obvious connection between the pre-2008 financial crisis lending practices, regardless of whether it was mortgage, consumer, or other kind of debt, and the spending practices it encouraged, and the fact that Americans bounced back to spending at those levels within 3 or 4 years as if the crisis never happened; maybe because interest rates weren't adjusted to incentivize saving?

Government workers don't really need savings because they know the chances of ever involuntarily losing their jobs before retirement are minuscule and they have pensions waiting for them. Compared to private-sector workers, they live in a parallel universe.

Hopefully they have learned that their chances of having their paychecks be delayed for a period of time is close to 100% every so often.

Governments do do layoffs during tight economic times. The number of public employees declined precipitously during the 2008'09 crisis and took many years to return to the status quo ante

I want to see your homework: a nice DSGE model.

Let inflation be 2%, the Fed's target. Keep productivity growth on its current low path.

Let the marginal propensity to save rise.

What happens to the real interest rate?

The only way that more savings can translate into more investment is if the real interest rate falls. Otherwise, we have a drop in aggregate demand: the paradox of thrift.

If the new equilibrium real interest rate (R*) falls below -2%, we are stuck in a liquidity trap. We nothing out of more thrift but lower employment.

And might more thrift just boost asset prices, and cause bubbles? We saw what Japanese thrift did in the 1980s to asset prices.

Greater thrift might just lead to a larger current account balance. Ask which nations want to run current account deficits with the USA.

Exactly, thank you.

We should be saving less not more.

Not to worry, $3.2 trillion a year in new government spending will keep that savings rate down. Then no one will have to run current accounts deficits.

Plus, as bb points out, it will crowd in investment.

If I recall correctly the Nordic countries do have exceptionally low savings rate, because the safety net is exceptionally good.

As someone 31% nordic by genetic assay, that works for me. The mileage of southern Europeans may vary.

I don't know about the other Nordics, but Sweden has the second highest savings rate in the OECD behind Switzerland.

@B.B. - you are quite wrong, and TC is right, as you did not solve for the equilibrium. Your Keynesian analysis, to the extent it's even valid, is a short term non-equilibrium solution. When the storm has passed, and the seas are calm, the famous Solow equation says that most countries are saving much less than they should (even China at 15-20% savings). According to moderate estimates of depreciation and returns on capital, countries around the world should be saving about 50% rather than 5-20% as today. Source: any advanced econ textbook on the Solow equation.

What does the famous Solow equation say about the return on investment that would devolve if the global savings rate were 50%?

There just isn't that much to invest in that pays a positive return.

Where is Mulp on this thread? Can’t wait to hear him lambaste Cowen for his “free lunch” economics.

Remember in Mulp’s world consumption spending from Labor is all that matters. How dare anyone disturb the equilibrium by introducing increased savings over consumption.

The thing about them Mormons is that they don't drink or injest caffeine. that's like half my diet

Dave Ramsey is a lot more mainstream than all of the late night leftists combined.

Yeah, that was a weird aside. Ramsey has a weekly audience of 12m. That sounds pretty mainstream to me. Tyler is confusing elite conventional wisdom with the mainstream. For better or worse, ecw is not mainstream.

We see the same confusion in the religious world where mainline and mainstream are confused. Evangelical beliefs among Christians are mainstream. The views of ainline clergy are not. The disconnect killed their institutions. Something similar is happening in the secular realm and explains how we get surprised by Trump.

When you work in the private sector or are self-employed you learn quickly to have at least 4 months of expenses saved - I have always has at least 6 months.

I know people in the private sector that with EVERY paypackage they also get a lay off notice which will be rescinded if orders come in, but the employer needs to cover their bases in case they have to lay people off and they want to do it legally. THAT really focuses workers on their savings.

But government employees really never have experienced that since the risk of getting laid off is very, very small. And in this case they get their pay even if they didn't have to work. WTF?

So I have NO sympathy for government employees who were furloughed.

Trumpistas: “Democrats are the party that espouses the politics of envy! Meh!”

Also Trumpistas: “Federal workers have benefits I don’t have! Meh!”

anonymous, you've picked a weird point to dig in your heels on. The Wall is stupid, the shutdown was stupid, but it's not really some tragedy that government workers just learned the hard way that they need to plan for contingencies the way the rest of us do.

They got a paid vacation for 35 days. Paid in arrears, ok, so be a grown up and plan for those.

As another anonymous, I find this one more impenetrable than insightful.

But it did provoke an incorrect response.

The correct response is to encourage all workers to save, and to criticize all employers who break the payroll in fits of pique.

Face it, some of The Best of You are less sympathetic here because because these are government workers.

That is not very Centrist.

Put more simply, pretend Union Pacific Railroad could not meet payroll because the board of directors was in conflict. Would your focus really be on saying "suck it up railroad workers, this just teaches you life the real world?"

Who didn't meet payroll? You are really not showing a lot of intelligence here.

In a strict factual sense the US government did not meet payroll, dropped an IOU instead.

What actually happened was they got a paid vacation, paid in arrears. I'm just suggesting that because this kind of thing happens, that federal employees should make plans for it, like the rest of us make plans for unexpected problems. Is this controversial?

Like usual, even when someone agrees with you (that Trump is an idiotic jerk, that the shutdown was a shit show), you find a way to attack them with a stupid change of subject and a bad analogy. Do better.

Are you not informed?

FBI agents were coming to work, required to come to work, and not getting paid.

Their payroll was missed, while they worked. They really did get an IOU instead.

https://www.google.com/amp/s/qz.com/1528214/us-government-shutdown-2019-the-average-fbi-salary-is-37000/amp/

Do you really not know what arrears means? You're dumber than I thought.

These are public servants. Servants. They’re doing the work no private sector worker would do, and for almost no money or benefits at all.

They’re the heroes of the United States. And we’ve decided to ruin their lives by not fulfilling our duty to our heroes.

Msgkings thinks it’s a joke. “Let then eat unemployment benefits.” As they lose their homes and live on the street.

When you sock puppet someone you need to get a lot closer in tone. The first line was already too over the top.

By the way, I believe there is a bill to pay interest on missed payroll. A snowball's chance.

Invite Mr. Money Mustache to "Conversations with Tyler" please!

There is a lot of distrust of the Fed, the idea that the Fed deliberately works off equilibrium and can suddenly favor one group (government) of borrowers over anther.

How exactly did the shutdown directly affect you? I'm in the private sector without much of a reach, but speaking with friends and friends of friends, unless you're one of the federal workers not going to work, I haven't really noticed any devastating effects. It makes me ask what type of work are these federal workers out of at the moment?

It's probably a good thing that you're not interacting with the Department of Justice on any regular basis.

Correct, and neither does anyone I speak to. So I can see that.

You probably don't fly or pay taxes or care about illegal immigration or food inspection or patents or small business lending or...

I'd be happy to save more if my salary was large enough to allow it, but also I'm already struggling to afford food and rent. And completely forgoing healthcare.

Funny how the US can't even fund it's own government quarterly but can manage to give Israel $30 Billion for the next 10 years.

Glad to see Israelis enjoy the fruits of low defense costs and universal healthcare at US's taxpayers' expense!

I am as strong a supporter of Israel as exists anywhere in the world, BUT:

Israel is a rich country and doesn't need our money. It was once a poor country, but it isn't any more. It is as much a Tiger as Taiwan, South Korea, or Ireland. PPP GDP per capita of $38,000, higher than Spain and almost as high as Japan. For Jews in Israel it's significantly higher, since Israeli Arabs have lower incomes. Keep up the defense, stop the financial aid.

U.S. aid to Israel is actually aid to U.S. military suppliers - it is for defense purchases.

I put 4 kids through college and are all professionals and make good money. But my parent student debt payment exceeds my mortgage payment. How about the Dept of Education lowers the interest rate on loans? Are there so many defaults? Many students apply for student aid and never go to classes. This is another program gone wrong. We cannot afford anymore "help" from the government.

If you are heart broken, Contact dr.mack201@ ( gmail ). com, and have your Ex lover back in 3 days.!!!!!!!!!!!

Forget Netflix (easily done, once you've watched "The Crown and "American Vandal"). Mr. Money Mustache's most controversial prescription is to forgo getting a dog.

A survey of 1000 mormons means that anyone should be able to save 10%? I can think of at least 10 reasons off the top of my head on why those results may not be relevant to the bulk of Americans living at a median wage or below. Having close relationships with folks in this wage range in the Bay Area, a median wage will not pay for median housing costs, median health care costs, median child care costs and median transportation costs. Families make it work by having multiple families in housing or having lucked out years ago on a rent controlled place or free family provided childcare or forgoing health insurance (not really an option anymore). The inevitable bumps in life (accidents, health issues, relatives with emergencies) are significant financial events that make saving hard. Why not move? We offered to move our warehouse workers and there was not interest. Overall, the improvement in life style/ability to save was not worth the risk of moving to a new community. Extended family was nearby and providing care. Risk if our job went away. Spouse would need to find work. Inability to move back if things didn't work out. That is not to say that there are not many people that should be saving more than they are, and there aren't bad decisions made from time to time. But the post is judgmental and paints lack of saving as a moral failing of the lower incomes rather than a challenge in an environment in which housing, child care, education and health care or rising much faster than wages.

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