Americans Saving More as Debt, Job Worries Mount

Lack of optimism when it comes to the U.S. economy is encouraging Americans to save more than they did a year ago, American Express (AXP) said in a report released Sept. 9. The downside, in economic terms, is that a lack of growth in consumer spending indicates the domestic recession may not end anytime soon.

Respondents were decidedly pessimistic. Almost half of those polled said the economy will deteriorate further before improving, compared to the 42% who said the same a year ago. They cited friends' and family members' job status, the local real estate market and vacancies within their local business district as negatives.

Such pessimism appears to have put many individuals into cash-hoarding mode. When asked how they'd spend $500 found on the street, consumers were 60% more likely to say they'd save the money than they were a year ago. Then, they said they were more apt to pay monthly bills.

A need to reduce debt, get by with lower income and better handle fear of a job loss were other reasons Americans are spending less, American Express said in its report, which cited a survey of more than 2,000 people.

Interestingly, the survey found that of those who are maintaining spending habits, people who characterize themselves as sports junkies were most likely to throw caution to the wind, followed by tech hounds, fashionistas and foodies.

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mhgymcoach

During the 8 years that George W. Bush was president our national debt more than doubled from about 5.6 trillion to 11.9 trillion. At the end of the 1990’s the government budget was running surpluses so President Bush enacted tax cuts. His reasoning was that if the government was taking in more than it was spending, the surpluses should be given back to the American people. This is sound reasoning. However, when he decided to engage our country in 2 wars, the tax cuts should have been repealed to pay for these wars. As part of the war on terror, the Bush administration presided over one of the largest expansions of government agencies in number of employees and spending and private contractors whose only customers are the U.S. government. The housing bubble which occurred entirely during the Bush administration is often blamed on policies put in place to loosen the standards regarding home loans prior to the Bush administration. The biggest contribution to the housing bubble was allowing financial institutions to sell their riskiest loans as investment instruments called Collateralized Debt Obligations (CDO’s). This allowed the financial institutions to make these loans without any real screening of the prospective home buyers because they could make their money up front in fees and sell the risk to someone else. Most of these CDO’s were sold to investors through their 401K’s, private retirement systems, and government retirement funds. When the CDO”S tanked so did the investment funds that were holding them in their portfolios. When this occurred, the Bush administration authorized over 1 trillion dollars in bailouts for the financial institutions that caused this problem in the first place. Their defense is that they had to approve these loans or they would have been in violation of federal law requiring lower lending standards to increase homeownership. A secondary contributor to the housing bubble was not increasing interest rates on home loans as a way to curtail inflation in the housing market. The reasoning behind this was that such action would slow the economy. Unfortunately the end result is that our economy in now currently in shambles. Deficit spending at times is a necessary evil. However our current economic mess is the result of exactly that, a 6 trillion dollar increase in the national deficit under President Bush, trillions of dollars in private deficit spending by people who were using their houses as piggy banks, and unscrupulous lenders knowingly making bad loans that they then indirectly sold back to the public as CDO’s. The current administration inherited this horrible mess. I remember the night before the 2008 elections, more than one political commentator remarking that after tomorrow the winners of the election will envy the looser. The reference being in regard to the current state of our economy, two expensive wars (that were considered unwinnable by many), increasing tensions in the middle east, and loss of our dominance internationally as a result of the aforementioned references. Things are probably going to get worse before they get better. It didn’t matter who was elected president. I grew up in the 1960’s and 70’s. We used to practice getting under our desks in case of nuclear attack. We suffered disgrace in Viet Nam. Many of the summer movies were apocalyptic visions of an amoral and desolate future, Inflation was rampant. Manufacturing was in decline. From the mid 70’s to the end of the 80’s interest rates on home loans was high, 18% at the beginning of the Regan Administration. In 1988 the interest rate on my home was 10% fixed (a good rate at that time). Somehow in spite of all of these conditions our country came back to prosperity in the early nineties and continued for about a decade. It will take some time to dig out of this hole. Just like the last time we had a recession. But I do believe that this too shall pass. I have lived through this before. History does repeat itself.

September 12 2010 at 3:24 PM Report abuse rate up rate down Reply
dsti625596

ddscorp1 WRITES THE FOLLOWING ---------- 1:01 PM Sep 12, 2010• Pozboys, I heard Obama say your exact comment on tv yesterday. Stop being such a sheepling. You do understand that Congress is who paves Americas path don't you? Our Congress has been controlled by the Democrats since Jan. 2007. That's a few months short of the last 4 Years. The Democrats have on top of controlling Congress had a Democratic president for just short of the last 2 years. So, ask yourself when the bottom fell out....2008 right. Don't believe the liberal Democrats, they are the minority and they have to use deception, lies and trickery to gain power. That is exactly what they have done! Bottom line, Democrats have controlled America for the last 4 years. No way around that. No way to BS your way out of that! Republicans create jobs and Dems kill them, has been like that my entire life! -----------------------------------------------------------------------------------UH, no... ddscorp1, study a bit of constitutional law. The Democrats took the Hill actually in 06- but NOTHING came of it and here's why: the VETO power given the executive. If you don't recall, that was the worst administration we've ever had. There was no legislation that occured of any great significance until the economy had tanked. And yes, dubya was still president then, and HE signed TARP, 700 billion dollars to bail out the financial sector. The outline of TARP came from the Fed. with largely republican appointed officials. I'll say it again, DUBYA signed this bill, so don't place the blame on Democrats dimwit.In any case, this was the culmanation of 8 years of economic mismanagement. The Bush tax cuts had been largely opposed by American economists, including the Bush administration's own Economic Advisement Council. In 2003, 450 economists, including ten Nobel Prize laureate, signed the Economists' statement opposing the Bush tax cuts, sent to President Bush stating that "these tax cuts will worsen the long-term budget outlook... After being given a budget in the black, Dubya ran it back into the red in almost no time. So, get your facts straight dumb ass. Oh, by the way, first the republicans screwed up the economy, next it will be foreign policy. I live in D.C. and have it on good record that the next show will drop. Dubya took out Iraq - the only counter-balance to Iran. Now Iran is well on its way to developing nuclear weapons, much like N. Korea did under Bush. However, Israel has made it clear, and the well known secret around here that in the next 12-18 months, there will be a pre-emptive strike to take out Iran's nuclear capabilities. BUT, if this is even possible, we don't know- in any case, Iran has already made it clear they will block the Straight of Hormuz through which 40-50% of the world's oil passes. The economic collapse of 2008 will look like a blip on the radar screen compared this the effect this will have. Once again, we can thank the repubs and that cretin G. Bush. Ah, but maybe by then we'll have that epitome of repub brilliance in the white house - Sarah Palin. LMAO -

September 12 2010 at 2:46 PM Report abuse rate up rate down Reply
ikihoa

Saving is what people should have been doing and not living beyond their means through credit card debt. Whoever you want to blame for the economy please include ourselves. The increase in the savings rate tells me that some people have learned an important lesson about balance in their financial lives.

September 12 2010 at 2:21 PM Report abuse +3 rate up rate down Reply
rgo007

I've always been taught that the more people save in their bank, the more money the bank can lend to others. Saving is not a bad idea. Here's my 2 cents worth if I were king. Make all interest earned from a bank tax free. That way more people would save and the banks would have more money to lend out. And instead of the government spending money on paybacks to policital friends, use that money to match whatever interest rate the bank paid. So if the bank paid 2% interest, the government would match that amount and the total money earned would be tax free. Maybe then people would have confidence in the ecomony and spend a little of their cash. One more thing on the Bush tax cuts. I'm a successful businessman who ownes his own business. I fall in the more than $250,000 but less than $1,000,000 bracket. I need about $300,000 in the bank at the end of the year to meet my next payroll and current payables and a little left over for captial improvments in the business. If the tax cuts expire and the government takes 39% of that $300,000, it will hurt my business. So I'm left with the decision to not hire new people, delay new machinery, or cut back on employees benefits. Not to mention the added cost of health care next year. Where's the wisdom in collecting more and more money to fund political debts?

September 12 2010 at 2:13 PM Report abuse +3 rate up rate down Reply
1 reply to rgo007's comment
oildad

Good luck on that. Not that I wouldn't like to see it, But, our economy is based on SPENDING............

September 12 2010 at 8:50 PM Report abuse rate up rate down Reply
sjeffrey1

Iraq war weapons of mass deception. wallstreet rating D mortgages as A and selling them all over the world.freddie mac and mae not doing back ground checks. Yea lets blame president Obama .

September 12 2010 at 1:59 PM Report abuse +1 rate up rate down Reply
dickn2000b

It's not just individuals, trillions of dollars are being held by small businesses because they are uncertain of the future. And Obama's most recent debacle...a plan to improve this nation's infrastructure will do nothing to free up those dollars or provide a single new job. It will only provide temporary work for those already employed by contractors who do work for federal, state and local governments building and improving roads, etc.

September 12 2010 at 1:33 PM Report abuse +5 rate up rate down Reply
esperanza711

Come on honey let's just go on another vacation. They will still be b..... about us when we get back. I want some ice cream!!!!

September 12 2010 at 1:23 PM Report abuse +2 rate up rate down Reply
CHABSENTIA

pozboys is typical of why we are in this mess. Here it is again. If Lamborghini, Mercedes, Maserati and Porsche announced that you could buy their cars with no money down then what do you think would happen to their Business. That is exactly what happned in 1999 when the Clinton administration made it possile to buy homes with no money down. How do you stop people from being irresponsible. If people had been still required to out down 20% and have evidence they could pay then we would not be in this mess. If you count all the unemployed and not just those actively looking for work as does the Government then the unemployment rate has been 16.8% since August 2009.Who has been in charge?hmmm. The Democrats have been the majority party in both the House and Senate since January 2007 and the Recesssion started in 2007. HMMMM. What happened to the shovel ready infrastrusture jobs were were promised with the 800 Billion February 2009 Stimulus? Instead the money that was spent so far has been soent on plugging State Budget gaps, Food Stamps. Medicaid. Unemployment benefits and bailing out Unions. This is Wealth Redistribution and not Jib creation and why we have remained at 16.8% unemployment for a year. The Democrats not only have been the majority in Congress for almost four years but they had a filibuster majority in the Senate and used it to push Obamacare instead of addressing Unemployment and the Economy.Now they want 50 Billion to spend on Infrastructure when four times as much was promised over a year ago and not done.They just spent 26 Billion or more than 50% of that amount bailing out Teachers Unions and Medicaid and now this Administration want to spend a paltry 50 Billion on Infrastructure when they have let unemployment remaain at 16.8% for over a year. Some people just keep drinking the kool-aid and believing everything they are spoon fed by the Media and this Administration instead of the Facts.Let the Democrats have another four years. They have done so well in the last four.

September 12 2010 at 1:14 PM Report abuse +2 rate up rate down Reply
bkprsnet

Are you really saying that saving is bad for the economy? Does that make any sense? Used to be a good thing when people saved. When American's saved less, it was a bad thing. Savings were the basis for bank lending. If people shouldn't save, where does the money to lend come from? But then why do we think being is it so important for banks to have money to lend? Oh because businesses need loans to operate. Businesses that don't have enough cash to meet their payrolls, should go out of business. Either they are not making enough money or they are spending too much. To keep our consumer economy going we practically forced people to go into debt. And then we berate them for getting into debt, and tell them they better not save. Seems a little contradictory don't you think?

September 12 2010 at 1:07 PM Report abuse +3 rate up rate down Reply
glb819

Comes November you will see some major changes that will bring our country to some financial sanity. Comes 2012 you will see some major changes in the White House that will bring our country out of this recession.The american people are going to get rid of this clown. The private sector is going to create jobs again. The country will elect a president that will go back to basics. Bye, bye democrats, enjoy the ride now. It will not last for too long.

September 12 2010 at 12:36 PM Report abuse +7 rate up rate down Reply
2 replies to glb819's comment
pozboys

Yea, just what is it that the repubs are promising us, huh? Going back to the polices that caused this mess to begin with, are you out of your minds? And what is it they're going to cut, more jobs??? If they get in, we are in for more trouble than we're in now thats for sure! What short memories people have !!

September 12 2010 at 12:50 PM Report abuse -2 rate up rate down Reply
ddscorp1

Pozboys, I heard Obama say your exact comment on tv yesterday. Stop being such a sheepling. You do understand that Congress is who paves Americas path don't you? Our Congress has been controlled by the Democrats since Jan. 2007. That's a few months short of the last 4 Years. The Democrats have on top of controlling Congress had a Democratic president for just short of the last 2 years. So, ask yourself when the bottom fell out....2008 right. Don't believe the liberal Democrats, they are the minority and they have to use deception, lies and trickery to gain power. That is exactly what they have done! Bottom line, Democrats have controlled America for the last 4 years. No way around that. No way to BS your way out of that! Republicans create jobs and Dems kill them, has been like that my entire life!

September 12 2010 at 1:01 PM Report abuse +1 rate up rate down Reply