Don Boudreaux has written a commentary on a Rockefeller Institute study about American “financial insecurity."  Don correctly points out that “in modern America a lack of savings is almost always the result of individual choice.”

However, Don’s note – being limited by the length constraints of a letter to the editor – missed what I think were a couple of important points.  So here is the note I sent to Don elaborating on what I think also bears mentioning:

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Don,

I’d make two additional points about savings and insecurity:

I can’t tell from the study whether it includes investments in the stock market (either direct, or through retirement plans) as savings, and it’s pretty clear that it does not include investment in a home as savings. Standard definition of savings does not include these things. I understand that their issue is liquid assets to help cover short-term downturns in income, but (even though housing has been a remarkably bad investment in recent years) many people consider such investments as reasonable alternatives to getting 0% or some other low number in a bank account, CD, or money market.  Therefore, people are not as irresponsible as the study and similar studies would make them sound.

Second, and more importantly, actions of government to make people feel that they don’t have to take care of themselves (such as politicians’ refusal to address the structural problems of Social Security) and a Congress which keeps extending unemployment benefits, reduce people’s impulse to save for a rainy day.  Why should I forgo the bigger house or the wide-screen LCD TV today just in case something bad happens tomorrow if Big Nanny (the successor to Big Brother) will take care of me if something bad happens?

Many Americans are happy with this situation.  After all, they see their unemployment benefits and other “safety net” money as free, even though it obviously isn’t.  Many people also like government taking care of everything.  It’s this same thought process, the same assault on principles of individual responsibility and voluntary community or inter-personal assistance which also squeezes charitable giving, especially by Democrats.  It’s no wonder, for example, that “blue states” are routinely less charitable (as a percentage of income) than “red states".  Blue states are populated in majority by people who believe that government, not people, should help others, so why should they give away any of their own money?  (A perfect example is Colorado Senator Michael Bennet who reportedly gave about $2,400 in total charitable contributions while making over $12 million in income in two years.  Of course, this is a guy who wants to pass legislation to take your money since he knows how to spend it better than you do.)

Back to the study: Of course recessions are no fun. But given the over-generous transfer payments given to the unemployed by sucking the financial blood from the employed or simply from America’s future economic power (by transferring money the government borrows instead of gets via taxation), it’s hard to feel as sorry for those whose incomes drop (as mine has) as I otherwise might. As Milton Friedman taught us, There Ain’t No Such Thing As A Free Lunch. (TANSTAAFL).  Massive government aid to the unemployed not only decreases people’s incentive to work, but it also places current or future tax burdens on the productive sector, making it less appealing to take the risk involved with starting a business and creating the jobs which would put those people back to work. 

So, while I have some sympathy for people who are economically “insecure", I’d have a lot more if they weren’t getting nearly unlimited transfers of money from the rest of us right now.  The current structure not only reduces my level of sympathy for them, but also my interest in helping through charitable contributions.  The government has squeezed me out of almost all charitable giving except to organizations which are fighting to reduce the size, cost, and intrusiveness of government.  Once we return to an ethos of political responsibility and voluntary donations to the less fortunate, I’ll be glad to more directly help others.  In the meantime, their lack of “savings” is being overcome by bleeding my children’s future.