I filled my gas tank for $22 this morning. In August, it cost me $50. Assuming I fill my tank once a week and assuming that gas prices stay at this level (not likely), I'll save more than $1,000 on gas expenditures this year.
I bought a shirt at Banana Republic the week before Christmas for $19, marked down from $79. I was shopping for someone else, but hey, a deal's a deal. A box of fireplace starter logs was around $14 at Schnucks last weekend. At Ike's, just a few blocks down Union Avenue, a similar box was going for $2.99. We don't have Showtime or HBO at our house anymore. I'll miss Big Love, but we'll struggle by — or rent the season DVD later.
We're a two-income family, not struggling financially, but we're becoming increasingly conscious of what we spend. It's a natural reaction when the economy seems tenuous. And it's happening all over the country.
Unfortunately, though it's a natural reaction, our cost-cutting is actually contributing to the larger economic problem. A Wall Street Journal article this week addressed the "dangers" of thriftiness: "Usually, frugality is good for individuals and for the economy. Savings serve as a reservoir of capital that can be used to finance investment, which helps raise a nation's standard of living. But in a recession, increased saving — or its flip side, decreased spending — can exacerbate the economy's woes. It's what economists call the 'paradox of thrift.'"
My brother is a car salesman on the front lines of the paradox of thrift, you might say. People aren't buying cars, and he's hurting. And the chain reaction continues, as car manufacturers shut down their factories (see this week's cover story), putting more people out of work and creating even more involuntary "thrift."
I'm not an economist (though I play one in my column sometimes), but it seems to me that soon-to-be President Obama's first order of business should not be to throw billions more at failing companies who are laying people off. Nor will a "stimulus" refund of, say, $1,000 a taxpayer do anything to correct the problem. We need to fix the economy from the bottom up, which means putting people back to work. Which means we should consider creating a variation of FDR's Works Progress Administration.
Between 1935 and 1943, the WPA created almost 8 million jobs, constructing public buildings, roads, and other public projects. Eight million jobs would go a long way toward eliminating our paradox of thrift.