Save! (But Not Too Much.)

Americans are getting thrifty just when we should be spending more.

Thrift, like the repossession business, is a classic counter-cyclical industry. When the gross domestic product shrinks and the bulls are stricken, Americans are called to rouse themselves from a consumption-induced daze and start saving and investing rather than borrowing and splurging. At about this time in the economic cycle, we hear a lot more from Warren Buffett and a lot less from Donald Trump. Coupon-clippers are exalted, and high-flyers are laid low. Of course, once the good times begin to roll again, the calls for thrift subside.

Back in 1994—I know I’m dating myself here—I wrote a piece of juvenilia on the hot new cheapskate trend (The Tightwad Gazette, sluggish charitable donations) that grew out of the wave of corporate restructurings. But penny-pinching went out of style once the dot-com boom started, never to return.

During the last recession, which coincided with the 9/11 attacks, we didn’t even try to cut back. President Bush went on television and urged people to go on trips. For New Yorkers, patronizing a restaurant in the afflicted downtown area became something akin to a civic duty. “Our leaders in recent years seem increasingly determined to insist, as a response to such challenges, on the importance of high and continued consumer spending,” writes historian Barbara Dafoe Whitehead, in the newly released “For a New Thrift,”a report sponsored by an array of think tanks, left, right, and center.

Whitehead writes eloquently about the powerful array of anti-thrift institutions that have made it difficult for middle- and lower-income Americans to save: aggressive credit-card solicitations, ubiquitous casinos, state lotteries, and payday lenders, which “outnumber McDonald’s franchises in four out of five of the nation’s most populous states.” The nation’s biggest banks dole out loans with abandon, yet my bank doesn’t offer passbook savings accounts.

More powerful still may be the macroeconomic barriers to saving. The income of a typical family hasn’t risen in real terms since 1999, while the costs of basics such as health care, energy, food, and housing have soared. “Surveys show that much of the rising credit-card debt is related to job loss, home repair or health care,” said Tamara Draut, vice president of policy and programs at the New York think tank Demos and author of Strapped: Why America’s 20- and 30-Somethings Can’t Get Ahead.

In addition, during asset bubbles and booms, we tend to let buoyant markets do the saving for us. According to the Federal Reserve, the net worth of households and nonprofit organizations soared from $39.2 trillion at the end of 2002 to $58.7 trillion in the third quarter of 2007, a 50 percent increase. This came at a time when real personal savings were miniuscule: $174.9 billion in 2003 and just $57.4 billion last year—the rise in net worth was attributed to the rise in real estate prices, and thus was a mirage. Those who live by paper gains also die by them. Between September 2007 and June 2008, according to the Fed, the nation’s net worth fell by $2.7 trillion. And it has likely fallen much further since.

Clearly, we need to save more. But as John Maynard Keynes taught us, thrift can be counterproductive in times of weak demand. Consumer activity accounts for about 70 percent of economic activity. Spending money heedlessly—traveling, redecorating, eating out—keeps our friends and neighbors employed. The great concern about the stimulus package was that Americans would squirrel away those $300 checks for a rainy day rather than put them into circulation immediately. Self-described global citizens have also had reason to eschew thrift. The prodigious appetites of U.S. consumers for imported goods enabled tens of millions of peasants in China to escape subsistence living and find factory work each year.

Time was, national crises stimulated saving. Whitehead notes that during World War II, the savings rate soared to 25 percent, as the government, “partnering with the leaders of civil society, actively stressed the importance of saving for the war effort while also providing a specific new savings tool, in the form of war bonds.”

But thrift today has a negative connotation—miserly, penny-pinching, no fun. Here, too, we need to go back to the future. “The goal of thrift is not to cut back or scrimp and save, but rather to enjoy the good things in life,” said David Blankenhorn, president of the Institute for American Values and author of Thrift: A Cyclopedia, a charming compendium of musings and quotes on the many virtues of thrift, going back to Benjamin Franklin’s “The Way to Wealth.

Is there any reason to think we’ll recover our lost sense of thrift in this economic crisis? Perhaps. The baby boomers, champion consumers who had counted on appreciation of their homes and 401(k)s to ensure a golden retirement, will have to start saving more. Policy changes—a program in which the government matches savings accounts, or lottery offices where people can purchase savings tickets—might help. But profligacy and spendthriftness is also part of our cultural inheritance. The most compelling character in the greatest American novel, The Great Gatsby, makes a pile of money and then squanders it in spectacular fashion. For every Buffett, patiently building a down-to-earth fortune by purchasing stocks with hard-earned money, there’s a Trump, impatiently building glitzy over-the-top towers with cash borrowed from others.