Weekly Reading: The Return of Thrift

Posted on February 24, 2008
Filed Under Uncategorized |

A week or so ago, I wrote on why we should not budget like our government does and then a few days ago I stopped by the library and picked up a couple of personal finance books. I was in a hurry and didn’t stop to look at more than the titles. One of the books that I picked up was The Return Of Thrift by Phillip Longman.

By the title, I thought it was going to be a book on why so many people were looking to frugal living. I did not read the subtitle which is “How the Coming Collapse of the Middle-Class Welfare State Will Reawaken Values in America”. Middle Class Welfare? I must be missing something, I thought welfare was for poor folks.

I have not finished the book yet, but I have learned quite a bit in just the first few chapters. The book was written in 1996 and so the statistics that Mr. Longman uses to illustrate his point of view are somewhat dated but in light of our current budget deficit, even more alarming.

He begins the book by describing the middle class welfare state and he goes into detail about why our middle and upper class are receiving far more financial aid than our nations poor. As a matter of fact, in 1990, 75% of the government dole went to families earning more than $20,000. Seventeen years ago, $20,000 was a livable income. The rest of the statistics are shocking and I never really thought about what things like the tax deduction for mortgage interest was costing the US in tax dollars.

He also discusses the likely failure of Social Security and how the continual bail out of it and other private pensions are driving up our budget deficit. He predicts that in the coming years, the government will be forced to “pull the plug” on these middle class entitlements and that it will bring thrift and frugality back into necessity.

While the book is a bit out of date, it also mentions military pensions and veterans benefits as a part of the middle class welfare state. It made me think about the war in Iraq and the long term effects on our budget that it will have. He predicts that the budget crisis will eventually trigger a collapse of the welfare state and a resulting return to thrift and more fundamental values.

In truth, the budget deficit scares me. If you or I had a comparative amount of debt to income, we would probably be considering bankruptcy and while I am not informed enough about our current budget to make any judgments on the current middle class welfare state, even I can see that we cannot continue to borrow money to pay our bills.

The next few chapters in the book are history related, and then the last ones are suggestions as to what the government should do and what we should do personally. I think that most of the folks I know in the personal finance arena are already ahead of the game.

I will circle back around with some final comments when I finish the book and summarize his suggestions. I am not sure I would rush out and buy this book but it is very thought provoking especially as I see so many of his predictions coming to reality in today’s world.

Does Congress Use Any Common Sense?

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Comments

2 Responses to “Weekly Reading: The Return of Thrift”

K31 on February 24th, 2008 10:01 am

So the Government is “doling out” money to me that it took from me in the first place, this is “costing the US”? “Veterans benefits and military pensions? That is “middle class welfare”? You have got to be kidding me.

Also,Social Security is “continually being bailed out”? No, Social Security is a Ponzi scheme that is bankrupt because the money collected for it is being used for things it was never intended for and the money is used as if it is part of the general funds available to Congress.
CindyS on February 24th, 2008 10:33 am

I’m going to answer this with a some quotes from the book as I think they are probably a better response than anything I could say. As I said, it is a thought provoking book.

“The tax expenditure concept still strikes many Americans as wrongheaded, so it’s worth pausing here for the benefit of readers who have objections. A common complaint is that the concept somehow assumes that government “owns” all your income before doing you the favor of letting you keep part of it. Certainly politicians often behave as if that is true, but such a notion really has nothing to do with the concept of tax entitlements. Instead, the presumptions behind the concept is simply that, as a people, we have decided on a general rate of taxation. When certain groups secure exemptions to that general rate, everyone else has to pay more. And when that happens, it’s no different, fiscally or morally, than when government just sends benefit checks to certain favored groups.”

I am not making moral judgments on veterans benefits or military pensions, however, I believe it is a fact that a large majority of them are paid out to the middle class.

I believe that Mr. Longman’s term “Middle Class Welfare State” refers to any financial subsidy or entitlement that is handed out by the government to certain groups or classes of people. His point is that the list is endless and that we as Americans have come to think of it as something we are due. While I mentioned veterans and military pensions because I was thinking of the war in Iraq, there are also farm subsidies, subsidies to homeowners, social security, disability and the list goes on. It is also a fact that most of these go to middle and upper class Americans.

I am not making moral judgments on it, I am simply stating that all of these are a fact of life and I think your comments illustrate his point that we as Americans feel that we are entitled to them.

Are we? That’s for better minds than mine to determine but I do think that the day is coming when we are going to have to pay the piper. Like most Americans, some of these are built into my budget and I would be hard put to budget without them.