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July-August
Every other Saturday
Our Big Money Moment
was a big money moment. ; My
first financial adviser was George
W. Wanner, the teller at the old
Citizens Savings and Loan, where
I had my first savings account.
Eleven years
ago, Congress
heard the call
for tax cuts,
but missed
the warning
about what
might result.
Every two weeks my dad and I
ON THE COVER: CLOCK WISE FROM TOP LEFT: R.O. BLECHMAN; PHIL BANKO/GE T T Y IMAGES; RED NOSE STUDIO THIS PAGE: JONATHAN CARLSON
would walk into the bank and peer over
the counter as Mr. Wanner opened, then
emptied, my savings bank, counted the
pennies, nickels and dimes, and recorded
the deposit in my passbook. ; During our
visits, he shared his four savings essentials:
(1) regular deposits—small steps achieve
big goals; ( 2) compound interest—there’s nothing more reliable if you’re a saver or more costly for borrowers; (3) lockbox—my bank required a key, which made withdrawals difficult, just as they should be; and ( 4) balance—deposits should
exceed withdrawals. You get in trouble if they don’t. ; The
scale has changed, but not the lesson. As a reporter, I spent
years following the money—from scoundrels and scammers on
Long Island, to town and county budgeteers, to Washington tax
writers and big spenders. That journey included a seat at the Senate Budget Committee hearing on Jan. 25, 2001, when Federal
Reserve Chairman Alan Greenspan famously concluded that the
federal government faced a huge $5.6 trillion budget surplus over
the next decade, and the nation needed a tax cut. Congress leapt
at the opportunity. But the lawmakers missed the rest of his message. “Economic relationships,” he told them that day, “are different from anything we have considered
in recent decades,” and the projections
could be wrong. His conclusion: Consider
a short-circuit for the tax cuts if targets in
the surplus trajectory aren’t hit.
No one listened. Instead, we went on
an $11.4 trillion spending spree to fight
two wars, expand Medicare, finance a
sequence of gigantic tax cuts and battle
the greatest economic challenge in two
generations.
What happened to George Wanner’s age
of prudence? In a word, plastic. As a nation, we stopped saving, became greedy
and put our expenses on a credit card that will be paid off by our
kids. Spending became the easier choice, especially after the reassurance by Dick Cheney that “Reagan proved that deficits don’t
matter.” Now we know better. They certainly do matter.
The age of plastic has produced a budget gap that is exceeded
only by the chasm between what the public expects from govern-
ment and the willingness to pay for it. In the words of the head of
the nonpartisan Congressional Budget Office, “The United States
faces a fundamental disconnect between the services that people
expect the government to provide, particularly in the form of ben-
efits for older Americans, and the tax revenues that people are
willing to send to the government to finance these services.”
The nation is facing a big money moment. Washington lawmak-
ers must raise the legal borrowing limit—the money has already
been spent, after all. But while the lawmakers wrangle, it’s worth
recalling the warning of George Wanner about balance. Spending
is easy. Saving and building up reserves is slow and painful—but
necessary. —Jim Toedtman, Editor
AARP Bulletin July-August 2011, Volume 52, No. 6 (USPS Number 002-900; ISSN 1044-1123) is published monthly except February and August by AARP, 601 E St. N.W., Washington, DC 20049 (telephone: 1-888-687-2277). Internet site: aarp.org/bulletin, “The Newspaper of 50-Plus America.”
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