Saving What You Don’t Have

Want a good example of how out-of-touch the President is? Well, here’s a preview of his State of the Union address :

President Bush is expected to promote a series of health care initiatives in his State of the Union address tonight, including new incentives for workers to choose coverage that gives them more control over their medical spending.

Bush’s proposals will center on health savings accounts, which allow people to set aside tax-free dollars to cover medical expenses. These accounts, which were established under the Medicare Modernization Act passed in late 2003, are tied to high-deductible health insurance policies.

This concept is designed to make people more prudent health care consumers because they spend more of their own money. The accounts reflect Bush’s philosophy of an “ownership society” in which individuals take greater control over their personal health and wealth.

Only a rich kid like the King George would ever think up something like health savings accounts. In his world, it makes perfect sense for Americans to save up for something they can’t afford. Hell, he’s never had to worry about money, why should we? Well, here’s a good reason to worry :

Americans spent $42bn (£24bn) more than they earned last year, turning the annual US savings ratio negative for the first time since the Great Depression.
. . .
The savings ratio fell to minus 0.5 per cent last year, meaning Americans not only spent all of their after-tax income but also had to increase their borrowings or plunder their savings. This is the first time theratio has gone negative for an entire year since 1932 and 1933, when the US was struggling to cope with the Great Depression.

The savings ratio is seen as a key economic indicator as it shows how vulnerable households are to a sudden shock such as a surge in interest rates or unexpected redundancy.

Since our trust fund baby-in-chief is fond of recycling the same crappy proposals over and over again, I hope you’ll forgive me for doing the same by reposting part of what I wrote the last time he tried to sell this utopian garbage :

I wonder if Bush has ever had to lay all his bills out on the kitchen table and figure out which ones he can pay immediately and which ones can wait until the next paycheck? Or if he’s ever lived in an overcrowded apartment with hand-me-down furniture, eating the same thing six days a week because it’s cheaper? Or if he’s ever had to settle for a job slightly less shitty than the one he had in high school because there weren’t any jobs in the field he majored in? Of if he’s gone through the process of figuring out which generic brand products at the grocery store are as good as the name brands and which ones aren’t?

As most of you know, I’m not just describing poverty here. This is normal life for many Americans. Some live paycheck to paycheck, while others are able to pinch enough pennies to save a few bucks. Either way, most people don’t have thousands of dollars to spare.

Practically speaking, savings accounts for retirement and heath care a huge mistake, but for entirely separate reasons. With the latter, the rub is that health care is expensive. Let’s say you have an medical emergency with costs in the $20-30K range. How long would it take you to save that much? A few years? Even with the vague incentives, we’re still looking at a plan that’s the equivalent of asking every American to buy a new car that he/she may never drive.

That same principle holds true with Republican proposals for education and retirement savings. Do they honestly believe we’ve all got extra income sitting around that we can throw in the bank? It must be nice to grow up in the GOP world of disposable income and “personal responsibility”…