Why a Penny Saved is Not Always a Penny Earned

Brian Urich/New York Times

When I came across this photograph in the NYT yesterday I was stopped in my tracks. The story that it anchored concerned “the way we live now” in an era of debt, but all I could think was that this is a picture of the late modern ghost town.  A shopping mall without shoppers … or for that matter, without shops or shopkeepers.  Instead of sage brush and weeds we have rubberized plants, and while the store fronts are not boarded up it is a fair bet that the building has been locked down to keep vandals and scavengers away, but the scene nevertheless evokes the eerie, spectral presence of the now absent, bustling commerce that once filled these halls.

In the days following 9/11 we were told that it was our civic duty to consume in order to keep the economy on its feet; the now prolonged recession makes even this limited civic responsibility impossible for many to honor; and for others, well, as the Times reporter notes, “it just [feels] better to owe less money,” and so rather than to spend many citizen-consumers have resorted to saving, or paying down their debt.  It is hard to blame individuals for the same strategy being exercised by banks who severely limit the money they are willing to loan in a “risky” economy or corporations who refuse to invest or hire—or for that matter, the strategy being counseled by Republicans who think that the solution to our economic woes is to limit spending (including on such items as extended unemployment insurance) while extending the Bush tax cuts.  But nevertheless, the effect of such thrift on the economic recovery is palpable.

The question is, how do you give presence to an economic problem, particularly when it is animated, at least in part, by a psychology of risk?  The photograph above does a pretty good job as it visualizes the problem (or at least the effect) in chicken-and-eggs terms:  what comes first the shoppers or the shops?  What the picture makes most clear is not the old saw that a “penny saved is a penny earned,” but rather its counter, that one needs to recognize what is entailed by being “penny wise and pound foolish.” The members of Congress in particular should pay heed.

crossposted at No Caption Needed