The federal government wants us to save more?

Recently U.S. Treasury Secretary Timothy Geithner was quoted as saying “Everyone is going to come to terms with the fact that we are gong to (have to) save more in the United States…If the U.S. starts saving more, that changes the whole world’s economic reality.”

Geithner isn’t wrong, saving more would help the economy; he’s just sounding a little too much like Marie Antoinette - elite and out of touch with the suffering general public.

For those of us that live in the real world, we can’t imagine where Mr. Geithner thinks we will get the money to save. Is he really so unaware of the millions of unemployed and the underemployed? Does he really not realize that those who are working are afraid of losing their jobs? We are facing a historically unprecedented federal budget deficit, and colossal federal debt which could raise taxes to enormous proportions; perhaps 30-35% of GDP. Soon we will be expected to support a massive new healthcare program which promises to tax everything that moves, along with a not too distant cap & trade scheme to pick our pockets.

How much better if instead of taking our money and spending it, if Washington would help this country by incentivizing more savings. Then, even if the deficit stayed large, the increase in private savings would provide more financial capital for private investment which would grow the economy and help put people back to work. It would also make the US economy less reliant on foreign investment.

There are many ways to incentivize private savings but one great way would be to scrap the federal health care program now being debated and instead return insurance to its rightful place - a product one buys hoping that one will never have to use - then strongly incentivize health savings accounts; a product where people save for the regular health maintenance of life.

Unfortunately today, “health insurance” is misnamed and thereby misunderstood - it has transitioned into a health maintenance product instead of an actual insurance product. This transition has created impractical expectations, poor incentives, and loss of consumer influence in the healthcare marketplace.

As a nation, we need to have a public discussion about our expectations. Routine health maintenance, like maintenance for your car or home, is just a part of life that one is wise to look after.

It is evident that any “insurance” product that will pay for routine health maintenance costs is going to be very expensive for a variety of reasons; increased consumption, lack of transparency and consumerism, and a lack of competition to name a few. The natural response of insurance companies is to stabilize these effects by setting limits, second guessing the decisions of doctors’, by excluding tests and treatments, and raising rates to cover costs. It is clear that the expectations of the consumer and those of the insurance company are at odds with each other; a federal government plan would surely produce similar results with the added disadvantage that it will literally take an act of Congress for unhappy constituents, unable to flee the program, to make any changes.

Health maintenance plans should be labeled and marketed as such - not insurance. Actual insurance should be returned to its rightful place; insuring for major emergencies and illness. The federal government should find better ways to incentivize participation in health savings accounts; the savings for minor illnesses which build up tax free, growing over time - eventually used for retirement or inheritable. This would help return power to consumers; granting more freedom in healthcare decisions. It would also increase private savings providing us an end-run around the problem of a large federal deficit.