A pervasive mood of fear and gloom has settled over the nation. More to the point, the various government bailout deals represent a short-term fix.  Despite the staggering multibillion dollar price-tag for buying up bad debt and infusing cash into the banking system, these emergency measures cannot produce the long-term change that is needed to restore public confidence and put families and the nation back on a secure path.  At best, they buy us a bit of time.  But if we are to solve the longer-term problem, we need to abandon the unsustainable culture of debt that has led to this crisis and to build a new sustainable culture of thrift.

For decades, Americans have been living beyond their means on easy credit.  We’ve bought more stuff than we needed.  We’ve used plastic to finance our everyday wants and needs.  We treated our single most important asset – our homes – as piggy banks, draining home equity lines of credit for everything from high-end granite-countered kitchens to fully-loaded SUVs.   We’ve been willfully or naively blind to subprime mortgage and credit card offers that are too good to be true.  As a consequence, we have built up a mountain of consumer debt – including $937.5 billion in credit card debt alone last year -  and produced a savings rate that hovers close to zero.  [At the height of World War II, Americans saved about 25 percent of their income.]

But as we now know, the American consumer isn’t solely to blame for the economic chaos.  Powerful and trusted Wall Street institutions have been caught up in the unchecked addiction to high-risk debt. Likewise, our public institutions have been part of the culture of debt.  The federal deficit has reached a half trillion dollars, a figure so stratospheric as to be inconceivable to most of us.   It will be left to our children and grandchildren to grasp the full meaning of federal debt as it eats up more than five percent of our GDP and shortchanges their futures. Meanwhile, as the federal debt balloons, forty-two states and the District of Columbia have gone about the task of aggressively expanding the state-owned and operated lotteries – a public institution that turns many citizens who might be regular savers into habitual bettors. 

This brings us to the current moment.  We stand at a historic watershed:  The debt culture has failed.  The entire institutional edifice of debt, built over several decades of wild profligacy and greed, has collapsed almost overnight.  Foreclosures, bankruptcies, and broken dreams are all that is left from our borrowing-and-spending binge.

The path out of the failed debt culture will not be fast or easy, but its main direction is clear.  It points toward the greater freedom and security rooted in the value and practice of thrift.

Thrift is one of the oldest and most durable American values but its reputation has suffered during the decades of a debt culture. For many people today, thrift carries the musty odor of the attic and the canning cellar.  Some hear the word “thrift” and think of the painful Depression Era privation of their parents and grandparents.  Others think of tight-fisted stinginess and joyless self-denial.  Still others believe that the practice of thrift is destructive of the economy itself.  Thrift, properly understood, is none of these things. 

Here’s what thrift is:  First, thrift is rooted in a broad social philosophy of human flourishing.  It unites two classic themes in American life:  self-help and mutual aid.  Thrift says that everyone who can master the habit of thrift can save.  At the same time, thrift rejects the radically individualistic notion of “do-it-by-yourself.”  It holds that people can be thriftier together than they can be on their own.  Thus, thrift encourages an institutional culture based on cooperation, associational bonds, and mutual aid.  For three centuries, thrift has been the animating value behind mutual savings banks, buying cooperatives, public libraries, community gardens, environmental movements, faith-based credit unions and philanthropic thrift shops.  

Second, thrift is generous.  Yes, thrift says we should save more but it rejects the idea of hoarding or scrimping for its own sake.  Indeed, thrift sees greedy acquisitiveness as a form of idolatry.  Thrift is about taking care of our material and natural resources so that there will be enough left to enrich the lives of future generations. 

Finally, thrift is a source of pleasure.  The practice of thrift leads to an abundance of good things to savor in life.  As Benjamin Franklin wrote, “Wealth is not his who has it but his who enjoys it.”  In addition, thrift liberates us from the anxiety of overindebtedness, the competition of keeping up with the Joneses, and the envy of others’ good fortune.  Thrift makes us grateful for what we have achieved on our own, and what has been given to us from others.  And last of all, thrift says that it is more fun to give than to get.

So how do we rebuild a culture of thrift?  No one has the complete blueprint but we can begin with two goals in mind:  first, we must create alternatives to the anti-thrift institutions that undermine the ability to save; and second, we must build an institutional infrastructure that will make it easier for more people to practice thrift.   To advance the two-pronged strategy, here are five promising ideas that are already underway:

1. Repurpose the lottery:
   The average person spends $184 a year on the lottery and households earning under $12,400 spend a whopping $645.  States could provide a government savings bond option linked to the lottery, similar to the successful “prize bond” programs in Britain. FDIC head, Sheila Bair, has asked her staff to explore this idea, first proposed in the Institute for American Values report, For A New Thrift.
   
2. Provide alternatives to payday lenders:
   Payday lenders serve up  “fast cash” and “free money” to 15 million strapped wage-earners every month at interest rates ranging from 300-500 percent APR.  But there is a better way.  Many credit unions now provide emergency short-term loans to members on more reasonable terms with incentives to save.  Cleveland’s Faith Community Credit Union, for example, offers Grace Loans and Amazing Grace Loans to church and community members.
   
3. Launch a public education effort to promote thrift:
   Americans are most successful at saving when there are large-scale efforts to encourage everybody to save.  A pro-thrift saving campaign would blanket the media with ads on the benefit of savings, much as the lottery blankets the media with pro-gambling ads.  Such a campaign –expanded from the current small-scale effort by the Treasury Department -  would target younger Americans who, research shows, are more likely to save if they learn to practice thrift early on.
4. Create an American Savings and Investment Plan with mandated automatic enrollment:
   The government’s Thrift Savings Plan, created in 1987 and enrolling 3.8 million participants, could be expanded to help all workers save.  The plan would put contributions into a few diversified, conservative investments and would allow withdrawals for any purpose, though there would be incentives to encourage people to leave their money in accounts for longer-term goals, such as college education, home purchases, business start-ups and retirement.  
5. Establish matched savings accounts for low income adults:
   Each year, the federal government spends about $110 billion on tax incentives to encourage people to put money into IRAs, 401Ks, and other retirement savings plans.  Yet because these incentives come in the form of forgiven taxes, they disproportionately benefit wealthier Americans.  However, a bipartisan Congressional initiative, now in the works, proposes to establish matched savings accounts for low income people which would grow tax-free, be partially matched or subsidized and could be withdrawn only for specified purposes. 

These ideas are suggestive of the practical steps we might take to build a thrift culture but the fundamental change will come not simply with new policy ideas but with a renewed sense of hope, social energy and shared commitment within the civil society to become good stewards of our resources.