With Americans mired in unprecedented debt, a group called the "Commission on Thrift" has issued a report with a plan to shrink debt and encourage saving among Americans of modest means. (1) Here are the highlights of the plan.
The Commission on Thrift proposes a National Thrift Initiative. This is mainly a public education campaign for thrift similar to campaigns to reduce drunk driving, reduce smoking, and encourage seatbelt wearing. (p. 49) (2) As part of this, the Commission calls for revival of National Thrift Week, which was celebrated in America from 1917 to 1966.
Another component of the thrift plan is the creation of a savings plan available to all Americans modeled on the U.S. Thrift Savings Plan. The U.S. Thrift Savings Plan was created by the federal government in 1986 for all federal workers and military personnel. It enables them to place a small portion of their earnings into diversified stock-and-bond index funds. (p. 50) These funds are managed by an independent board with oversight by public and private sectors. (p. 50) Currently the federal savings plan has 3.7 million participants, manages assets of approximately $225 billion, and operates at a much lower cost than commercially-run funds. The Commission on Thrift wants to extend this savings and investment opportunity to all American workers who would participate through their place of employment. (p. 51)
Next, the Commission proposes to craft community-based thrift institutions to compete against payday lenders and other anti-thrifts by offering opportunities and incentives to save and by providing access to credit at low cost. (p. 51) In some cases this means creating new organizations; in others it means expanding and diversifying existing ones, especially credit unions. The Commission proposes that these thrift institutions operate as non-for-profit cooperatives. As part of this, the Commission calls for significant growth in the number of Community Development Finance Institutions, which currently number about 1,000. (pp. 52-53) (3)
Another component of the plan involves a change in the services provided by state lotteries. While conceding that the popularity of lotteries with the public and legislators makes abolishing them unrealistic, the Commission proposes that lotteries enable customers to gamble and to save. In the future you can buy a scratch off or a "savings ticket." (p. 54) The report says that a good marketing slogan for such savings tickets can be "Every ticket wins!" (p. 54) But the report gives no details on how the proposed savings component would work.
Finally, the report offers a list of additional possible strategies that should be considered to promote thrift, such as reinstating low usury caps, banning credit card companies from college campuses, instituting school savings programs, coaxing banks to offer more services to low income customers, and many others. (pp. 55-59)
It remains to be seen whether the Commission on Thrift triggers the sweeping change that it hopes for. Those who benefit from the status quo are certainly going to oppose its plan aggressively. Nevertheless, the members are to be applauded for studying and acting on a crisis in America that begs for intelligent problem-solving.
- For a New Thrift: Confronting the Debt Culture, Institute for American Values, 2008. References to this report hereinafter are by page number.
- One assumes that the Commission anticipates the use of public service announcements on radio and television for this purpose. However, PSAs which are critical of advertisers who pay for air time will likely object to them, in which case the Commission will need to turn to foundations and benefactors to provide funds to purchase ads. One also assumes that a comprehensive education initiative needs to involve schools but the report says very little about this aspect.
- "Community Development Finance Institutions are supported by the CDFI Fund, established by the U.S. Congress in 1994. To date, this fund has awarded $820 million to local financial institutions." (p. 53)
© 2008 Tom Shipka