“IT MIGHT BE, IT COULD BE...IT PROBABLY ISN’T”

3/29/08

Two recent news stories, which most would consider only tangentially related, are probably both more closely intertwined, and better, news than many people think.

The Wall Street Journal’s print edition reported today what its online edition reported yesterday: The Labor Department says that personal income increased 0.5% in February while personal spending increased only 0.1%. The Chicago Sun-Times reported today that revenues at Illinois “riverboat” casinos were down 13% in February following an 18% drop in January.

Both stories are being reported as bad news, and understandably so. The conventional wisdom is that what this economy needs right now is spending, spending, and more spending, so news of the paltry (negative, adjusted for inflation) increase in personal spending is added, by conventional thinkers, to the litany of bad omens for our economy. Similarly, any news of an industry taking the kinds of hits the Illinois casino industry is taking is perceived as bad. It is hard to argue with either argument in the short run.

However, as I was saying to a friend of mine at lunch yesterday, if our economy has any hope of surviving, we have to increase our savings rate, and we have to do so quickly and drastically. The genesis of our current economic problems lies in overspending and its flipside, under saving. So news of personal income outrunning personal spending, with the axiomatic increase in personal savings such statistics entail, is good news in the long run. Our politicians and Wall Street economists, ever focused on the short run, will respond with antipodean proposals and programs to increase savings, like the fatuous Bush rebate program, which are akin to curing alcoholism with generous doses of cheap hooch. But if we really want to cure our economic diseases, rather than treat their symptoms, we have to increase our savings rate. Yes, doing so will involve pain, probably lots of pain. But this problem has been developing for over twenty years, and efforts to avoid pain, like curing a hangover by chugging half a bottle of rot gut booze, are bound to make the ultimate problem even more acute and the cure perhaps even worse than the malady it was designed to treat.

The connection to the gambling story should now be obvious. While a drop in casino business is tough for the industry, and the economy in the short run, the growth in (at least legal) gambling in this country over the last twenty or thirty years is alarming. Money that could be saved or invested in more substantial businesses has been frittered away at the tables and machines and has gone to support a business that, well, holds little promise for making people’s lives substantially better. Given my instincts, I have no problem at all with legalized gambling; I just wish people would exercise their freedom of choice to gamble less. The growth in the industry not only is financially debilitating in the long run but reflects a soul sickness, or at least a spiritual and moral hunger, that has increasingly come to permeate our society. So a falloff in gambling revenue is, while perhaps regrettable in the short run, a positive development in the long run.

My realistic (er, sorry, cynical) nature suggests that both these developments are fleeting; in March, personal spending could outrun personal income…again. And the financial problems with Illinois “riverboat” casinos could be entirely due to overall economic difficulties and a 2008 law that forbids smoking indoors in public places, including casinos, in Illinois while gamblers in Iowa and Indiana can ingest as much malodorous poison as they please as they fritter away their credit lines while complaining that they just can’t make ends meet. But, at the risk of endangering my reputation as one of the most cynical scribes in cyber-space, I can still hope that maybe, just maybe, the American people are starting to figuratively sober up.