 Thanks everybody. I think we're going to get underway. It's great to see so many of you here today. Welcome to the New America Foundation. I also want to take a moment to welcome all of our viewers online. Nearly all of our events here at New America are broadcast live on our website, www.newamerica.net. My name is Justin King. I work in the asset building program here at New America. Our work is focused on breaking down barriers to savings and asset development for all Americans. But primarily that means for low and moderate income families. We believe that improved opportunity for savings can lead to increased welfare for Americans, their families, and the nation's economy as a whole. The guest at our event today is Professor Sheldon Guerin from Princeton University. He's the author of a new book, Beyond Our Means, Why America Spends While the World Saves. This is a timely event for us and we're excited to welcome this book into publication and Professor Guerin to New America today. A core part of our work in the asset building program is reaching out to and educating policymakers, members of Congress, the administration, sometimes to leaders at the state and local levels. And as we perform that work, there are a few key questions that we often encounter. The first question is, of course, can the poor save? And while some of us might tire of having to address that question over and over, I'm happy to tell you that at the very least we have a good answer. The answer is yes, the poor can save. They do save and they will save more if they're given access to the right structures and incentives. The other question that we really frequently come across when we're talking about savings with people is, isn't it just culture? Aren't we sort of as a people just given to spending instead of saving? And it's sort of hard to blame people for asking that question, especially when you look at sort of savings rates in America and the lack of savings that Americans have across the spectrum. To a certain extent, it doesn't really matter whether you have a high income or a low income. It doesn't matter your race or your gender. Americans don't save enough money. And if you're troubled by income inequality, my recommendation to you is to look up the stats on wealth inequality. It's a much worse picture. Recently, an economist at UC Berkeley calculated that in 2007, the six wealthiest members of the Walton family had as much wealth as the bottom 30% of all Americans combined. Now, I'm sure that those six members of the Walton family took a hit in the Great Recession. I'm also sure that they were much better positioned to handle that hit than the 90 million Americans who comprised that bottom 30%. Professor Garen's book, Beyond Our Means, takes a historical look at the origins of savings in the U.S. and in the Western world and early campaigns to promote thrift. He contrasts that history with the history of savings development in other countries, particularly Asian cultures in Japan. What emerges is a really interesting study of different political choices, shifting cultural attitudes within and across cultures. And he ties that history into the most important economic development of recent years, and that, of course, is the Great Recession. I don't normally go around recommending comparative histories of political economy, but in this case, I'm going to make an exception. This is a really interesting book. He's a professor of both history and East Asian studies at Princeton University, which strangely but uniquely qualifies him to write this story. And we're thrilled to have him here with us today. Joining him for discussion also is Ray Bushara. For those of you who don't know, Ray's the founding director of the Asset Building Program here at New America, former vice president of our organization, and currently a senior advisor for the Federal Reserve Bank of St. Louis. His career has been dedicated to the promotion of thrift, savings, and wealth development for all Americans. And I'm very pleased to welcome him back to New America. We're going to begin with Professor Garen, who's going to walk us through his book and the story that it tells. And then Ray is going to have an opportunity to respond. And then we're going to open up to questions and discussion from those of you here in the audience today. And we're also going to follow up that with a bit of a reception afterwards. So if you're watching online and happen to be in the 20036 zip code, there's still time to get here. But without further ado, I want to turn it over to Professor Garen. Please join me in welcoming him. Well, thank you very much, Justin. And it's really great to be back here. I had a very nice sabbatical leave about a year and a half ago at the Woodrow Wilson Center. And at that time, I came over here regularly, and I'm really delighted to be a part of the program this time. Well, I want to thank you very much for the opportunity to talk about my new book. The book, as Justin said, is a global history. And it's a history of how many nations have actively encouraged household saving from roughly 1800 all the way up to the present. And when I began this project, I will confess that the saving was not exactly a sexy topic in the United States, where policymakers have long fixated on consumption and credit as the drivers of economic growth. But in the wake of the 2008 housing and financial crisis, the issue of saving has become maybe too exciting with millions of Americans, as you know, lacking the savings to protect themselves against home foreclosures, against job losses, medical emergencies, and the prospect of impoverished retirements. So the book is in part a history of developments that culminated in America's current predicament. But the book also tells the long story of how people in many other nations, east and west, learned how to save. Now it's well known that my own specialty of Japan and also other east Asian societies, including presently China today, boast very high saving rates and are known as being very thrifty people. Americans know that, but it's been easy for Americans to dismiss east Asian saving as a product of something that we call culture, whether it's Confucian heritage or Oriental culture. Somehow we can relegate it to a cultural oddity that's different than the quote unquote normal pattern in the West. The problem with that formulation is that most Americans, and I have to say most economists I've talked to, seem to be unaware that continental Europeans have also been strong savers and they remain so today. And I want to show you a very quick table of these are household saving rates, the percentage of saving as a percentage of household disposable income. What jumps out at us is the high rates of saving in places like France and Germany, one could add Austria, one could add Belgium, one could add Sweden, several other continental countries that have over the past 30 years and even before maintained very high saving rates. Ironically today even higher than the Japanese and I could have also put the South Koreans up. Now the question for economists is how to explain how continental Europeans maintain high saving rates, how historically both east Asians and Europeans have had high saving. Economists have not done a particularly good job of explaining these cross national variations to just to give you one example that's often mentioned in economics departments in the United States, the welfare state. Economists will tell you, based on certain models from the 1970s, that a welfare state and a social security system, we call it here a national pension system, that in general, generous social benefits from a state will disincentivize people from saving. Well, a quick look at a table like this calls that into question the idea that Germans or French or Swedes don't have very generous welfare systems is a little hard to take. They have these are the super welfare states of the world, yet they boast very high saving rates. And if one was following the rationality posited by economists in the United States, which has much flimsier safety nets, we should be saving a bundle because life is so risky. And yet we have the counterintuitive case here. Europeans with welfare states save a lot. Americans with relatively poor welfare state save very little. So how do we explain these variations? And what I've done in this book is I've looked at a factor that that that economists probably would not measure since it doesn't tend to be central to their methodology. And that is that nearly all of the high savers here, whether in East Asia or in Europe, have long histories of actively promoting saving among ordinary people. What used to be called and still is called in these places small saving. So we're not talking about large investors. We're talking about ordinary people saving. And they've done so by means as as we've just heard of institutions of policies and sometimes even moral Swazian campaigns. And in the book's 12 chapters, I describe these histories in detail, but allow me here to just sum up the European and Japanese experiences and then consider the ways in which the United States has diverged from the institutional promotion of saving that we see elsewhere. And I'm going to just run through very quickly, since I want to have a long discussion here and we want to have raised comments. I want to look at the very short brief history of the last 200 years and the institutional promotion in Europe and in East Asia. And we begin with an institution called the Savings Bank. Many of you are familiar with it. It starts in various European countries about 200 years ago, sometimes even in the late 18th century, but roughly around 1800. It spreads like wildfire. It's what we call a transnational phenomenon. It's a big reform movement at the time. So you might see it in England and Scotland, but you'll see it in Germany. You'll see it in Switzerland. You'll see it in France. It spreads very fast because reformers are very much in touch with each other. Well, what is a Savings Bank? It is a special institution, a social institution, rather than a financial institution that's designed to encourage the working poor and to some extent the middle classes to save. These savings banks were usually philanthropic in their foundation or often started by civic organizations, particularly in places like Germany, where cities would actually start and run the Savings Bank. The Savings Bank was associated with the emerging concept in the 19th century of citizenship that somehow everybody in the community was somehow now seen as a citizen whose economic behavior was very important. You wanted them not to depend on poor relief. You wanted them to be self-reliant. You wanted them to stay away from crime. And increasingly, as you have working class movements, middle classes and upper classes wanted them to stay away from revolution. The term that was used in places like Britain at the time was by having a working class person put his money in a Savings Bank, that person thereby gained a, quote, stake in the country that they wouldn't be less likely to revolt because they had money in the country. They had property in the state in the country. And in some ways, it's akin to European notions of financial inclusion today, which are also very much bound up with citizenship. So Savings Banks was one of the big institutions, 19th and 20th century. Another institution was the Postal Savings Bank. This really came in a second stage after the Savings Banks. It started first in Britain in 1861. And like the Savings Banks, it too spread very fast transnationally. It was considered one of the hot social policy innovations. I show here just a stunning Postal Savings Building in Central Europe in Vienna. There's also one in Hungary, which is even more fanciful. These were showcases for governments around the turn of the last century. I mean, it demonstrated that governments were actually pursuing active social policies and helping their working classes and generally the small savers in general. The Postal Savings Bank is probably most famous in the Japanese case, my own case. A lot of people think it started in Japan. It did, in fact, start very early in 1875, soon after the British. And the Japanese developed it rapidly. So that today it is so large, some of you may know that the Japanese Postal Savings is actually the world's largest bank. So Postal Savings is very important in many countries, particularly in Japan. What does the Postal Savings Bank do? Well, it takes even smaller denominations in the Savings Banks. It is very accessible because the mid-19th century is a time of explosion of post offices all around nations, it was a major part of nation building and the idea that ordinary people could have a post office very near where they live. This was a marked improvement in terms of access to Savings institutions. And finally, the Postal Savings Bank offered a security that none of the banks, including the Savings Banks, could offer, namely, your deposits were guaranteed by the state that ran them. Another institution that promoted saving was the School Savings Bank. Thrift Education, this too, starts in the 19th century. It was probably first perfected on a nationwide basis by the Belgians, soon after by the French. It spread rapidly halfway across the world to Japan by the 1890s. It was all around. And it consisted of, I mean, an iconic picture would be this. I mean, just at the another end of the world, Australia. This was a transnational Monday, basically. Everywhere in the advanced nations of the world, including parts of the United States, as we'll get to, but certainly Europe, Australia, New Zealand, et cetera. On Monday morning, children brought their coins in and they were made to learn habits of thrift because they were going to be the future citizens. So school savings, very important. Another way of promoting saving when we get into the 20th century is the War Savings Campaign. This is the one that we're probably most familiar with as Americans, and we'll talk about the American case in a few minutes. You can see an American poster here. The fact that you have posters. The two world wars really innovate in terms of mass communication to save. And of course, the imperative to save is no longer simply that it's good for the soul or that it's good for society. Now it's good for the state and its pursuit of protracted war, these two total wars, the two world wars, and you can see how fast the message is to save, spread. We think of propaganda as nationalistic, but in many ways it's very transnational. Friends are looking at each other, the Americans and the British in this case, basically coming up with the same poster. Admittedly, the American one is much more attractive. And also, Joan of Arc makes a lot more sense in America than it does in England, where Joan of Arc is actually the mortal enemy left over from the Hundred Years War. But these transnational messages to save, enemies looked at each other. So the communication process and getting people to save really advances during the two world wars, even if the immediate objective is for national strength and war effort. And it carries over into post-war periods. And the post-war is the, oh, let's, oh, I'm sorry. I can't depart from World War II without showing you one of the iconic posters from War Time Britain, where you can see how the act of saving and the act of not saving, in other words, the shopper, the shopper's disease there on the bottom, economizing and saving is seen as a patriotic act and to do otherwise is to be Hitler's pal. And I suppose you could fast forward to post 9-11 in our own country where not to go shopping and main due bin Laden's pal. Okay, so clearly we have very much departed from the sort of messages that one saw in World Time Europe and even World Time the United States. Also the mobilization of, sort of, grassroots mobilization of neighborhood leaders, especially women in the home fronts in World War II, you can see that in Japan. This woman would have been a member of a patriotic woman's organization who's knocking on doors getting people to part with their saving each month and the British woman is doing exactly the same thing a year after the war but in the same sort of war time in post-war national savings movement. Well, the next and final stage in the European and the Japanese story is what happens after World War II. This is what Americans don't seem to know much about, but the war ends in 1945, but in war-torn Japan and Europe the savings campaigns and the austerity campaigns continue for one very good reason. All of these societies are war-torn, they suffer major damage, they need enormous amounts of finance for reconstruction and for recovery and saving in addition to taxes is extremely important toward this end so in Britain the campaign starting right in the last months of the war and continuing the post-war is to keep on saving not only to beat the Japanese and the Germans but to construct the post-war British welfare state which you see here in terms of roads, education, housing, health, et cetera and you see these campaigns all over Europe and France and Italy and Germany everywhere in the Germanies and in Japan and in the Japanese campaigns last particularly long. The Japan actually had active savings campaigns in the post-war period that ran probably all the way to the early 1990s with extensive grassroots organization. Now in the European case unlike the Japanese the overt savings campaigns pretty much died down by the late 1950s or so but in many ways European governments keep promoting saving quite, quite actively, how do they do it? Well those of you who lived in France you know that there is a tax-free small savers account called the Leveret-Ah or the A-Pass book. It was created in 1818 to just show its longevity. It's available at all the savings banks, the postal savings banks and in the last two years it's actually available at all banks. Tax-free, a tiny, tiny minimum balance, no fees. It's capped so it's intended for small savers. There's about I think 11 or 12 million of these accounts in France today which is a good chunk of the French population. In Germany the savings banks of the 19th century are very, very much alive called Sparkassen. If you go to a German town or city you can't turn the corner without crashing into one of these. They are everywhere, very accessible, still have a major thrift promotion message to them and they offer things like youth savings accounts and small savings accounts which like the French example are really designed to get lower income and younger generation saving. Thrift education is alive and well in many of the cases in Japan but particularly probably in Germany where the Sparkassen, the savings banks actually have Europe's most popular comic book called Knachs and they subtly promote it's for very young children. They subtly promote going to the savings bank and things like that. Well, so I've told you a lot about the European and Japanese approaches to promoting saving over long term. How does the United States fit into this picture? How does it fit into the global history of promoting saving? And the book argues rather uncomfortably. The United States is an outlier in much of this story. How is it an outlier? Well, let's just look very quickly at the institutions that we've been talking about in the European and Japanese case. Savings banks, well the United States in the 19th century had a fairly extensive system or what we're called mutual savings banks. They're basically English style savings banks. The problem is they're very dense and available in the Northeast particularly in New England to some extent in the upper Midwest but they don't spread much beyond the Northeast, the upper Midwest and a few Pacific Coast cities. As late as 1910 my book shows very few Americans in the Southern and Western states which is a fairly good chunk of the American population. Very few of these people had access to any savings count whatsoever. So the rate of unbanked Americans in 1910 was huge and a real contrast to what one would find in contemporary Europe and Japan at the time. Postal savings bank, well I should ask the older members of the audience, did the United States have a postal savings bank? Yes, okay good. How many hands were there? Two. Right, that's what I figured including some of you who should have remembered but the fact you don't remember is significant because it wasn't much by the time that you were young. It was established in 1910 after nearly 40 years of stalemate in the U.S. Congress, U.S. commercial banks and regional interests fought tooth and nail against the establishment of postal savings bank. In 1910 it was passed but it was passed in a way that almost made it destined to fail. It offered much lower interest rates than the banks for good reasons because the banks didn't want them to do that, it wasn't accessible in all rural communities, only in major post offices. It didn't do what it was supposed to do and finally in 1966 Congress abolishes it and the fact that most of you can't remember it is highly, highly significant. School savings banks, did we have them? Oh, oh I'm sorry I should have. Okay, yeah sorry, that just to show you that we really did have a postal savings bank, I didn't make it up, okay. School savings banks, well I brought this from my home state of Minnesota. Yes, we did have good school banks. I show this picture in Europe a lot and especially in Germany they say well how do they get Americans to line up like that and they said well they're all Swedes and Germans, okay. It has to be the answer but who knows, they look like it. Okay, anyway, so there were pockets of school savings banks and some of you may have gone through them, New York City very good, Minneapolis very good, most places terrible because we have a highly decentralized school system and also even if you wanted to have a school savings bank you had to have somewhere to put the money, the postal savings bank was actually, it was illegal for them to take school savings so you had to have a savings bank because the commercial banks said ew I don't want those high transaction costs, commercial banks have changed very little in this country in terms of transaction costs, transaction costs, you know, social mission, not a lot. Okay, so you didn't have so very uneven school savings banks and only really in World War II, well World War I to some extent really World War II does the United States converge to what the rest of the advanced world is doing. That's when you have very active savings campaigns with grassroots organization and you have the innovation of the US savings bond. This highly accessible small denomination very easy to administer savings instrument and you could sell them at the workplaces, 27 million Americans were in payroll savings, you could sell them in schools, you could sell them in post offices, very, very clever solution to the problem of getting a small savings instrument and the other thing of course the United States did around this period was it created the FDIC. It's established in 1934, doesn't have that much effect in the 30s but after 1945 when Americans had huge savings from the war the fact that now all banks were, well, all banks of savings and loan a little different but at least the banks had the FDIC insurance system, the full faith and credit in the United States. So this is also America's answer you could say to postal savings elsewhere, highly effective and the result is that, sorry, a little out of order here, the result was that in World War II but even in the post war decades the US had pretty good savings rate and then I think some of you know this ranging from 1946 to the 1980s between about 7 and 11 percent. So, you know, fairly respectable, far below the Japanese, significantly below Germans and others but still rather high compared to you know what we've seen in recent decades when as you can see the savings rate falls off the cliff basically in the 1990s and the early 2000s. Well, long-term factors in the decline of saving and go over very fast but the United States comes out of World War II with unparalleled prosperity, doesn't really need the savings and austerity campaigns other countries have. We have already from the 1920s a vibrant consumer credit culture starting with the installment plan, the 20s and 50s people get used to buying on credit and home ownership which let's see, sorry, enormous rise in the US sponsorship of home ownership going back to the 30s but particularly kicking in the 1950s and thereafter the GI bill, the FHA, all sorts of things that promote on fairly easy terms home ownership in lots of ways, tax benefits, all the sort of things we know and that really brings us to what happens in the last 30 years or so. What happens after about 1980? Up to the 1980s, the US pattern of saving through housing and its consumer culture, this is pretty sustainable. The United States had high savings or relatively high savings with relatively, with very high consumption. It was people paid back their credit both housing and consumer but after 1980 or so something snaps. I think most of you probably know this story so I'm not going to spend a lot of time on it but certainly the deregulation of credit cards is enormous and the universalization of the credit card and the revolving credit, in other words borrowing against your credit card, we take that for granted but if you were to go to Germany or Italy or Belgium and you looked at people's so-called credit cards and not credit cards at all. They're called delayed debit cards. They pay them in full each month. They are scandalized to think that Americans actually don't have to pay their credit cards back. In Japan almost everybody pays their credit card bill in full as well. So this is unusual what the Americans have, few other countries have it, but particularly America. The home equity loan, nobody really talks about it but this really only got started in the mid 1980s, particularly encouraged by the 1986 tax law which makes home equity interest tax deductible along with regular mortgages and there's an explosion of home equity credit and the line between housing credit and consumer credit blurs because you got that nice line of credit that you can draw on for any purpose. You don't have to use it for home improvement. You can use it for a vacation. You can use it to buy things. You can just use it as a source of ready cash and I think that had a lot to do with diminishing saving, subprime mortgages, we won't talk about it because people know that story well and also lots of prime mortgages that were given with no down payment and of course all that's occurring as income equality is growing, particularly in the last 10 years so that in a sense credit becomes America's welfare policy. In Europe you get in trouble, you get social benefits. In America you get in trouble, we give you more credit. Okay, so that's a lot of the story. Well, now since 2008 Americans have started saving again and there were a lot of stories about how we were returning to a new frugality and all that, well I think they were exaggerated because even at their peak the annual savings rate it looks like now didn't even go above 6% actually below where we've been in the post-war period and below where everybody else is and now in the last few months it's been below 4%. So in the last chapter I offered recommendations and I'm just going to leave them up for now. I'm not going to talk about them right now. Except for maybe two things, these are recommendations at the back of my book, odd for a historian, but I was in Washington and people said you can write a book like this, you need policy recommendations. So these are the lessons of history or how I spent my European vacation sometimes I call. But anyway, I want to single out two of them. Revive postal savings. Now that seems lunatic except that it's normal everywhere else in the world. Moreover, now you might say why would you want to revive postal savings? Because the post office is about to go down and my answer would be that's exactly why I want to revive postal savings. Because in Europe and Japan many postal systems seen declining revenue from delivery have actually compensated by the rise in postal financial services. So you could actually kill two birds with one stone here. It's a wonderful way I think of improving access and it might saving, might actually save the post office. The other thing is promoting financial inclusion as a democratic right. I think the way we talk about it, we've not done enough to talk about really the importance of saving and equal access to it, particularly lower income households, we've done a lot in the post war period to talk about the democratization of credit and to pursue that. We've done very little to make it as easy to start a bank account as it is to get credit. And I will end at this point and turn it over to Ray. Good afternoon, everyone. It's great to be back in New America. Thanks, Justin, and Reid for the opportunity to come back. I wouldn't have taken a job in St. Louis. It didn't bring me back to Washington periodically. It's great to be here. I now have to say that these are my own views and not necessarily the views of the Federal Reserve Bank of St. Louis. So, first I really want to congratulate Shell on a truly remarkable and incredibly well-timed book. The timing, you know, my own book that I wrote with Phil Lungman, The Next Progressive Era had it been published now instead of two and a half years ago. I'm sure it would have been a blockbuster. But I don't know how you did it, Shell, but maybe there's something about writing about a topic that is not sexy. It's like buying stocks when they're down, right? It's counterintuitive. Let me just point out two things about Shell's remarkable timing. You know, I don't know if many of you had a chance to hear the President's speech last week in Osama Tomei as a week ago today, but here's what he, here's something he said. This is not just another political debate. This is the defining issue of our time. This is a make or break moment for the middle class, for all those who are fighting to get into the middle class. Because what's at stake is whether or not this will be a country where working people can earn enough to raise a family, build a modest savings, buy a home, secure their retirement. Now, these all involve saving, right? The President didn't really talk a lot about how to achieve saving, but he's talking about reaching a middle class and the savings that are needed to get there. And he talked about it being one of the defining issues of our time. So, fabulous timing on that point. But there's another point, too. Some of you may have seen Schell's op-ed in the New York Times Thanksgiving Day, I think it was. Black Friday, I'm sorry. Oh, perfect, there we are. Yeah, great timing. And, you know, and he talked, he ended with a call to sort of help rebuild balance sheets. And some of you, or many of you are probably well aware that the household balance sheet, you know, really is the core economic challenge of our time. The IMF has labeled the balance sheet as, you know, what's the weak American balance sheet is what's inhibiting growth. The couple of economists, me and Nsufi, recently pointed out that two-thirds of the jobs lost between March 2007 and March 2009, two-thirds were due to household deleveraging, i.e. families, because they didn't save and because they built up too much debt, have to rebuild their balance sheets. So, you know, the balance sheet really is the core economic challenge, and the president is talking about the importance of savings in building assets as to defining moments of our time. So, this is all a way of saying, Schell, congratulations on your timing. You've written a book that I think is incredibly well timed, and I think there's a lesson in that for all of us to, of course, potentially find a topic that isn't necessarily on people's radar, but might be at some point. So, that's my first comment. I have just a few more. I really like how you had a lot of counterintuitive observations, it's not just culture, policy, moral suasion, institutions, these things all have an effect on, you know, whether culture, whether people save or not, but there's also something about a moment, a political moment, and the one that you talk a lot about in your book, which I really admire is the war moment, the way you talk about how nations mobilized savings campaigns around that, and in Chapter 6, there's a really good discussion of what President Wilson did at the beginning of World War I, and he noted that prior to that, Americans had been wasteful and spendthrift, you know, really irresponsible in their ways. And as a result, he started something called the Committee on Public Information, which was basically turning a big part of the U.S. government into a giant ad agency, which is really remarkable, and they had posters, and there's one in the book that says, fight or buy bonds, you had a duty to either fight or buy bonds, which I thought was really remarkable, and Wilson even made this statement in Shell's book, if this nation can learn something about saving out of this war, then the war would have been worth the cost. Now, I don't know if he was, he must have written that before we really knew the full cost of that war, the human cost and the financial cost, but that says something about the depth of his passion for this idea, and I guess I'm intrigued with this, and then now, of course, many of you remember that when 9-11 happened, you know, the response was not go out and save, but go out and shop. So my encouragement to Professor Garan is to reflect a little bit more on this moment, this war moment, how it's been used, how it could be used, how do you mobilize savings, apps in a war? I'm really intrigued with this, and the radically different responses in America around the war moment in World War I and really following World War II, and then what happened in 2001, and maybe that was just a culmination of a lot of other factors, but I think it's an interesting contrast that you document in your book. The third comment is this around language, Reed and Justin and I, many in the program have struggled really hard to figure out the right language to talk about rebuilding savings and assets in this country. We learned that asset building is not the right framework. I'm not sure what is the right framework, but I'm intrigued with your idea of financial inclusion as, you know, and which is of course very successful in Europe and even outside of Europe, South Africa I believe uses that framework as well. And, you know, and there's other folks out there thinking about this. It turns out that Reed and Shell and I have all signed this new report coming out soon called Why Thrift Matters. We were part of a thrift commission. They're betting the store that thrift is kind of the right framework to not talk about just conservation of financial resources but environmental resources as well. But, you know, why is thrift not the right term now and why do you stake your efforts on the notion of financial inclusion after all this research? Why not just savings? You know, if we're trying to build a savings culture, why is financial inclusion where you sort of settled? Fourth comment, and I'm almost done, I'm, you know, in your book when you talk about how to achieve savings and financial inclusion, you, your recommendations are very heavy on policy and I think very dependent on sort of bricks and mortar institutions, postal savings banks, regular banks, you know, opening up bank accounts and things like that. I'm curious to hear your views about the role of private markets as well as the role of technology in trying to achieve financial inclusion. I think, you know, if I had a critique for the book and it was hard to find one, this would be it. You know, do we need to think a little bit more about technology and private markets as we think about achieving financial inclusion? Certainly in the asset building field, there are whole institutions now dedicated to figuring out those very things. And so what role do you see for those other sectors or those other kinds of institutions to achieve what you set out to achieve? And then my final comment question is, you know, really about saving for what and for when and for whom. You know, what are your priorities? Should it be emergency savings, precautionary savings? Should it be savings for durable goods, homes, college education, retirement? Americans' budgets are limited. Certainly the American budget is very limited and probably getting smaller and we can't just do everything we want to do. We certainly can't subsidize everything that we want to subsidize. So my question is, well, what do we prioritize here? Of all the things that we could, say you're in a room with Gene Sperling and he says, I can support one savings initiative, what would it be? You know, so give me a sense of your priorities. I remember when Reed and Justin and I were working with Senator Schumer to introduce the ASPIRE Act which would create a savings account at birth for every single child in America. You know, he said, I'm doing this because I grew up in Brooklyn. And I grew up with, I grew up in the school savings program. I learned so much about saving and about financial literacy. To me, that was an important part of the culture of saving in America and part of the reason I, Senator Schumer, and proposing this bill is that I think we need to rebuild that culture. He did not, to my knowledge, sponsor other savings initiatives. For him, this was the route. This was the priority, young, school-based, targeted at kids, at birth for every kid. Would that be your priority, Professor Guerin? And if not, what would be? So I will stop there and turn it over, back over to Justin and we'll open it up for Q and A. Thank you. Thank you both. There's a lot to dig into there. And I think I want to sort of keep it up here and sort of start by giving Professor Guerin an opportunity to respond to the, to raise comments. Not necessarily all of them. I think they're just sort of for the room. Yeah, I mean, I sort of think in particular, sort of, you know, sort of, you do talk about in your books sort of the modern sort of history of this war moment that we're in and sort of how the sort of governing structure in the U.S. and individuals within that structure have responded. So maybe a little bit about that, a little bit about why financial inclusion and your savings priorities. I mean, we don't have to go into all that right off the bat, but I do want to give you an opportunity to swing for the fences. Okay. I'm going to be very brief because I'd like to hear what the audience has to say. But the first, the war moment. Actually, I'd be a little uncomfortable if we used a war model to promote saving today. One of the points I tried to make toward the end of the book is that the wartime in the early post-war campaigns are a thing of the past even in Europe and Japan. And that what we, I think, can better learn from is, are there contemporary peacetime ways of promoting saving, you know, which are more subtle to be sure, but things like small savers accounts and certainly the revitalization of school saving and things like that. I suppose if there was one thing that I'd like to see a little bit more consolidated and centralized, it would be financial education, which is done well in some school districts. It's the same story I told 100 years ago, but has very little coordination. And I could see the Department of Education and the New Consumer Financial Protection Bureau, which I understand is some sort of mandate to do that, that a lot more could be done so that our goal would be to have high quality financial inclusion classes in every school in the country. So it's not necessarily a war model, but it does involve, I think, a national effort. So that'd be one response. The language is interesting. Why do I use financial inclusion? Well, I must say, even though I do sign these thrift reports as do you, I don't have a lot of faith in the emotive power of thrift in American society. Most people don't even know what it is anymore. And when they do hear it, those who do know it, they tend to frown and think it's really retrograde. I know some of our friends in New York really like this term, but I just don't think it's going to play. Saving, while saving, yes, that literally is what people are doing, but that doesn't seem to fire up people either. And I do like this European term of financial and social inclusion. It's going to be a stretch for us. We don't think of a central goal of this nation as including people. One of my Danish friends said that he observes that we're very patriotic, but we're not very nationalistic. We don't think so much in what the Europeans call social solidarity. So even this word social is problematic, but financial inclusion, that might work. I mean, it's a stretch, but the idea that this is a basic part of citizenship, that it's something that we, that everybody should have bank accounts, ways of building their assets, that our government should do a lot more to, to incentivize and to subsidize this, particularly for lower income households. I think this is very important, and while it's not going to be easy, this to me is the best term around. In other words, putting it in the language of democracy and of citizenship, and as I said, we have no problem with the term democratization of credit and we needed democratization of saving. And I think financial inclusion might be a way of doing it. And let's see, I think you had a lot of great questions, but the saving for what, well, this is where I think we have to take a step back and understand that simply getting people to save is not going to solve all of our problems. I mean, there are people who believe that, who believe in, you know, kind of old notions of self-help and that, yes, that's important, but it really does have to be supplemented by an active state, and maybe I'm giving my politics away here, but I mean, this is why strong welfare states in Europe also have high saving, because citizens are not expected to save for everything. There are areas where what the Europeans would call the socialization of consumption occurs. The dirty word we would use here are taxes, in other words. You actually come, education and health would be my two big choices. I don't think people can really save up for those, and I think it would be counterproductive to focus on that. You know, we need to socialize the cost, and it's actually a more efficient way of doing it. I do think short-term saving needs to be recognized. Economists, you know, their life cycle, hypotheses, you know, they somehow think the only reason people save is for retirement, but boy, you ask somebody who lives in an American city, what do you save for? And they say, we save for the car repair the next day. We save for, you know, my child has an ear infection. You save for short-term things, and that we should be incentivizing that. Small savers accounts, you know, taxes is not the best way of doing it, but if we are going to use taxes, obviously, you know, you people have done this, and I'm borrowing from you, but we need credits, not tax deductions because right now, we incentivize the rich to save for their retirement and to buy bigger houses, as if the rich need, and I'll include myself in the rich, I don't need an incentive to save for retirement, I'm going to save for retirement. We should be incentivizing lower-income people with all sorts of things, including credits, rather than deductions. I'm going to stop at this point. So, I want to use the moderator's prerogative, and I want to pick up on a thread that's in there. One of the things that, and steal Ray's role a little bit as discussed and responding to the book, one of the things that was really interesting to me sort of reading this book and reading this history, you come to a realization that essentially, not all, but the vast majority of these savings products are, they're not, they're delivered by the market, they're delivered by the financial sector, but they're created by governments, and if we sort of look at that purely domestically, we think about sort of the restrictions on savings accounts are set by the United States. The 401k is a creature of the government. The IRA and the Roth IRA are created by acts of government. And so I think when you sort of go down the spectrum of sort of what savings products are available, the market has created some products, but by and large, they're creations of the state. And so when we see, at least when I look at sort of where are the holes for us as a nation in terms of vehicles for people to save, a lot of the shortcomings that we have I think really need to be pinned at the doorstep of, you know, a lack of imagination or, as you said, where you know school savings account can't be handled by the postal savings bank because of lobbying, then, you know, we have an issue where there's a sort of a failure of action, a failure of imagination on the, and I realize I don't have a question here, I'm just making a declaration. But it's a thread throughout the book that products are created by governments. And then I'll go on to my next one then since I didn't have a question at all. The other thing that I found really interesting sort of throughout is that, you know, sort of having worked on Capitol Hill, having worked on creating legislation and work to shape it from the outside as well, a common theme that people discuss is unintended consequence. And I think one of the things that's really interesting that pops out in the book is the role of unintended consequence both from a perspective of regulation and from deregulation. And I just wonder if you can talk a little bit about sort of unintended consequences in the American context over the last 30 years or so. Yeah, sorry, never mind, that's fine. All right, so I've got to take the moderator's prerogative to make two statements and not ask any questions. So let's turn it over to the audience and I see some eager hands. We'll start in the front on the left here. Professor Garan, I have two quick ones. I'm sorry, my name is Mark Nadell. One is when you look at the low savings rate in the United States, I wonder whether part of that might be explained by spending on health care, where a lot of families have large negative savings rates because they have to deal with, so have you tried to back out or is there any way to back out that number and see what the savings rate would be other than health care? And the second one is I'm trying to encourage my son to save whatever, there's the power of compounded interest that if you get 0.01% and it comes, the rates are so low now, you don't talk about interest rates. Is that not as important because that's going to, we just don't, shouldn't worry about that, but to me in introductory economics, the big motivation to save was there's this interest rate and it's going to make it more attractive. Yeah, shall I take that? We'll start there. Okay, I'll be brief. I mean, health care, you're absolutely right. Now, I'm not an economist, so I wouldn't even know how to model this, but that may be a good thing because, look, there's a simple experiment. We're the only country that doesn't have a national health care system or health insurance. So, we are already odd man out. It's very clear that even though we say, you know, consumption is 70% of the U.S. economy, it's not as if all that is accounted for by going to the mall. A lot of that, I mean, a significant portion of that is what we spend on health care. It's very inefficient. It's very costly here. The socialization of health care in most other places does keep costs down and it certainly, I mean, it socializes it. So, it's not as much of a burden for any one person. So, I think our low savings is quite related to the fact of how much people have to spend on health care and particularly health emergencies. Now, your second question, interest rates, that's a little fuzzier. If you look historically, interest rates are not necessarily as powerful a motivator as one might think. Witness right now, after 2008, you know as you said, you don't get much interest, but Americans, at least briefly, panicked and got into precautionary saving. The Japanese did the same thing in the 1990s. We laughed at them. Postal savings paid more or less 0% and yet the Japanese flocked to it and we said, well, aren't they stupid? And then, of course, we did it. So, there's not, and in the 1990s, interest rates were great in the United States and nobody saved. So, I don't think it's as much of a causal link as one might think, but I do think you have a point that particularly for children and lower-income people, seeing some interest is important and it's not for nothing that in the 19th and early 20th centuries, the British and the French postal savings systems, one had 2.5%, one had 3% and they kept those for decades and decades. These were non-market rates paid for directly out of their treasuries. The Leveret, I showed you this A-Pass book in France is a politically determined interest rate. It's often above market rates and of any French president or prime minister will say, well, yes, it may be above market rates, but there is a social good toward encouraging the small saver to save and we'll take it out of our treasure. I mean, we redistribute money all the time here. We just tend to send it to affluent people. It's a way of sending it to lower-income people. So, I do think seeing some interest is important. Ray, do you want to piggyback on that? No, no, let's go on. It's great. This is a gentleman across the row right here. Ed Berger, let me say that I'm very sympathetic to the message that you've given us, but let me ask two quick questions. The, I would propose that there has been a mixed message sent from the government over years on this subject. We've had a negative current account balance for a long, long time. That is to say, we don't have a robust export economy as those, some of the countries that you've described. And therefore, there's been an admonition from the White House down to consume. How does one craft a political argument in the face of that that in fact makes sense and could be bought? The second thing is you didn't mention a consumption tax of that, which I would propose should be considered perhaps in thinking about encouraging savings. Yeah. Good questions. I mean, you're right. Most of the high-saving economies do tend to be export-oriented economies. And of course, that's one of the reasons why President Obama, a couple of years ago, talked about rebalancing and talked about both boosting saving and boosting exports. Of course, that hasn't really happened. But I think one can also make another argument, though, for savings, even if the export sector is not as vibrant as it should be. Saving leads to investment, at least it can. It leads the generation of capital. And at this point, we are quite dependent on two Asian countries. We only talk about one of them, China, because they're scarier. But Japan is the other one, and they more or less almost split 50-50 their ownership of U.S. debt. And clearly, I mean, generating more domestic capital would be a good thing. Of course, that capital has to be productively invested, and that's yet another question, how our financial industry deals with the capital. But I think savings is a good thing, can be a good thing, within measure for the U.S. economy. I mean, the idea that, you know, that Christmas shopping, that buying a Chinese trinket, is that any consumption is the same. You know, I don't quite see it. In the 1950s, you know, you consumed, and not only did you help the people who ran the store, but you actually helped at least your fellow citizens who produced it. Now, okay, we can be global, and say it's nice to help the Chinese and all that. But it does seem to me the sort of glorification of consumption, I'm not even sure, in economic terms, if all consumption is necessarily the same. So that's one thing I would say, and let's say your other question. Oh, the VAT, yeah, you know, I mean, I don't know if I have any more intelligent opinion as anybody in this room about that. I think there's plenty of room to raise the income tax progressively before we need to go to the VAT. I mean, let's remember that in places like Europe and Canada. You already had high income taxes, so VATs became politically a palatable way of raising extra revenue beyond them. You know, not every American would agree with me, but I do think as you move up the income scale that affluent people are undertaxed in income tax, and that should be the first place we should go. But, you know, reasonable VAT is probably reasonable. It's okay. I want to move towards the back of the room, and I see a hand way in the back. We'll start there and sort of come forward a little bit. And while we're doing that, while the microphone's moving, I want to sort of just make a note for folks that, you know, recently we were very pleased to host the economist Robert Frank from Cornell. It was a new book out as well, and he, you know, very aggressively promotes the idea of a progressive consumption tax, both in his talk here at New America, which is archived on our website, and in his new book. So there are people who are out there who are making the case that that's a direction that we should head to the back. Hi, I'm Diane Oakley from the National Institute on Retirement Security. And one of the things that occurs to me listening to the dialogue about the war discussion is sort of the charges being lobbed about class warfare. And, you know, when we look at income inequality as one thing, when we look at asset inequality, it makes income inequality pale in comparison. And so, you know, is there some response professor that you feel we might be able to attach to the 99% as looking at savings of a way of maybe taking it to the man as they might say? Yeah, I don't think a discussion of inequality is necessarily class warfare, but I don't think you meant to say that. You know, I don't know if getting people to save a little more is going to make that much difference. I mean, I think, again, we need to really think of the tax policies as they are that not only recognize and do nothing about inequality, but actually make it worse. And, again, I mean, we need to put this in international comparison. There is no first world country that has our level of unequal wealth and income distribution. And the reason most of them don't have it is because of various tax policies. And so, I don't think savings is going to solve that. I think it's taxation. I think we know where some of the questions are coming up. Next, we want to move sort of to the far right here in the middle and then come forward. But I want to follow up on that. You've made a recommendation in your book to eliminate the tax subsidy for second mortgages. And, you know, I wonder sort of looking around the world at home ownership. And this is, you know, this is a hot topic and a big topic. And we don't really need to go sort of too deep into it. But I wonder if you've sort of seen models of home ownership subsidy that work in other countries that the U.S. might want to look at. Or are we sort of in so deep with the system that we have now that we need to sort of work around the edges of it and try and make it better? When you said second mortgages, are you talking about? Home equity lines of credit. Right. Okay. Home equity, yeah. I can't really see any reason to give a tax deduction for home equity loans. I think it was a total accident. I mean, it was one of your unintended consequences that, you know, you had this huge 1986 tax bill. I don't think anybody thought these things through. And there's no justification whatsoever. It doesn't promote home ownership. No other, no form of consumer credit gets a tax subsidy today. And I don't see why a home equity line of credit should. So that's one thing. But, you know, your question about what other countries do, well, nobody else seems to go as far as we do in terms of government subsidization of mortgages either through the tax policies or through, you know, our FHA system and things like that. And yet, you know, it's frequently pointed out that, you know, places like Canada have high home ownership without those sorts of policies. I mean, it does become a huge tax giveaway at the upper reaches and does tend to lead to buying too much. And so we know that. We also know that most Americans don't even get the home mortgage tax break. And yet, somehow they think they do. So it's, I mean, it really is very skewed toward the higher income. So, you know, should we be encouraging more home ownership? But, you know, I don't have any problem with a tax break or a tax credit for, you know, a certain lid on, you know, 500,000 or whatever, something like that. But, you know, to go above that for second homes, third homes, there's no justification for that whatsoever, right? It's $2 million. Well, it depends. Yeah, well, it seems like a lot. It sure does. Sir. My name's Chuck Devine. If I'm going to put down an organization, I'll say Metro Washington, Mesa. One of the things I noticed when I was looking at the figures on the board, the UK and the US both seem to have a significantly lower saving rate than either continental Europe or Japan. One of the different, one of the cultural differences between the UK and continental Europe is that it tends to be a more freer and more democratic society than continental Europe. And in the past 30 or 40 years, both in the, particularly in the US, but even to some extent in the UK, we've seen a lot of people who have gotten power and they don't much care for a free democratic society. So they're doing things like making it more difficult for the middle class to come into existence, to keep jobs, et cetera, et cetera. Anybody, if you ever looked at any of those kinds of things? Not in that way. You're right, there is a, for a lot of a better term, Anglo-Saxon, English-speaking pattern, except for Canada, which seems to be more sober than, but you could put Australia, New Zealand, the UK, and I guess you should throw in Ireland, which was the really extreme version. What do these have in common? Well, I would state it somewhat differently than you did. All of these places in the 1980s did various big bangs, enormous financial deregulation, the financial industries in comparison to either Japan or continental Europe, extremely strong, some might say even out of control, the availability of cheap credit in all these places. Okay, so if I said in Germany and Italy, you can't even find a credit card, clearly in the UK, and Ireland, and New Zealand, and Australia, there are a lot of American patterns of credit cards, home equity lines of credit, all that sort of thing, and so I'm not surprised that they have similar patterns in low savings, particularly since those things came into effect in the 1980s. So a little different take, but that's where I see it. So we are headed towards the witching hour and I'd like to take a group of questions, and we sort of, if everybody can sort of be concise and sort of deliver your question quickly, we'll just do these sort of three in a group right here, and then we'll see if we have time for more after that. Mark Brodsky, you didn't mention mutualization and demutualization as affecting the savings rates, where the insurance companies and the mutual banks disappeared in the same time frame as the savings rate went down. I didn't see a recommendation to go back to mutualization in your list. Could you comment on that? And was you? Not intelligently, so I think your way ahead of me on that, I haven't thought about it. My name's Li Yang. I just wonder how do you figure out those savings and savings rate, and the second is when a person tries to save, they got to figure out the justification. For instance, why do you need school children saving when they can really go with their parents to have a joint account, so they will be more saved than individual student, they don't know exactly what's going on, pretty soon their money will be all gone, even a dollar account will be the same. And if the government is not support and protect individuals, or joint account, or their asset, or their equity home, then what's the justification to have savings? Because pretty soon all the money will be gone, as you can see, occupy Wall Street and occupy the globe. Certainly means their money, their assets are gone, not because they're just unemployment manipulative, to be fired, but also because their money was just simply gone, be taken away, including post office. So there's no democracy, there's no freedom, there's no protection of their assets. So I just wonder if you can really say, no, the Federal Reserve can really implement the good laws, or the bank will not take away, or compare to the cost benefit, because you say- I think we're ordering on an existential question here. So I think we have a lot to chew on there. Can we move along? I just want to say the cost of savings, but it's just one. Thank you very much. Thank you. And actually, right next door, so we're gonna see, roll them along here. Thank you very much. Yeah, Rafael D. Gennaro. Postal savings, your recommendation. Tell us more how that would work and how we can be confident in it. I'm not sure we can be confident, but it's a, I guess you call it the nuclear option, the public option. Look, ideally we want to work within, you know, our so-called market system, and we would love it if commercial banks would create accessible small savers accounts instead of doing the Bank of America number of October and deciding that because you need a financial fix, you're gonna hit your poorest customers with things like $5 fees. People don't trust the banks anymore. How do we make the postal savings? Well, that's where the postal savings comes in. Okay, I mean, I'm on your wavelength here. The first line, as I said, would be to try and get the banks to do it, to create, you could create tax incentives, the French government manages to put these things in banks, but okay, you don't think it's gonna happen. I don't think it's gonna happen, and that's why I think actually setting up postal savings for small savers accounts, they're capped. This actually happened in 1910. The commercial banks wouldn't touch small savers, and then when they got close to the postal savings thing being in reality, then all of a sudden the commercial banks actually started competing for the small savers. So that's why the healthcare debate we had a couple of years ago, this is like the public option. It didn't happen in healthcare, but I think it's possible. How would it happen? Well, post office is handle money. It doesn't even have to be bricks and mortars. A lot of the European Japanese accounts are online now. They're maybe more friendly to youth. It could be set up. It's not that hard to do. I mean, I can't tell you the nuts and bolts of it, but we have a lot of models out there in the world, and I don't think it's hard to do. I think the key is it's sort of what's lacking is the will, and I think that what we have here today is sort of an effort to sort of begin to continue to build the case that a lot of us have sort of been engaged in. We are closing in on our finishing time. I want to folks in the audience to remember that Professor Garen and Ray and folks from New America will be remaining in the room for a little while, so we can continue these conversations later, but I wanted to make sure and give Ray an opportunity for some closing thoughts. Just one, really, thank you. I mean, I was, I want to go back to this idea of what motivates a population to save, and I liked your comment that we shouldn't be invoking war or using the war moment necessarily to do that. In Wilson appears to have been a little eager to capture a war moment to get a nation's saving again, but I think it, to me, it brings up a larger question. You know, if saving as an Indian itself isn't going to happen, perhaps savings happens because of a larger purpose, a larger national purpose, and I'm wondering what that larger national purpose could be right now in America that gets America serious, gets American serious about, yes, we need to think about our future, about our economy, about economic growth, about prosperity, about the middle class. Can you imagine a larger purpose for which savings could be achieved? How about the stabilization of American homes, which are in serious social distress today because of lack of saving and over indebtedness, and I mean, that's what I would target. I mean, we talk about, again, the health of our society. And that those efforts, of course, have been very difficult to try to remove the, you know, the negative equity off of balance sheets has proved to be very difficult, so maybe, but maybe the route then is the American dream itself is at stake, and it's sort of what President Obama was hinting at, so could there be a larger national purpose to revive the American dream, and part of that is you need to do your duty to save, and we need to do our duty to help you save to order, in order to achieve that. I'm just wondering, does national purpose, could national purpose be a motivator to getting a savings culture generated again in America? Well, I think national purpose is the good of society. We don't like to use those words, but I'd like to see the President and others using those words, because if we can't even find the language to talk about the greater good for the community, I don't see how we get to first base. I'm not sure there's a better note to end on than that one. I want to thank Professor Garen and Ray Boshara. Please join me. Thank you all for being here today. It's a pleasure to have you, and we look forward to seeing you next time.