Will new behavior prove permanent?

Warren Buffett said the other day that the economy had “fallen off a cliff” and added that the American people had changed their behavior in ways he had never seen before.
He was referring to an abrupt increase in personal saving rates and an equally sharp reduction in borrowing to spend. President Obama referred to the same change last week and went on to urge Americans to be prudent but not to “stuff their money into mattresses.”
Man-on-the-street interviewers learn that more and more of us worry that our retirement money may not materialize so we’d better save more now. That means making the car last another year, putting off expensive vacations, buying fewer, less expensive clothes, paying off credit card debt.
Is this good or bad news for the economy? Bad news short term; good news long term.
Seventy percent of the U.S. economy runs on consumer buying. When malls empty, the economy sags. Retailers have been in trouble since December 2007. The government stepped in when consumers stayed home. Is it working? Retail sales came in a little higher than expected last month. It’s too early to say a trend has started. But increased spending would be good news for battered retailers.

IT IS ALSO true that irresponsible consumer borrowing played a major role in creating the recession. It will be good if the change Buffett noticed becomes permanent. Subprime mortgages started this mess — and those mortgages were signed by ordinary Americans, most of whom knew they were biting off more than they could chew.
Added to those who signed up for champagne houses on beer incomes were the millions who ran up more credit card debt than they could handle and now must live hand-to-mouth. Would it be good for the U.S. economy if those borrowers got religion and turned prudent? Of course.
In addition to the rational fears generated by recession, the conservation movement sparked by climate change concerns is also changing attitudes and private philosophies. Detroit can’t sell Hummers anymore as a consequence. “Greenies” also use less fuel at home, grow gardens, walk and ride bicycles more and have a different attitude toward high living. These changes in personal behavior explain to some extent why high dollar restaurants, luxury hotels, and similar enterprises that cater to the extravagant have been hit hardest by the downturn: even those who can still spend at former levels cut back because they think it is the proper thing to do.
The shopper who brings a reusable bag to the grocery to make all those plastic bags unnecessary doesn’t buy as much pre-cooked food or come home with as much stuff packaged in tin or cardboard or heavy plastic: more energy is saved and sometimes less money is spent.
Some of these changes are faddish and therefore temporary. But it would be a good thing for the economy and the world in general if rampant consumerism were replaced with needs-based buying and individuals took more responsibility for providing for their retirements and end-of-life medical care.
Maybe these changes will prove permanent. We should all join Mr. Buffett in hoping so.

— Emerson Lynn, jr.