Cutting Back is the New Chic

Is saving money good or bad? Are do-it-yourselfers virtuous or ruining the economy? Is bringing lunch to work an act of treason? While there are certainly plenty of Americans struggling to make ends meet, there is also evidence that nearly all Americans have cut back on spending--whether they need to or not. Grandmother would be proud, but Uncle Sam is not too thrilled.

It seems cutting back and do-it-yourself have become the new chic. According to recent newspaper data, sales of sewing kits and hair dye are up, while dry cleaner and beauty salon business is slumping a bit. A case in point is the Target advertising campaign that shows a yoga ball as "the new gym," an espresso maker as "the new coffee spot" and chairs on the deck as "the new night out." Wal-Mart has seen a pronounced increase in the purchase of seed packets and herb plants. Sales of oil, filters and funnels are also up.

A recent Washington Post article said, "The frugality of ... Americans who still have their good jobs feed back on the economy, holding down growth and encouraging other worried workers to trim their spending -- causing the whole vicious cycle to run another lap."

And it's not just individuals, as even companies that are doing well are reluctant to spend cash reserves or hire new employees. A recent Austin-American Statesman article pointed to local start-up Pyxis Technology Inc. as a good example of this reluctance. "The company, which sells software tools used by advanced chip designers, raised $3 million in venture capital this month but has no immediate plans to expand its 20-person staff. After cutting its work force by a quarter last year, CEO Phil Bishop says, Pixys is focused on conserving cash."

As a Washington Post article pointed out, this recession has had a powerful effect on Americans' minds, causing many people to adjust their behavior even though their financial circumstances are relatively unchanged. A Post-ABC News poll in February showed two-thirds of those responding had cut back on their spending, including nearly a third who had cut back sharply.

While the we-are-in-this-together mentality is reassuring to some, it is not going to help end a recession that is going on its eighteenth month. Economists credit this new trend toward austerity as a matter of consumer psychology. If neighbors are losing their jobs and house values are falling, the perception is everyone is worse off even though there may be no change to an individual's bottom line.

Certainly the media plays a role in this as the news these days is just, well, confusing. An Associated Press poll this week found that 48 percent of Americans think the country is headed in the right direction, up from 40 percent in February. These poll results came out the same day as articles saying there is no end to the recession in sight. With such conflicting headlines it is no wonder that people want to stick their money in a mattress. Perhaps we would all be better served if we tried to be a little more reasonable while continuing to keep spending within our actual means.

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