Refills. Retailers are doing what they can to woo these new, economy-minded consumers. In April, Starbucks began offering new rewards on its stored-value cards, including free refills on hot and iced brewed coffee and complimentary syrup and soy milk. "This was an opportunity...to show Starbucks can be a part of people's lives even when budgets are tight," Brad Stevens, vice president of Starbucks's customer relationship management, says.
But what happens when budgets aren't so tight? Plenty of hardheaded economists say we'll go right back to our prodigal ways. Alan Blinder, economics professor at Princeton University and former Federal Reserve vice chairman, thinks that optimism and the drive to spend are hard-wired parts of America's cultural DNA. Blinder expects that even baby boomers will continue the spending spree that has defined most of their lives, buying medical care and golf vacations instead of new cars and larger homes.
Economist David Malpass argues that Americans aren't nearly as bad off as the low personal savings rate suggests because that calculation ignores the buildup of net worth. (If you bought a share of XYZ Corp. in January at $100, for instance, and its value doubled by December, the savings rate measure would still value that investment at $100.) Malpass points out that the average household has $573,379 in assets, including the value of retirement plans and the cash value of life insurance, and only $117,951 in liabilities.
Even if Americans do curtail their spendthrift habits, the result would probably be a healthier and more balanced American economy. Next year, the federal budget deficit is projected to reach almost $500 billion for the first time. America couldn't afford such a fiscal shortfall if foreign investors, such as the Chinese, didn't buy our debt—U.S. treasury bonds. If as a nation we bought a bit less and saved a bit more, economists say, the result would be stronger long-term economic growth. And depending on the kindness of strangers to perpetually finance your lavish spending sure seems risky. If the foreign appetite for U.S. dollar assets abated, says T. Rowe Price chief economist Alan Levenson, the dollar would probably weaken further, reducing Americans' standard of living.
Besides, there is more to the economy than just the consumer. The economic boom of the 1990s was led by business investment, especially in technology, aiding a boost in productivity that continues today. While businesses are holding back on investment because of recession fears, they are likely to beef it up after that threat passes, says Robert Brusca, chief economist at Fact and Opinion Economics.
And Uncle Sam may have a role to play as well by investing taxpayers' dollars to upgrade our national infrastructure and advance alternative energy technologies. "We're at a critical moment," says Benjamin Barber, author of Consumed. "In two or three years, we might say, 'We had a moment where the banks were broke, credit cards didn't have much credit left, when Americans were beginning to rethink consumerism, when we really could have turned the page,' " Barber says. "Or we might be saying, 'We talked ourselves back into the old fixes,'" such as rebate checks and even telling Americans directly to go out and spend, as President Bush did after 9/11.
With baby boomers' habits well ingrained, it may instead be generation X and generation Y who decide to embrace a simpler, less wasteful lifestyle, rebelling against the conspicuous consumption that their parents helped make the American way of life.