Opinion Editorial | |
| Monday, June 15, 1998 | |
Americans are Wealthier -- and Saving More or Less |
It is very common to read that Americans do not save enough. Commentators
frequently point to the fact that the personal saving rate in the U.S. is
very low compared to most other countries and has been declining. According
to the Commerce Department, the saving rate fell to just 3.9 percent last
year, its lowest level since 1950. As recently as 1984 the saving rate
was more than twice 1997's figure. By contrast, Japan, Germany, France,
Italy and the United Kingdom all had saving rates well into double-digits
last year. Among major countries, only Canadians saved less than Americans
did. These official statistics, however, need to be taken with a great deal
of salt because they define saving very narrowly. They do not, for example,
include the rise in the value of investments people may have in their individual
retirement accounts or 401(k) plans, or the rise in value of any mutual
funds or corporate stock they may own. Nor do the official statistics count
the implicit wealth people accumulate in defined benefit pension plans as
saving. Yet, quite rightly, people view these assets as saving, even if
they don't set aside anything from their current income for "saving." To the Commerce Department, which compiles saving statistics, personal
saving means just one thing: the difference between income and consumption.
This is assumed to be saving. Thus saving is not measured directly, but
is in effect a residual left over after income and consumption are measured. By contrast, the Federal Reserve measures saving directly by looking
at flows of funds into savings accounts, mutual funds, insurance policies,
stocks and bonds. By this measure, the saving rate is almost double the
more commonly cited Commerce Department figure. According to the Federal
Reserve, in 1997 Americans saved 7.1 percent of their disposable income. In addition, the Federal Reserve also measures the increase in net worth
of households resulting from rises in the value of investments. In recent
years increases in net worth have been many times larger than the rise in
saving as conventionally measured
(see figure).
Saving is important, both for the economy and for families. But there
is no need to exaggerate the need for saving by ignoring much of the saving
people actually have. Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis,
June 15, 1998. For more on Economic Issues go to http://www.ncpa.org/pd/economy/ecoinc.html Home | Support Us | All Issues | Social Security Debate Central | Contact Us |
