In today's WSJ($), economist David Malpass explains something that's always bugged me; namely, why the US national savings rate is so low.
This may not seem all that significant, but I'm sure all of us at some point have channel surfed past some MSM account of how the sky is falling because Americans don't save enough:
With each hike in interest rates, those predicting a bad ending to the 40-month U.S. expansion look expectantly for consumer spending to flag. One of their main worries is the premise that we will run out of savings, especially if foreigners pull the plug or asset prices fall. ...
... We apologize for our "low savings rate" and "dependence on foreigners," turn our foreign economic policy over to the International Monetary Fund's economic gurus, and contemplate consumption tax increases, forced saving, protectionism, and a weaker dollar (with the consequent increase in inflation).
As I understand Malpass' column, however, the problem isn't that Americans save too little; it's that the government is measuring the wrong things:
The personal savings rate doesn't really measure saving in the real sense. It subtracts a broad measure of consumption, $8.5 trillion in 2004, from "disposable personal income," a subset of household cash flow, and labels the difference "personal savings." It was recorded at only 1.1% of disposable income in 2004, or $101 billion. It would have been even worse if not for the $25 billion Microsoft dividend in December, which counted as income in 2004. Without it, the personal savings rate would have been only 0.9%, nowhere near enough to finance a fast-growing economy if it were a true measure of saving.
So it looks like the "personal savings rate" is at least one thing I can cross of my list of big picture problems to worry about late at night. (But I wonder what the boys at Marginal Revolution made of it.)
