Makin - Should Americans Save More.pdf

This month’s Economic Outlookis dedicated to thememory of David F. Bradford, who wrote the blueprintfor the consumption-based who call for American households tosave more point to a steady drop in the conven-tionally measured . saving rate to about 1 per-cent at the end of last year and to a rise inhousehold debt to a level well over 100 percent ofpersonal disposable e. The current accountdeficit, our external deficit, measures national dis-saving at close to 6 percent of GDP. The fed-eral government’s budget deficit contributes about4 percentage points to national dis-saving and it,too, is the subject of considerable hand-wringingby those who point to a need for higher . sav-ing at both the household and national levels. Government dis-saving, better known as thebudget deficit, has received adequate attentionelsewhere. Suffice it to say that the federal budgetdeficit has probably peaked at around 4 percent ofGDP with no apparent damage having resulted inthe form of higher interest rates, higher inflation,or slower growth—notwithstanding claims to the contrary emanating from the many critics ofdeficit spending. This essay will focus on house-hold saving, the form it is taking, and whetherhouseholds actually should increase their saving. Saving is a good thing, but it is possible tooverdo it. The uncr