Low U.S. saving rate

A recent article entitled “Low saving rate in U.S. seen as danger” the European Union’s monetary chief said “the United States low savings rate and large budget deficit pose a risk to the global economy”. He went on to say that “the world’s largest economic powers should take advantage of current prosperity to reform their economic policies”. I completely agree with the European Union’s monetary chief’s statement. I think running a deficit should be reserved for recessions. The United States should run a surplus during times of economic growth such as now.


Dr. Tufte said...

I would say that if you are going to run a surplus, the time to do it is when the economy is doing well. I would not say that they should be running a surplus at any time.

If you can excuse my hyperbole, they could always run a surplus by executing a few tax cheats. Gosh ... we'd all run to give them extra money in that case. But obviously, this wouldn't be a good idea.

I find it very bothersome that the EU is worried about our economy. Let's think about this: if we saved more we could invest more in ... wait for it ... the EU. And, if we raised taxes to close our deficit, our economy wouldn't be as strong, making the economy of the ... wait for it ... EU look better.

If you have a built-in BS detector, it should be flashing when you hear stuff like this.

Matthew said...

When I first read the title of this post, I immediately thought of the low savings rate of Americans as individuals. I could not access the original article, but even if the article was focused mainly on the government's budget deficit, I still think it applies to Americans on a personal basis.

The average American's saving rate is negative – this means that people are dipping into their savings to buy things. We live in a generation of “buy now, pay later” and have so many people going into debt and facing a lot of trouble. Spending money in excess is not going to help the economy when we as taxpayers have to bail these people out time and time again.