Perspectives on the Household Saving Rate

SEPTEMBER AND OCTOBER 1998, the personal saving rate as measured in the national income and product accounts (NIPAs) dipped below zero for the first time since the Great Depression.For the entire year, personal saving totaled just 0.5 percent of personal disposable income, the lowest rate since 1933.And in the advance estimate for the first quarter of 1999, the personal saving rate fell to -0.5 percent.These results are just the latest steps in the decline of the NIPA personal saving rate, which, after averaging 7.6 percent in the 1960s, 8.2 percent in the 1970s, 6.7 percent in the 1980s, and 4.8 percent in 1990-94, fell to 3.0 percent in 1996 and 2.2 percent in 1997.Although both academic publications and the popular press have repeatedly warned of a saving crisis over the last twenty years, the virtual disappearance of personal saving since 1998 has brought the issue back into the limelight.At least three different views of the decline in personal saving have been aired.One group, with a focus on long-term growth, views the low saving rate as bad news and worries that saving will stay low.Holders of this view believe that low saving rates signify dangerously low levels of capital accumulation.At a macro level, this breeds increasing dependence 181