Negative Savings Rate

The Commerce Department has reported that the savings rate for Americans in 2006 was a negative one percent. The rate was a negative 0.4 percent in 2005. This is the worst performance for American savings since the Great Depression, when there was a negative savings rate in 1932 and 1933. To simplify, this means that overall, collectively we spent more than we made. We actually drew down our savings. To add insult to injury, if I understand it right, in 1998, we had a "zero," savings rate. The Clinton Administration's response was to redefine "savings," adding in some items that had previously been excluded, thus giving us a small gain in savings that year. (Hey, I consult Clinton on definitions all the time. I now know the definition of "is" and "alone.") Anyway, that means that using the pre-1998 definition puts us even further behind in both 2005 and 2006.

The big question is, "Why?" With a population as large as the United States, I'm sure there isn't any one answer to that question. One reason put forward by some conservative economists is that many people don't feel the need to maintain large savings accounts, because they have home equity and stocks/bonds, either individually, or through some retirement plan, or both. Now, is that possible? I suppose so, but I'd put it in the same category of possibility as our likelihood to have a severe thunderstorm in Cleveland tonight (the temperature is around 12 degrees). I seriously doubt that it is THE major reason, or even A major reason. The idea is just a bunch of nonsense and an attempt to put spin on a growing problem for many Americans; that is, wages and benefits have not been rising enough to sustain many Americans' standard of living.

High oil, gas, and natural gas prices, plus increased health care costs (if you're lucky enough to have a decent health care plan), the cost of sending kids to college, and severe job losses, particularly in the manufacturing sector, have forced many Americans to look for ways to bridge the gap between their incomes and their living standards. Folks, this is NOT a tough one! You just have to keep your eye on the ball, and not on the spin. We have a bunch of Wall Street fat cats and business execs telling Americans that they don't save enough for retirement, but these very same people don't pay their employees enough for many of them TO save for retirement! In fact, as these latest government statistics show, we can't even keep the assets we have (our money in savings).

It is no wonder that polls tell us that we're anxious. We just seem to be involved in endless "catch 22" situations, with many folks just looking out over the edge of a cliff. If we stay in Iraq, the chances for success are dim, if we leave Iraq, the country, and perhaps the entire region could implode. If you need something other than a small car for your family or business, the cost of fuel is enough to send you to the poorhouse, and if the situation with Iran deteriorates, today's fuel prices will look cheap. Our kids need college educations more than ever, but if we send them to college, we end up virtually bankrupt, and mom and dad could face a very tough retirement. If you have medical problems, but minimal or no insurance, you stand to lose everything to get treatment. Business people want us to spend money, but if we keep spending everything we make, we'll have no money for retirement, and if we spend more than we make, we'll end up with huge credit problems, also ending in possible bankruptcy. If we keep the trade agreements we have, we'll suffer more job losses, if we try to alter or abandon the agreements, we could face retaliatory measures from abroad, causing job losses in businesses involved in international trade. The list just keeps going.