A major reason for the low personal saving rate in the US appears to be the population's consumption behavior.5 To change personal consumption behavior, it is necessary for (1) serious doubt about the country's economic future to be placed in the collective mind of the American population, or (2) government to either provide (a) incentives for saving, or (b) disincentives for consumption.6 One such action, perhaps unin tended, was effected by the Tax Reform Act of 1986 (TRA). As a result of the provisions of the TRA, cost of capital changes affect individuals, with a rise in the cost of capital related to home onwership from a minus 20 percent to a minus 14 per cent, and a rise in the cost of capital related to consumer durables from minus 11 percent to zero.7 This capital cost increase for individuals may beexpected to have a negative
Personal Saving Rate and Real Per Capita Personal
Disposable Income in the US: 1976 1988
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Year Personal Real Per Capita
Saving Disposable Per
Rate (1) sonal Income (2)
(%) ($)
...