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Low Personal Savings Rate in the United States

This research examines the personal savings rate in the United States . Considered in this examination are the causes, consequences, and cures of the country's low personal savings rate. This topic is especially relevant in late1989, as the country's personal savings rate continues to hover around the 4.0 percent levelthe lowest of any industrialized country,1 at a time when the country is heavily dependent on a continuing infusion of foreign capital to provide for credit and investment needs in both the public and private sectors of the economy.2

SAVINGS IN THE UNITED STATES

Saving by individuals occurs when current disposable income (personal income after taxes) exceeds current consumption expenditures.3 Over the past 50 years or so, the personal savings rate in the US has been substantially lower than that of other industrialized countries. A part of the reason for the lower personal saving rate in the US is the result of an American behavior characteristic, which pursues immediate gratification. Another part of the reason, however, is federal government policy, which has, for the most part, been designed to stimulate consumption rather than saving.4

Data pertaining to the personal saving rate and to real per capita personal disposable income in the US for the 19761988 time period are presented in Table 1, which may be found on the following page. As the data presented in the table indicate, the personal saving rate in the US has generally trended downward, while real per capita disposable income in the country has generally trended upward. In seven of the 12 annual changes reflected in the table, the personal saving rate declined, as real per capita personal disposable income increased. In four of the years, the two indicators moved in the same direction, and in only one year did the personal saving rate increase, as real per capital disposable income decreased.

A major reason for the ...

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Low Personal Savings Rate in the United States. (1969, December 31). In LotsofEssays.com. Retrieved 12:15, March 28, 2024, from https://www.lotsofessays.com/viewpaper/1691744.html