Should We Worry About Trends in the U.S. Saving Rate?

Many public policy experts are concerned about the recent sharp decline in America’s personal saving rate. Private saving is the major source of funding for the investment that fuels our economic growth and helps provide for retirement security and, as such, is extremely important. Besides these crucial motives, people save in order to build up sufficient reserves against unforeseen events (precautionary motive) or to leave some form of financial assets to their descendants (bequest motive). These observations have led a number of leading policy experts to call for changes in U.S. tax policy to encourage saving. However, some economists have argued that this concern is misplaced, and that the official saving statistics do not give an accurate account of the true level of saving in the economy. This report investigates both sides of the debate and tries to draw conclusions from the available evidence.

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