Chart of the Day: How Much Money is the U.S. Really Saving?

Americans aren't savers. Perhaps this is because we are simply a consumerist culture that loves cool gadgets, pretty cars, big houses, and delicious food. Or perhaps Americans assume that the government safety net of Social Security and Medicare will be enough to make saving for retirement pointless. Whatever the reason, the personal saving rate has not ticked above 8% since the mid-1980s. In the pre-recession 2000s, it rarely ticked above 4%. But personal saving is only part of the picture. The government spends, borrows, and saves too.

Today's chart provides the full saving picture, which is found in the Federal Reserve's semiannual report to congress:

net saving 2011-q1 fed.png

All three of these lines are interesting, but the blue one is possibly the most fascinating. It captures saving on all levels of the U.S. economy. You can see that it's generally been low, rarely above 6% of GDP. But in 2008 total saving went negative.

The chart makes clear why that happened. Government borrowing soared in 2008, which resulted in a deeply negative saving rate. It actually bottomed out below negative 9% in 2009.

How much did the government borrow? So much that it overshadowed the very aggressive saving of individuals and businesses during the recession. In 2010, nonfederal saving began to approach 9% of GDP, approximately matching its 20-year high. Still, total saving remained negative.

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This chart is potentially distressing for a couple of reasons. First, it implies that a very large portion of the government's stimulus-induced borrowing effectively went to saving, instead of boosting economic activity. This might not be terribly surprising to experts who have criticized the government stimulus for having little impact. But even if much of the money was saved instead of spent, it still may have helped consumers and firms feel a little bit better about their own economic health, since their bank accounts grew.

That, however, assumes that economic sentiment ignores government borrowing. If you believe that consumer and business confidence is intrinsically connected to broadly-defined fiscal fitness, then this chart could provide a reason why economic activity remains weak. If Americans realize that government borrowing has more than wiped out all of the saving they've done both personally and in business, then they aren't going to feel too confident about the future. After all, eventually they have to pay for all of that government borrowing.

Looking at total net saving in the U.S, the economy hasn't gained much stability through additional saving. In fact, the nation has less money accumulated now than it did before the recession.