By DALE McFEATTERS
Consumer spending drives the American economy and is the force behind such buoyant statistics as the surprisingly strong 3.6 percent growth rate in GDP during the last quarter. But there’s early evidence the consumer might be doing too good a job driving the economy.
Their savings rate is the lowest its been since the Great Depression and for the first time since the economically abysmal years of 1932 and 1933 Americans spent more than they earned for two consecutive years.
The figures may not be quite so grim as they sound. During the Great Depression, people spent more than they earned simply to survive. Many economists think the current spending spree is caused by a sense of wealth, whether real or imagined. Perhaps people feel secure in their jobs and in the rising values of their homes and in their investment portfolios. And the numbers in the decline of the savings rate aren’t huge; in December, the savings rate was but a negative 1.2 percent.
Still, there are two grounds for worry. First, the declining savings rate is a long-term trend. In 1985, we saved 11.1 percent of our disposable — that is, after taxes — income. But with the exception pf a few blips, it has been going downhill ever since, finally plunging into negative territory early in 2005 and remaining there until the present.
Second, 78 million Baby Boomers should be socking away money for their coming retirement.
Unfortunately, Americans have the example of their government, which has spent more than it took in for the last six years and shows few signs of easing up. The government always has the options of raising taxes or printing more money. We don’t. Start saving.