Personal Savings Rate Rise = Voodoo Economics
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John Crudele / NY Post
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nypost.com
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…”So, how can the Commerce Department claim that the personal savings rate for Americans jumped to 6.9 percent in May?
First, off, there was a government rebate to some Social Security recipients in May.
But that doesn't even come close to accounting for the whole increase in the savings rate, which would probably still be 5 percent without that bit of one-time largess.
Here's the answer. After Washington claimed the savings rate hit 5 percent in January, I made a call to the Commerce Department.
I thought the figure was astounding since there is a recession and the 5 percent figure was the most money Americans had put into savings in 13 years.
First, an expert on the savings rate at Commerce warned me that these figures are the very first estimates and are the ones most subject to revisions.
He said that people shouldn't take these preliminary numbers very seriously. But there was something even more intriguing.
What seemed to be happening, this source explained, was a convoluted calculation of savings.
Here's how the thinking went: The US Treasury was receiving much less income tax revenue, which of course was understandable because we are in a bad recession.
But the Commerce Department's computers were probably interpreting this, he said, to mean that Americans had more money in their pockets.
Since the computers believed people still had the money (because Treasury didn't have it) and since they are not spending that money, it must mean Americans are saving more.
I know it's stupid logic. The more reasonable explanation, of course, is that the money isn't going to the Treasury because people simply aren't earning as much.
Under this scenario, a penny not earned is a penny that can't be saved. So relax if you aren't saving 6.9 percent of your pay. Neither is anyone else.” |
