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Politics : Ask Michael Burke

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To: Nadine Carroll who wrote (58196)	4/30/1999 11:36:00 AM
From: Mike M2	Read Replies (3) of 132070

Nadine, some people try to downplay the significance of a low or negative savings rate by referring to household wealth - home equity, retirement funds, financial assets but these came from past savings. I don't know the formal computation of the savings rate but I interpret it as after tax income which is not spent on consumption therefore it is saved. With a low or negative savings rate as a nation we are eating our seed corn for the future and living off past savings ( our grain stores) . One criticism of the savings rate computation is capital gains taxes paid reduce net income and reduce the savings rate. This is a valid point but IMO it does not by itself explain away the low savings rate. In addition, to the best of my knowledge the method of computation has been consistent for a long time so the long term decline of the savings rate does have a message- as a nation we consume too much and save too little. Mike

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