Robert Samuelson makes us feel better about our dis-saving

Do Americans "save" enough. It depends on how you count. Robert Samuelson explains.

... economic statistics also distort what's happened. The outlook isn't as dire as the zero personal savings rate implies. One common error is to confuse personal with national savings. Along with consumers, businesses and governments can save, too. In 2004 companies saved about $1.4 trillion in retained profits and depreciation allowances. If you own stock, your companies are saving for you. But federal budget deficits, a form of dis-saving, erase some of that. The overall result: Although our national savings rate has declined, it's nowhere near zero.

The personal savings rate is derived by subtracting Americans' total consumption spending from their total after-tax income (i.e. "disposable income''). By definition, the rest is "saving." In 1984 the personal savings rate -- savings as a share of disposable income -- was 10.8 percent. It's drifted down ever since. It was 4.6 percent in 1995 and 1.8 percent in 2004. It hit zero in June.

These low figures are not inconsistent with huge 401(k) and IRA contributions. Suppose you put $4,000 into a 401(k) account. You think you've "saved." But then you borrow $4,000 to go to Vegas or pay college tuition. Now your savings rate is zero. Ditto if you'd sold $4,000 of stock. Borrowings and stock sales offset much retirement saving.

The trouble with the official savings rate is that it excludes some items that people intuitively count as savings, notes Susan Sterne of Economic Analysis Associates. A big omission is the capital gains -- aka profits -- on housing or stocks, both realized (if you sell) or on paper (if you don't). If your home or stocks increase $10,000, you may feel comfortable borrowing $4,000 to spend. You've still got an extra $6,000 in savings. But the savings statistics ignore these value changes; all they show is that you've saved less by spending another $4,000.