Newspaper article THE JOURNAL RECORD

Savings Statistics Are Flawed

Newspaper article THE JOURNAL RECORD

Savings Statistics Are Flawed

Article excerpt

Most of the analyses decrying America's anemic personal savings rate miss several critical considerations.

One problem is that savings statistics are highly flawed indicators of America's actual propensity for thrift. Investor's Business Daily recently provided an example of how misleading government's approach to counting savings can be. If, for instance, you finance an addition to your home with $10,000 raised by selling some stock from your investment portfolio, the outlay is accounted for as spending, but the proceeds from the stock sale aren't counted as income.

For statistical purposes, it's as though the addition was financed from your regular paycheck, which would create "negative savings" data if your last paycheck didn't cover the project's cost.

As the article pointed out, Americans' total holdings of financial assets are nearly four times the value of U.S. annual economic output as measured by gross domestic product. Measuring savings in this context makes it difficult to accept the validity of official rates reported at lows not seen since the Great Depression.

Another element missing from savings data analyses is the effect of taxes on the individual American's inclinations toward thrift. It may be true that personal savings are slumping when measured within government's narrow definition of the concept, but total savings are rising.

Total savings, which includes business and government contributions, are expanding thanks to a record economic expansion and federal budget surpluses. With federal, state and local taxes claiming well over one-third of GDP, however, relatively large aggregate tax loads remain a disincentive to personal savings. …

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