Are We Saving Enough?

[Guest Jagadeesh Gokhale]

The United States has experienced a sustained decline in national saving since the early 1970s. The increasing foreign ownership of U.S. capital has increased the share of income accruing

to its foreign owners and lowered the share accruing to Americans. Not only does saving transfer consumption across time, the accumulated wealth it creates provides opportunities to

improve our living standards. If our consumption needs are secured for a sufficient length of time, savings can be invested to improve technology for producing goods and services and upgrading their quality. Hence, greater saving also enables the greater investment that is essential for increasing productivity and, ultimately, improving living standards.

 

United States, private and government consumption growth have outpaced output growth for the last two decades. This trend is unsustainable, however: If an ever-increasing share of output is

consumed, less will be available for financing investment.

 

If Americans especially those approaching retirement were more aware of the gap between their actual saving and that required for maintaining their living standards, they might begin to save more.