Perspectives on the Household Saving Rate

John Sabelhaus and William G. Gale
William G. Gale The Arjay and Frances Fearing Miller Chair in Federal Economic Policy, Senior Fellow - Economic Studies, Co-Director - Urban-Brookings Tax Policy Center

May 1, 1999

We evaluate official saving rate measures in light of the recent decline of NIPA personal saving to effectively zero. We find, like others, that official saving measures are not representative of basic economic concepts, and that various adjusted measures of saving have moved in markedly different directions over the past two decades.

In particular, although NIPA personal saving declined from about 5 percent of GDP in the 1970s and 1980s to less than 0.5 percent in 1998, a measure that adjusts personal saving for durables, retirement accounts, inflation, and tax accruals, and integrates personal and business saving fell from about 9 percent of GDP in the 1970s and 1980s to 7 percent in 1998. Using this measure, which we would claim is closer to an economic concept of saving, the decline is much smaller and the current level of saving is much higher, than under the conventional measure…