According to the BEA, "Personal saving" is defined as NIPA disposable personal income minus personal consumption expenditures. The definition is heavily flawed and pretty much meaningless.
However, it DOES include pension contributions and IRA contibution and 401K contributions. The defined benefit pension component is warped by the fact that they count employer contributions, which may have been reduced by plan asset appreciation. At the same time, not all contributions are immediately vested, so that aspect of pensions cuts both ways.
But, no allocation at all of expenditures on consumer durable goods is made to savings.
And, using disposable income means that Social Security taxes (which do "buy" benefits, regardless of how shaky they may be) aren't counted as savings.
Also, the owner-occupied housing assumptions result in the imputed value of rentals being too high, which inflates consumption expenditure figure by hundreds of billions of dollars, reducing savings by the same amount. Worse yet, no allocation of the implied "rent" is made to repayment of principal, which is obviously a savings component in the real world.
Finally, capital gains aren't counted at all, yet the taxes paid on those gains are deducted from savings.
The figures have a multitude of problems. My best guess is that the "real" personal savings rate is probably around 5 or 6%. Still too low, but not the total fiction that the BEA puts out.
Invest in soup. The lines will be long
Started by
Rogerdodger
, Feb 01 2007 10:53 AM
11 replies to this topic
