SUPER SAVER NATION:

U.S. calculations on savings don't add up, some say (ELLEN SIMON, 3/04/06, The Associated Press)

With retirement looming for the baby-boom generation, the concern is that a dearth of savings now could cause a cutoff in spending later.

Some economists say that's far-fetched. They argue the personal savings figures are artificially low, since the numbers don't include increases in assets such as equities and homes.

Yale University economics professor William Nordhaus made that argument in 2002 congressional testimony, saying that once assets were included, the savings rate for the 1990s would have been a robust 25 percent.

European countries count capital gains and home appreciation when they calculate personal savings, said William Hummer, chief economist at Wayne Hummer Investments.

"Our savings rate is understated," he said. "I think it's wrong."

Another argument is that the wealthiest 20 percent of American families account for roughly 40 percent of consumer spending, spending 4.5 times as much as the lowest 20 percent, something Citigroup's chief U.S. equities strategist Tobias Levkovich pointed out in a recent report.

The implication: This group isn't going to run out of money soon. If a healthy economy depends on the wealthiest Americans' continued spending on $200 haircuts and $500 seven-ply cashmere sweaters, we can all rest easy.

His corollary argument is that some of those with the lowest earnings are retirees, who are spending money they've already socked way, so the fact that they spend $18,000 a year but earn only $9,000 should worry no one.

I knew we were miscalculating, but didn't realize that Europe's weren't. That makes this whole meme even more asinine, if possible.

Posted by Orrin Judd at March 4, 2006 8:29 AM