I’m a bit of an extremist on saving. That partly reflects my supply side views—government policy discourages savings in 100s of ways. It partly reflects the fact that successful economies like Singapore and Switzerland tend to save a lot. And it partly reflects my (patient) personality. I’ve been in all 5 quintiles at various stages of my life, and can always save money at any income.
I often get into debates with commenters, and eventually it reaches the point where I’m told Americans are too poor to save. I don’t get it. Isn’t America the richest country in all of world history? How can we not afford to save? It also makes me think of my frequent trips to China, where people earning about $10,000 on average are able to save 50% of their incomes.
Lots of our economic problems, from excessive health care costs to excessive student loan debt to the housing crisis, are partly caused by insufficient saving.
Now Businessweek reports that even most “upper-middle-class Americans” don’t save anything:
Just 45 percent of upper-middle-class households (income from $75,000 to $99,999) saved anything in 2012, according to the Fed study. That means the other 55 percent didn’t save for a house, retirement, or education. About 16 percent spent more than they earned and went further into debt.
Now you might object that a family making $80,000 or $90,000 a year isn’t really “upper-middle-class.” It’s middle class. And I’d agree with you. But I’ll only agree with you if you agree that this shows the income distribution data doesn’t show what most people assume it shows.
To be fair, the income distribution data used by the right is often just as meaningless. Remember hearing about all those people who “escape poverty?” Lots of them are like me—struggling grad students moving up to fat and happy professional careers. The NYT reported that 73% of Americans spend part of their life in the top 20%. What’s the matter with Kansas? No, what’s the matter with intellectuals who don’t understand why average Americans don’t favor higher taxes on the top 20%.
PS. I recently did a post comparing Brazil and China. If you wonder where all that Chinese saving goes, check out this map provided by Matt Yglesias, which compares growth in the Rio and Shanghai subway systems since 1993. By 2025 Shanghai’s will probably double again.
Of course not all the Chinese saving is invested wisely.
PS. The Yglesias post has some other interesting graphs.