Kill the Poor

Americans' savings rate drops to Depression era-low

Sun Feb 4, 12:30 PM

WASHINGTON (AFP) - Americans spent more than they earned last year as the economy steamed ahead, pushing the personal savings rate to negative 1.0 percent, the deepest hole since the Great Depression of the 1930s.

The figure, published last week by the US Commerce Department, means that not only did Americans spend all their income, they dug into savings and used credit to buy more.

Over the past seven decades, the personal savings rate -- the difference between post-tax, or disposable, income and spending -- has been in negative territory only four times: 1932, 1933, 2005 and 2006.

In the 1930s, the Great Depression explains why Americans had to dip into their savings at a time when a fourth of the workforce was out of a job.

But in 2006 and in 2005, when the personal savings rate slipped to negative 0.4 percent, the economic situation was far different, which bothers economists.

"It's surprising, especially in a period with the economy growing so strongly," said Martha Starr, an economics professor specialized in savings and consumption issues at American University in Washington.

The US economy grew by a robust 3.4 percent in 2006 -- consumer spending accounts for about two-thirds of US economic output -- and the unemployment rate ended the year at 4.6 percent.

"That, I think, is what may be really shocking. We would think that with the unemployment rate so low and the economy growing so vigorously that there wouldn't necessarily be any reason for the saving rate to be so low," Starr said.

…

The American dream could fade under the glare of overspending, MetLife, an insurance and financial services group, said.

"The announcement by the Commerce Department about the negative US savings rate, which is at its lowest level in 70 years, is a bellwether for the future of the American dream," it said.

"The lack of savings, combined with the seismic shifts that have occurred in our society in the last few decades with regard to pensions, social security and health care, are increasingly putting the dream out of reach for most Americans."

(Read More)

The outright war on working people in America has been waged subversively since the end of the recession in 2001. The recent growth in the economy has almost entirely gone to the upper echelon of American class strata; and while inflation and cost of living increases continued, real wages for the vast majority of Americans have evaporated.

Between 2001-2006, national gross domestic production has grown at an average rate of 5.54% per year (source). In contrast, from November 2001-January 2006, hourly wages have only risen $0.46 (1,2). To mitigate this, working Americans have relied more on credit accounts and cashing in on the equity of their property during the recently-fading housing boom to simply maintain their standard of living. This is a consequence of a period of ‘economic prosperity’ that has only positively affected already-wealthy capital owners, while the actual physical producers of goods and services have seen their take diminish.

Furthermore, when compounded by the exponential rise in healthcare costs, and the Bush Administration’s rewriting of bankruptcy laws; the effect on the working class has been devastating. While upward mobility has been mainly quashed in the current environment, national poverty statistics have grown substantially since Bush took office. Whole new classes of working poor, and even working impoverished have been created by this national disparity. Even as this has been metastasizing in plain sight, our President and media have seen fit to encourage Americans to spend their needed savings on consumer goods and services to ‘spur’ our economy.

As it stands now, the current economic direction of the U.S. is untenable. We are creating an entirely divisive society, while promoting the highest levels of our class system toward aristocracy status. While our international situation is obviously dire and of great importance, one unnoticed benefit it has been to the right is its ability to draw attention away from this massively important issue that requires immediate debate. We are heading down a road that is going to soon pit American against American. If a majority of our citizens are fighting to maintain their current class in a time of ‘prosperity,’ then it would be wickedly immoral to fail to prepare them for future difficulties which may even place them and their families’ lives at risk. There is no reason why this cannot be resolved if not for the outright greed of our corporate kleptocracy.