In China, where per-capita income is closer to that of Mexico than the U.S., household savings rates are often well over 30 percent. One reason for this may be that the Chinese know their economic futures might be extremely volatile, and thus they hold funds in reserve.
Maybe you think that Americans, who live in a wealthier nation, shouldn’t have to be this way. And you’re probably right. But to the extent America is that way, the implication is that the savings rate should be correspondingly higher. For more than a decade Jacob Hacker has been writing about the “great risk shift” and the increased volatility of household incomes. To the extent these claims are true — and they are disputed — they bolster the argument for a higher savings rate.
Alternatively, you might blame this whole episode on President Donald Trump being mean and erratic, and see talk of low savings rates as irrelevant. That is an attempt at sleight of hand and emotional distraction. Insofar as the president is mean and erratic, it is yet another reason Americans should be saving more.
It has been a staple of common-sense morality for centuries that people ought to save for an uncertain future. It would be a shame if such talk is on the verge of becoming politically incorrect because it sounds too much like blaming the victim.
Trump’s presidency has created many victims. Let’s not allow common sense to become yet another of its casualties. Most Americans really ought to be saving more. It shouldn’t be controversial to point this out, even if the most obvious illustrations of this national failure also happen to be the most recent victims of Trump’s ineptitude.
Tyler Cowen is a Bloomberg Opinion columnist. He is a professor of economics at George Mason University and writes for the blog Marginal Revolution. His books include “The Complacent Class: The Self-Defeating Quest for the American Dream.”