Americans spend every cent - and more (CNNMoney.com)

[eppur_se_muova]

Critics say America's negative savings rate can't be sustained and see a recession coming. Are they right?
By Chris Isidore, CNNMoney.com senior writer
December 21 2006: 4:09 PM EST

NEW YORK (CNNMoney.com) -- Don't call us the Grinch for bringing this up with Christmas right around the corner, but Americans are spending more than they're earning, and some critics say the economy is at risk because of this.

Friday morning the government will report on personal income and spending for November. For the last 19 months, the report has shown a negative savings rate. That means American consumers are spending more than they're taking home after taxes. The savings rate was a negative 0.6 percent in October. In other words, the typical American spent $100.60 for every $100 of take home pay.

The savings rate compares after-tax income to the money spent on a wide range of items. It turns negative when people take on additional debt such as home equity loans or other credit, or sell assets, so they can spend more than their take-home pay.

Before the current streak of negative rates started in April 2005, only one month on record back to the late 1940s had a negative savings rate. As recently as the second quarter of 1985, Americans were saving more than 10 percent of their paychecks.
***
more: http://money.cnn.com/2006/12/21/news/economy/savings_rate/index.htm?cnn=yes

[Phredicles]

1. Yes, but the Dear Leader has decreed that we must Shop.

Surely you're not saying he's out of touch, are you?:sarcasm:

[ClintonTyree]

2. If we don't shop, the terrorists win.

Going into debt up to their eyeballs is the American Way. God (and consequently, George Bush) WANTS us to be the greatest debtor nation in the world, he WANTS us to rack up debt on those credit cards and pay super-inflated interest rates to the credit card companies. Our government is doing it so we should follow suit and do it ourselves.

Every time you whip out that credit card, Mr. and Mrs. America, you're doing your part to win the war on terra'. :patriot:

[Conan_The_Barbarian]

3. When people don't save

and spend all their income on consumer goods economic growth begins to slow. Less money in the banks, less money to lend out, higher interest, less capital investment. It would make sense to reorganize tax policy to encourage more savings.