Though the American economy is fundamentally healthier today than it was a decade ago, one weakness has been particularly disturbing: our low personal-savings rate. So it is heartening to get the latest figures from the Commerce Department, which show that savings have been rising sharply.
In March, the average American saved 6.3 percent of his or her disposable, after-tax income - up from 5.7 percent in February. The average savings rate for the entire first quarter of 1989 was 5.6 percent, a dramatic improvement on the previous quarter's 4.4 percent.One likely explanation is that America's baby-boomers, like previous generations, are saving more as they grow older. Their children's future college bills and their own retirement needs now seem more pressing, their thirst for high-tech stereo systems less so. Another stimulus to savings may be the 1986 tax-reform legislation, which reduced the tax benefits of borrowing for immediate consumption.
Americans could and should save a lot more: The average savings rate in Japan is about 19 percent. But since 1987 we have at least been moving in the right direction. It would be healthy to continue.