I’m pretty fond of Matt Yglesias in general, but sometimes he’s just lazy. Take a look at this post entitled “Personal Savings and the Age of Reagan.”
According to the chart, from 1959 to 1975, the personal savings rate increased from about 8% to about 12%, with reverses to below 7% along the way. The late 1970s saw a drop to 8% again, followed by a surge back to 12% in the depths of the 1982 recession (when, if I recall correctly, Reagan was in office). At the end of Reagan’s first term, the personal savings rate was above 9%, and at the end of Regan’s second term it was a bit below 8% – down, certainly, from the highs of the previous decade, but well within the long-term historic range. In Bush Sr.‘s term, the savings rate fluctuated between 7% and 8%.
Then, from 1993 to 2000, the savings rate dropped from 8% all the way down to 2%. It hovered around 2% for Bush Jr.‘s first term, plunging to (and briefly below) zero in his second term.
From this, we are to conclude that collapsing national savings is a product of “the age of Reagan” – how, exactly?
If we’re determined to name an individual, we could talk about “Personal Savings and the Age of Greenspan” as he was at least in charge of some aspect of economic policy during the period and, moreover, after 1994 was pretty much consistently committed to a policy of keeping interest rates too low, which in turn inflated a variety of asset bubbles (making people feel richer than they really were) and lowered the cost of borrowing (making people worry less about taking on debt), all of which logically should have boosted consumption and reduced personal savings, which indeed is what happened.
I’m very open to the notion that the story is much more complicated than “it’s all Greenspan’s fault” – indeed, I think it’s a lot more complicated than that myself. But it makes a lot more sense than saying that the 1981 tax cuts somehow caused the savings rate to plummet starting in 1993.