Come On, Matt
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.
This is an example in the tension in the Democrats’ economic story: everything is Bush’s fault and we should go back to Clinton vs. everything was Reagan’s fault and we should go back to (???). I suppose keeping it vague keeps the DLCers united with the unreconstructed Great Society wing.
— Aaron · May 4, 02:42 PM · #
I think he’s refering to the time period after 1980, per a well-known recent book called the Age of Reagan by Sean Wilentz.
— SomeGuy · May 4, 05:42 PM · #
yeah, i noticed the same thing. it seems like the clinton era is kind of a nuisance to liberal narratives.
— razib · May 4, 06:11 PM · #
Everything here is badly over-reading my comments. I didn’t say anything was Reagan’s “fault.” I said explicitly that I couldn’t think of a causal mechanism for why conservative public policy would lead to this result. That, I think, is the reverse of <em>blaming</em> it on conservative public policy. I didn’t even say that the decline in the personal savings rate is a bad thing.
As per Some Guy, The Age of Reagan is a term used by Sean Wilentz (in analogy with a long tradition in American historiography — viz. The Age of Jackson, the Age of Roosevelt) for the era dominated by Ronald Reagan’s and the modern conservative movement.
Long story short: Do I think Ronald Reagan is personally responsible for the declining savings rate in the United States? I do not. Nor have I ever written that he is. Do I think the declining savings rate in the United States is a bad thing? I don’t really have an opinion on this. I think the <em>negative</em> savings rate we saw for a while recently was clearly bad, but maybe we were saving too much in the 70s.
— Matthew Yglesias · May 4, 07:44 PM · #
Matt: thanks for stopping by and clarifying. I didn’t think you were saying this was “Reagan’s fault” but I did think you were saying, “conservatives think lower marginal tax rates = higher savings, but look: the opposite happened, so isn’t that interesting” which is what I was responding to. The data doesn’t appear to show much of a correlation with tax rates at all.
Whether a low savings rate is a good or bad thing is equivalent to saying: is it a good or bad thing to be dependent on foreign capital. There probably are circumstances where the answer to that question is “it’s a good thing” – but that can’t be the general rule.
— Noah Millman · May 4, 08:35 PM · #
wow, dialogue!!
— C3 · May 5, 03:01 AM · #