Since the mid-1990s, the national income and product accounts personal saving rate for the United States has been trending down, dropping into negative territory for three months during the past two years. This paper examines measurement problems surrounding two of the standard definitions of the personal saving rate. The authors conclude that, despite these measurement problems, the recent decline of the United States personal saving rate to low levels seems to be a real economic phenomenon and may be a cause for concern for several reasons. After examining several possible explanations for the trend advanced in the recent literature, the authors conclude that none of them provides a compelling explanation for the steep decline and negative levels of the United States personal saving rate.

This paper develops a time series model for aggregate consumption to predict the U.S. personal saving rate. It then uses the model to test whether there has been a structural break in consumption behavior because of the 2008 financial crisis. Before the crisis, the personal saving rate was trending downwards. However, in 2008 there was a significant rise in the saving rate that continued until the end of 2012, suggesting a permanent change in household behavior. To assess this issue formally, the unknown parameters of the model are estimated using data for 1961Q1-2007Q4, a period which precedes the crisis. The model is then used to predict the saving rate from 2008Q1 onwards and to assess whether the rise in the saving rate after 2008 was due to sizable, but transitory, income/wealth shocks or to changes in the underlying elasticities between saving and its determinants (hence structural). The statistical evidence suggests there was no structural break in the household saving behavior, implying that the rise in the saving rate during 2008-2012 was caused by the negative shocks to income, employment and wealth. This result explains why the saving rate resumed its decline in 2013, as real disposable income, employment and net worth recovered. Assuming that the real growth in these determinants remains strong, the estimated model predicts continued negative pressures on the current account deficit and further external imbalances attributable to the U.S. household sector.

In the past two decades the widely reported personal saving rate in the United States has dropped from double digits to below zero. First, we attempt to account for the decline in the National Income and Product Accounts (NIPA) saving rate. The macroeconomic literature suggests that about half of the drop since 1988 can be attributed to households spending stock market capital gains. Another thirty percent is accounting transfers from personal saving into government and corporate saving because of the way pensions and capital gains taxes are treated in the NIPA. Second, while NIPA saving measures are well suited for measuring the supply of new funds for investment and capital accumulation, it is not clear that they should be the target of government saving policies. Finally, we emphasize that the NIPA saving rate is not useful in judging whether households are preparing for retirement or other contingencies. Many households have accumulated significant wealth, primarily through retirement saving vehicles and capital gains, even as the saving rate slid. There remains a segment of the population, however, who save little and whose behavior appears untouched either by the stock market boom or the slide in personal saving. We explore reasons and policy options for their puzzlingly low saving rate.

Many policymakers, journalists, and scholars insist that U.S. hegemony is essential for warding off global chaos. Good-Bye Hegemony! argues that hegemony is a fiction propagated to support a large defense establishment, justify American claims to world leadership, and buttress the self-esteem of voters. It is also contrary to American interests and the global order. Simon Reich and Richard Ned Lebow argue that hegemony should instead find expression in agenda setting, economic custodianship, and the sponsorship of global initiatives. Today, these functions are diffused through the system, with European countries, China, and lesser powers making important contributions. In contrast, the United States has often been a source of political and economic instability. Rejecting the focus on power common to American realists and liberals, the authors offer a novel analysis of influence. In the process, they differentiate influence from power and power from material resources. Their analysis shows why the United States, the greatest power the world has ever seen, is increasingly incapable of translating its power into influence. Reich and Lebow use their analysis to formulate a more realistic place for America in world affairs.

One of the world’s top experts in behavioral finance offers innovative strategies for improving 401(k) plans. Half of Americans do not have access to a retirement saving plan at their workplace. Of those who do about a third fail to join. And those who do join tend to save too little and often make unwise investment decisions. In short, the 401(k) world is in crisis, and workers need help. Save More Tomorrow provides that help by focusing on the behavioral challenges that led to this crisis inertia, limited self-control, loss aversion, and myopia—and transforms them into behavioral solutions. These solutions, or tools, are based on cutting edge behavioral finance research and they can dramatically improve outcomes by, for example, helping employees: -Save, even if they aren’t ready to do so now, by using future enrollment. -Save more by showing them images of their future selves. -Save smarter by reshuffling the order of funds on the investment menu. Save More Tomorrow is the first comprehensive application of behavioral finance to improve retirement outcomes. It also makes it easy for plan sponsors and their advisers to apply these behavioral tools using its innovative Behavioral Audit process.