By MARTIN CRUTSINGER, AP Economics Writer Thu Feb 1, 8:56 AM ET
WASHINGTON - People once again spent everything they made and then some last year, pushing the personal savings rate to the lowest level since the Great Depression more than seven decades ago.
The Commerce Department reported Thursday that the savings rate for all of 2006 was a negative 1 percent, meaning that not only did people spend all the money they earned but they also dipped into savings or increased borrowing to finance purchases. The 2006 figure was lower than a negative 0.4 percent in 2005 and was the poorest showing since a negative 1.5 percent savings rate in 1933 during the Great Depression.
But not to worry:
The 0.7 percent rise in personal spending was the best showing since a similar gain in July. It followed increases of 0.5 percent in November and 0.3 percent in October and reflected solid spending by consumers during the Christmas shopping season.
Consumer spending posted a solid rebound in the final three months of the year, helping to lift overall economic growth to a rate of 3.5 percent during that period, up significantly after lackluster growth rates in the spring and fall.
So what we have is a situation where the majority of middle-class Americans are saving nothing of their paychecks, and then we're happy that "consumer spending posted a solid rebound." Yes, ours is an economic policy that celebrates when citizens spend money.
This headline grabbed me, a self-admitted economics moron, because it came on the heels of a TurboTax commercial that irritated the hell out of me. It was a man doing his taxes (so easily! without breaking a sweat!), when his wife comes in and asks how it's going. He shows her the screen featuring their tax refund amount, and she smiles, laughs and hugs him. Happy, happy days. All the things they can do/buy/own with that refund money!
Helloooooo?!!! That money is THEIR money! It's not a gift from the IRS! It's their money that should have been in their bank account getting interest for THEM! Until I met the babydaddy who explained this to me, I used to be one of those people who was delighted at my big ol' tax return, never thinking, "Oh my lord, that is $600 that was not in MY account this year working for ME. That is $600 I did not have in my account to pay my student loans and reduce my interest payments." I still know people who pay off Christmas gifts with their returns, or worse, buy more stuff, and I wonder, "Do you even remember what you got for Christmas in April?"
As the article pointed out, the last time our savings rate was so low, we were in the middle of the Great Depression, so people had to dip into savings to survive. What's our excuse in 2006?