I wonder if this would put a damper on the retail economy, especially big ticket items like new automobiles. It would seem to promote investment, but drive down discretionary retail expenditures.
The studies done in the past on this indicate an initial drop on the order of 5-10% in individual consumption as people tend to move toward more investment and savings over spending. That rapidly reverses as real household income grows with the economy as a consequence of enhanced technological productivity and yields from investment returns.
Not a negative from my view of things as we are far too dependant on government for our retirements and becoming more so as were spend ever more of our current family income to the neglect of our futures.
| http://mwhodges.home.att.net/family_a.htm#Saving
Rate of Personal Saving Plunges 100% - to new record low - $985 Billion missing
The chart at the left shows a 45 year trend of that part of disposable income that has been saved - - called 'personal savings rate'. Note: prior to 1970 the rate of personal savings was rising smartly - - as were family incomes per the first chart above - despite most families then having but one wage earner while also living without increasing debt ratios (chart below). Then, family incomes stagnated - - and the saving ratio stopped rising as seen in the left chart - - then started falling rapidly - - plummeting since 1992. As of June 2005, savings were at an all-time record low of zero percent !! $985 Billion in savings missing in 2004 compared to savings ratio of 2 decades ago. (realized capital gains, not calculated in the savings rate, mitigate this chart somewhat if one wishes to call such savings - - but the trend with and without is at all-time record lows).
|
If families have less inflation-adjusted income, despite mother working, then family personal savings must suffer as a consequence - unless, of course, families reduce their consumption. But, families increased consumption spending and, to cover this, they reduced savings to historic lows and increased household debt to historic highs. Dangerous Trend !!!
It is overtime for a encourage an earlier ethic on self reliance and thrift rather than a the socialist deadend ethic fostered under the income tax regime that will ultimately destroy our economy.