dissaving

Since 1990, deficit reduction initiatives and economic growth have reduced federal dissaving.

In a sense, government dissaving consumed much of the personal saving, leaving relatively little to finance private investment.

Government dissaving absorbs funds available for private investment and puts upward pressure on interest rates.

Over the long term, the federal government cannot avoid massive dissaving without reforming retirement and health programs for the elderly.

While deficits declined, reducing what economists call public dissaving, the savings rate in the private sector was falling.

State and local governments ran a small surplus in 1986, but total governmental dissaving still amounted to 3.3 percent of G.N.P.

Absent cost containment reforms, Medicare spending would contribute to federal dissaving over the long term even if the unified surpluses projected over the next decade are saved.

In order to support this future level of consumption post-retirement, the working individuals will have to save currently on a scale higher than the dissaving of the retired households.

Robert Barro, a Harvard professor and leading theoretician of the "rational expectations" school of economics, argues that Government dissaving will be automatically offset by increased private saving.

Even as federal surpluses have contributed to national saving in recent years, personal saving has steadily declined as a share of GDP, and personal dissaving in 2000 absorbed resources that otherwise would have been available for investment.

Moreover, under the given conditions, the aggregate rate of saving would become zero as the level of positive saving by the individuals during their earning years would be offset by the dissaving of the retired households using up their earlier accumulation.