There has been a lot of recent discussion about how to measure savings. Michael Mandel defines the issue thusly:
Real net worth per capita is household net worth, minus credit market liabilities of federal state and local governments, adjusted for inflation and population growth.
Savings represents the increase over some time period in real net worth.
Yesterday I posed a question to him as to how he defines government debt with his answer in the comment section of his post as well as mine. While my preferred definition of government debt would include the Federal government’s obligations to the Social Security Trust Fund, his does not and importantly should not because of how the Flow of Funds accounting defines household net worth.
The error of my thinking as I formed the question goes something like the following intergenerational tale. Let’s imagine some middle-aged liberal (like myself) who is hoping that the Bush Social Security deform efforts flop so that the Trust Fund reserves that I have been paying into for the last generation will be used to supplement my private retirement funds over the 2020 to 2040 period. As such, I would consider my share of these reserve funds as an asset as I would consider the total amount of Federal debt – and not just the portion held by the public – as deferred tax liabilities for my generation and that generation of 20-somethings that include those young Republicans who for some odd reason support George Bush’s tax shift onto their backs. But the Flow of Funds accounting does not include the Trust Fund reserves as part of household net worth and Michael is correct not to include the corresponding liability portion of the total amount of Federal debt. As such the following makes sense:
In 2005, real net worth per capita was $155.1 thousand, compared to $148.9 thousand in 2004 and $153.4 thousand in 1999 (all in 2005 dollars).
Bottom line – the average (as in mean) American has saved a grand total of $1700 over the past six years. That sounds about right to me.