Disposable Personal Income, Personal Savings

The other day I had a post looking at changes in a number of series over various Presidential administrations beginning with Ike. I looked over the list, wondering why I never looked at disposable (i.e., after tax) income and savings.

Then I went looking for the data and remembered. Data on disposable income and savings is available from the Bureau of Economic Analysis’ National Income and Product Accounts Table 2.1.

And while I trust the BEA when it comes to things like GDP and other big picture series of which they are the ultimate source, I simply don’t trust their 2 series tables, the ones on personal income and outlays.

For example, let’s look at annual data since Reagan took office in Table 2.1. In particular, consider lines 26 (disposable personal income) and 33 (personal saving). Since 1981, the correlation between these two series has been -0.75. In other words, a negative 75% correlation between disposable personal income and saving. The greater our collective after tax income, the less we save.

Now, I’m willing to assume that Americans buy more big screen tvs than is good for our collective health (easy for me to say – I barely watch tv and thus don’t have one), but it seems unlikely that one would save more as one’s income dropped.

But even suspending one’s disbelief over that, there’s still another problem. Line 34 of Table 2.1 tells us the personal saving as a percentage of disposable personal

Here’s what it looks like since 1981.

Here’s what I see on the graph… Savings as a perecentage of disposable income climbs during recessions, downturns and periods of relative weakness (1981, 1984, the GHW years, 2002). It falls when times are relatively good… the second half of Reagan’s term and most of Clinton’s term. During GW’s term, savings fell once the economy picked up a bit, and have been negative for the last two years.

Anyway, I don’t believe it. I simply don’t. Unless and until someone convinces me this data makes any damn sense, I am not going to look at how disposable personal income and/or personal savings as a percentage of disposable personal income changed over time. At least not using data originating at the BEA.