Because it was on every channel, I caught a little of President Obama's press conference the other day. Unfortunately, I caught the part where Chuck Todd, apparently an economic illiterate, asked the president why he wanted to stimulate consumer spending when consumer spending got us into our economic fix in the first place. The president acknowledged that Americans' savings rate had been low but pointed out that the present crisis was not one in which we could be overly concerned about the savings rate. In my view, Todd's perspective would be analogous to denying a patient a transfusion because he had been careless with his blood in the past.
Demand fuels the economy. The stimulus is designed, in theory, to increase overall demand in the economy with government spending until indvidual consumer demand increases. Individuals are cutting back on spending because they are worried about their jobs, because their wealth in the form of real estate and other investments has diminished, or because they are jobless. The economy slows down, and thrift is imposed on us by our circumstances. The personal savings rate is way up, but this is not a good thing in the current context.
Why weren't Americans thriftier during the last twenty years? One reason, in my view, is that the income of workers did not keep up with inflation, so there was less left over after the bills were paid. Others who might have had more savings saw their wealth in the form of realty and stocks rise precipitously such that they did not feel the need to set as much aside. I don't really see the relatively low savings rate as some kind of moral failure on the part of the American people.