Demographics, Fiscal Policy, and U.S. Saving in the 1980s and Beyond
Alan J. Auerbach
Laurence J. Kotlikoff
This paper focuses on U.S. saving, demographics, and fiscal policy. We
use data from the Consumer Expenditure Surveys of the 1980s to consider the
effect of demographic change on past and future U.S. saving rates. Our
findings indicate that demographic change may significantly alter the U.S.
rate of national saving and current account position over the next 50 years.
The gradual aging of the population is predicted to lead to higher saving
rates over the next three decades with declines in the rate of saving
thereafter. Associated with these predicted saving rate changes is a
predicted improvement in the U.S. current account position is the 1990s, with
a very gradual deterioration during the subsequent decades. While
demographics is a potentially very important factor in explaining saving, it
does not appear to explain the drop in the U.S. saving rate in the l980s.
What happened to U.S. saving in the 1980s remains an intriguing puzzle.
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