Jason Furman: evaluation

Transcript context

…What about having the US government change policy to induce or encourage a higher rate of savings? Is there anything we should do? Or is the savings rate just fine? I’m not that worried about the savings rate. I don’t think it’s the constraint on business investment right now because the cost of capital is very low. In terms of retirement security, the first place I would go for retirement security would be to expand Social Security rather than to raise savings. I think the main issue with low savings is just an intertemporal consumption one that we’re borrowing from foreigners today. We’ll need to repay those foreigners in the future. And with a current account deficit of around 3 percent of GDP, I think we’re on the edge of where we need to be worried, but not really that far past the edge of where we need to worry. If we wanted to increase savings, though, certainly you could do it on the private side. But you could also decide you’re going to reduce the budget deficit. But since we’re borrowing at real rates pretty close to zero — depending on the term structure and what day you’re talking about — and the growth rate of the economy is positive, why shouldn’t the US actually borrow much more? Either cut taxes, spend more, or some combination of those two changes. What’s the constraint? You said 3 percent of GDP. It’s just a number, right? As a percentage of wealth, it’s below 1 percent. Why not do much more?…

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