Inside Report (6)
SAVINGS. Will Americans spend those income tax cuts -- or bank them? No one's really sure.
Reagan officials say their policies -- a tax cut, expansion of IRAs, etc. -- will boost the personal savings rate. They say more money will flow into banks and other financial institutions to ease any credit crunch caused by voracious government borrowing. So far, they seem to be right. The amount of disposable income saved jumped in 1981 from 4.7 percent in the first quarter to 6 percent by the last quarter. The average for the year: 5.3 percent.
Will it creep back up to the 8 percent rate of the early '70s? Henry Kaufman, chief economist for Salomon Brothers, doesn't think so. He predicts an increase in consumer spending will send the savings rate down to 4.5 percent by the end of 1982.
Sandra Shaber, senior economist for Chase Econometrics, is more sanguine. If the economy recovers, she predicts, consumers will save more of the coming July 1 tax cut -- boosting the savings rate by about 1 percent.