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People shopping. Photo: Spencer Platt/Getty Images

Americans have been socking away an unusually high rate of their income since the Great Recession, which economists warn could become harmful to the economy over an extended period of time, according to the Wall Street Journal.

Why it matters: Economists think that if the saving rate surpasses investments for several years, it could hinder economic growth and make it difficult for the Federal Reserve to cut interest rates to boost growth during the next downturn.

Details: The personal-saving rate — or the percentage of income that people save after taxes — rose from 3.7% in 2007 to 6.5% in 2010, after the end of the Great Recession. This is standard and is usually followed by a decline as people grow more optimistic about the economy during an expansion and spend more.

  • However, the personal-saving rate continued to rise to an average of 8.2% in the first 7 months of 2019 — despite U.S. consumers experiencing historic levels of confidence in the economy.
  • In total, savings outpaced spending and investing in 2018.

What they're saying: "That is evidence to suggest that something structural has changed, and it’s made the saving rate kind of sticky at higher levels,” Tiffany Wilding, a U.S. economist at Pacific Investment Management Co., told the WSJ.

How it works: Some economists believe that today's high saving rate was influenced by the 2017 tax cuts passed by President Trump. Economists can't tell who's saving, as the latest saving data is not broken down by income, but they assume that the recent saving rate rise is likely being driven by the wealthy.

  • The tax cuts boosted many wealthy Americans' after-tax income, but possibly not enough to change their spending habits. As a result, they started saving more.
  • Others think the higher rate is the result of Americans who lived through the Great Recession — and were scarred by it — preparing for the next market crash. Another possible explanation is baby boomers preparing for retirement.

Go deeper: The end of money as we know it

Go deeper

15 mins ago - Health

CDC says some immunocompromised people can get fourth COVID shot

Photo: Noriko Hayashi/Bloomberg via Getty Images

The Centers for Disease Control and Prevention said in updated guidelines Tuesday that some immunocompromised people who have received either Pfizer or Moderna's COVID-19 vaccines will be able to get a fourth shot.

Details: People over 18 who are "moderately to severely immunocompromised" and have received three doses of an mRNA vaccine may get a fourth shot (of either the Pfizer, Moderna, or Johnson & Johnson vaccines) at least six months after getting their third Pfizer or Moderna dose, per the CDC.

Scoop: Biden plan expected to include at least $500B for climate

Photo: Stephanie Keith/Bloomberg via Getty Images

The White House is privately telling lawmakers the climate portion of President Biden's roughly $2 trillion social spending plan is "mostly settled" and will likely cost more than $500 billion, two sources familiar with the talks tell Axios.

Why it matters: A pricetag of $500-555 billion is a huge number and, if it holds, would likely be the single biggest component of the sweeping package. It also isn't far off from the roughly $600 billion proposed when the bill was expected to cost $3.5 trillion.

1 hour ago - World

U.S. presses Gulf countries to help resolve Sudan coup crisis

Jake Sullivan briefs the press. Photo: Chip Somodevilla/Getty

The Biden administration has asked its partners in the Gulf and elsewhere to press the Sudanese generals who carried out a coup on Monday to release captives including Prime Minister Abdallah Hamdok and to reinstate the civilian government, White House National Security Adviser Jake Sullivan said in a press briefing on Tuesday.

Why it matters: The U.S. has limited influence over coup leader Gen. Abdul Fattah al-Burhan and other military leaders, many of whom have close ties to Saudi Arabia and the United Arab Emirates.

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