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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

Collins helps contractor before pro-Susan PAC gets donation

Sen. Susan Collins during her reelection campaign. Photo: Scott Eisen/Getty Images

A PAC backing Sen. Susan Collins in her high-stakes reelection campaign received $150,000 from an entity linked to the wife of a defense contractor whose firm Collins helped land a federal contract, new public records show.

Why it matters: The executive, Martin Kao of Honolulu, leaned heavily on his political connections to boost his business, federal prosecutors say in an ongoing criminal case against him. The donation linked to Kao was veiled until last week.

How cutting GOP corporate cash could backfire

Illustration: Aïda Amer/Axios

Companies pulling back on political donations, particularly to members of Congress who voted against certifying President Biden's election win, could inadvertently push Republicans to embrace their party's rightward fringe.

Why it matters: Scores of corporate PACs have paused, scaled back or entirely abandoned their political giving programs. While designed to distance those companies from events that coincided with this month's deadly siege on the U.S. Capitol, research suggests the moves could actually empower the far-right.

9 hours ago - Politics & Policy

Scoop: Kaine, Collins pitch Senate colleagues on censuring Trump

Sen. Tim Kaine speaks with Sen. Susan Collins. Photo: Andrew Harnik/AP via Getty Images

Sens. Tim Kaine and Susan Collins are privately pitching their colleagues on a bipartisan resolution censuring former President Trump, three sources familiar with the discussions tell Axios.

Why it matters: Senators are looking for a way to condemn Trump on the record as it becomes increasingly unlikely Democrats will obtain the 17 Republican votes needed to gain a conviction in his second impeachment.

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