Other types of Social Security reform seem less promising from a national saving point of view. If, for example, the individual accounts were to be "carved out" of present payroll tax payments, as President Bush has recently proposed, household saving would go up but government saving, in the first instance, would go down by the same amount, meaning that the initial impact on overall national saving would be nil.

In the short run, output growth is healthy and inflation rates are stable. Investment shares are reasonable, but that is largely because the United States is borrowing such a huge amount from world capital markets. The key question is whether this borrowing is sustainable. However sustainable it is, the United States would seem well-advised to minimize risks by raising its own national saving to finance its own investment.

[The US] could raise national saving with some combination of fiscal tightening and measures to raise private saving, coupled with other measures, here and abroad, to increase demand throughout the world economy.

Given the low national saving rates, and the fact that many American households do not save enough to avoid a big cut in their standard of living in retirement, it would seem desirable to have Social Security reforms that also raise national saving. One obvious and immediate way to do that would be to raise payroll taxes; another obvious, and perhaps less painful, way to do that would be to have individual accounts on top of Social Security

The accumulation of ever larger amounts of debt entails a level of risk that makes me uncomfortable. I believe it’s important to implement policies that encourage greater savings in our country so that we do not overextend ourselves and weaken our bargaining power.

[One challenge is to] maintain the flexibility of our economic and financial system.  This will be essential if we are to address our current account deficit without significant disruption.  Central to that adjustment must be an increase in net national saving.  This serves to underscore the imperative to restore fiscal discipline.

At the moment, excluding...U.S. Treasury debt held by the Federal Reserve, half of our debt is owned abroad. And I would assume, at some point, it has consequences, but I'm not sure - I cannot tell you what they are.

If you're going to move to private accounts, which I approve of, I think you have to do it in a cautious, gradual way and recognize that there is yet another problem involved, which is this. Unlike almost all of the other programs with which we deal, moving to a forced savings account technically does not materially affect net national savings. It merely moves savings from the government account to a private account.

I would be very careful about very large increases in debt. But I do believe that relatively small increases are not something that would concern me.

The saving rate [in 2004] probably averaged around 0.5 percent—clearly too low to be consistent with the saving necessary to support a sustainable pace of capital formation over time.

Of the various savings concepts, it is national saving that is most important for determining our future national standard of living.  Thus, it is critical that any effort to raise personal saving be judged in terms of its efficacy in raising national saving.