DeKALB | Americans are spending more and saving less, and it has some economists spooked that an over-inflated economy could cause another recession.

U.S. Department of Commerce figures show that personal saving is at its lowest point since the Great Depression. In the second quarter of 2005, the savings rate was at its lowest since the figures started being calculated in 1959. But even the latest figures show that Americans are consuming more than they earn.

“We’ve backed ourselves into a very dangerous situation,” Dean Baker, co-director of the Center for Economic and Policy Research told USA Today recently. “The economy is dependent on everyone consuming like crazy. If everyone heard my diatribe and said, ‘Yeah, we better start saving,’ the economy would go into a recession.”

In a recent speech, Federal Reserve chairman Ben Bernanke echoed these concerns, saying Americans need to save more today to prevent adverse effects in the future — but cutting back is easier said than done.

“Saving more requires that we consume less or work more,” Bernanke said in a speech to the Economic Club of Washington.

Unlike periods in the Great Depression, Americans are not only saving less, they’re consuming more.

“In the Great Depression, income was so low you had to consume everything you earned just to survive,” said NIU associate economics professor Carl Campbell.

According to the Bureau of Economic Analysis, household consumption has increased rapidly since the beginning of the century, and with it, household savings rates have dipped. So what’s the reason for this increased spending and decreased saving?

Campbell said there is debate, but two things stand out.

“Savings has declined since the 1980s and has now turned negative,” he said. “Some of it has to do with an increase in the wealth of consumers. Housing values have gone up as well. So they’ll consume more and save less.”

This happens, Campbell said, when individuals feel there is less reason to save for the future if the value of their stocks and home investments are steadily increasing.

Another reason for Americans’ increased consumption can be attributed to increased credit card spending.

“Previously, it was very difficult to spend more than you earn,” Campbell said, “but now credit cards are more accessible.”

Not all economists believe the figures presented by the Department of Commerce are entirely representative of savings in the economy.

“It’s misleading to talk about the current consumptions without paying attention to housing and securities,” said Stephen Karlson, NIU associate economics professor. “It’s misleading to look at only part of the picture.”

Steve Brown is the Managing Editor for the

Northern Star.