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Household saving matters for two reasons. First, it is an important source of funds to finance domestic investment. Second, it is the means by which workers accumulate wealth and maintain their living standard into retirement. Congress has indicated its desire to promote household saving by, among other things, creating individual retirement accounts, and saving is an important consideration in proposals to reform Social Security. At a time, however, when policymakers have been looking for ways to increase spending to minimize the downturn and get the economy growing again, households have begun to save more. For the 40 months between January 2005 and April 2008, the personal saving rate averaged 1.8%. In contrast, in the 1970s, the average personal saving rate was 9.6%. In May 2008, the personal saving rate began to rise. It remains too early to tell with certainty if that represents the reversal of the long-term decline. What may seem unusual is that it occurred at a time of general economic weakness. The increase in household saving resulted in more than $300 billion less in consumer spending than would have occurred had the saving rate not risen. Prudent individuals might be expected to save enough to avoid a ...