Economist: Some policymakers believe that our country' s continued economic growth requires a higher level of personal savings than we currently have  A recent legislative proposal would allow individuals to set up savings accounts in which interest earned would be exempt from taxes until money is withdrawn from the account  Backers of this proposal claim that its implementation would increase the amount of money available for banks to loan at a relatively small cost to the government in lost tax revenues
Yet, when similar tax-incentive programs were tried in the past, virtually all of the money invested through them was diverted from other personal savings, and the overall level of personal savings was unchanged
A tax-incentive program that resulted in substantial loss of tax revenues would be likely to generate a large increase in personal savings.