The modern American welfare state is premised on a number of economic assumptions, among them that Americans would build personal savings over the course of their careers. In the Forties and Fifties, in the wake of the Great Depression, reality accorded with that assumption. Pensions were widely available and American families saved for higher education and for retirement. In 2007, the reality is starkly different.

The Commerce Department announced today that the national savings rate is negative one percent. Not only is the average American family (including two income families) unable to accrue a meaningful financial cushion; people everywhere are going into debt just to get by. Higher education costs are outpacing inflation. Property taxes are soaring because states and municipalities must cover programs cut or scaled back by the federal government. Few American workers have pensions on which they can rely. Health care costs comprise an increasing percentage of income. The list goes on and on.

President Bush’s reaction to the situation is somewhere between inadequate and nonexistent. Yesterday the White House released its State of the Economy report. The only context in which it mentions saving at all is in promoting decreased taxes on education, investment, and retirement saving. But that seams to put the cart before the horse: lower marginal tax rates on savings that people don’t have are worthless to those most in need of assistance.

If Republicans honestly hope to reduce the long-term role of government in people’s lives, they could start by investing in programs that encourage and facilitate personal savings. Individuals and families are the best judges of how to spend their money: on college, for health insurance, for retirement, etc. But if Americans cannot save in the first place, there is no decision to make. Congressional Democrats should bring this fight to the White House and challenge the President to do something about an issue that impacts the broad middle class.