THE NUMBERS: Annualized American household savings rates - 1st Quarter 2008: $127 billion 2nd Quarter 2009: $533 billion WHAT THEY MEAN: To see the coming challenge to American economic policy, think of some letters. The Commerce Department’s Bureau of Economic Analysis defines GDP as the combination of “Personal consumption expenditures, private investment, government spending (consumption and investment) and net exports,” with a shorthand version of C for consumption, I for investment, G for government spending, and X for export. Recoveries from recent recessions share a common theme: extra “G” first, through unemployment insurance and spending programs; then a burst of “C” as relieved families return to malls, real estate offices and auto dealerships. (After the recessions of 1982, 1992 and 2001, C added 3.7 percent to GDP in 1984, 2.3 percent in 1993, and 1.9 percent in 2002 and 2003.) Finally “I” bounces back, as businesses respond to consumer demand. This time around, we need something different — because the shoppers and home-buyers are missing. Though America’s median household income fell last year, families saved more anyway. From 2005 to early 2008 they were putting an average of about $180 billion a year in the bank; in early 2008 the figure hit a low of $126 billion. In 2009, anxious about job tenure and aware that home values have dropped and retirement accounts deflated, they raised total household savings to $533 billion. This is the highest rate, relative to GDP, since 1998. The revival of thrift is long-term good news: America will be able to finance more of its own investments, the national trade and current-account deficits are down by more than half, and private-sector debt should diminish. But it comes at an inconvenient time: St. Augustine’s famous youthful prayer — “make me chaste, but not just yet” — has found an echo in 21st-century economic policy. To shift $400 billion from shopping to savings is to take away the 2 percent to 3 percent of GDP growth from “C” that fueled earlier recoveries. So in 2010 and 2011 at least, and perhaps for much of the next decade, Americans need other sources of growth if the economy and employment are to recover. How to do so, as Americans remember savings? “G” can substitute for missing shoppers until the $787 billion stimulus program launched in February ends. But assuming G is not a permanent option, the main remaining option is more “X”: Americans need to tap growth abroad through exports. This recovery, therefore, needs a more ambitious trade policy than previous recoveries. Examining the options, the DLC’s recent trade paper finds the current trade agenda too focused on smaller initiatives. It recommends clearing the decks by passing three pending free trade agreements, then refocusing policy, through the WTO’s Doha Round if possible or ‘sectoral’ agreements if not, on (a) the big economies that buy the most American goods and services (Europe, Canada, Mexico, China and Japan alone account for 60 percent of U.S. trade), while the FTAs approved between 2000 and 2008 are with partners totaling about 3.5 percent, and (b) the industries most likely to be sources of growth, innovation and high-wage employment for Americans in the next decade, including health services and medical technologies, information and media, and clean energy and environmental technology. As always the weekly trade fact is provided as a courtesy from the Democratic Leadership Council.