While the deficit declined dramatically in recent years and CBO and the Office of Management and Budget now project budget surpluses, private saving has remained low, and total national saving and investment remain significantly below the levels experienced in the 1960s and 1970s. Many economists and budget analysts might have had a different view of the rapid surge in federal borrowing in recent years if the borrowed funds had been accompanied by increased spending on effective investment programs. Well chosen public investment ultimately can boost productivity by enhancing infrastructure, human capital and research and development. Figure 8 shows however that federal nondefense investment has been declining as a share of the economy during the period of federal borrowing upswings. A low national saving rate can have serious implications for the long-term growth of the economy.
Saving provides the resources to build new factories, and develop new technologies.
Such investments boost workers' productivity, which in turn produces higher wages and faster economic growth. Less investment today means slower economic growth tomorrow. While budget deficits and rising debt have potentially negative economic consequences, a balanced budget or budget surpluses can contribute to a stronger economy especially if private saving remains low. Some analysts believe that balancing the budget and achieving budget surpluses have helped to lower interest rates. The budget surpluses currently projected for the next decade could significantly improve national saving and investment, which would boost economic growth and improve future living standards.