HAND ON BILLFOLD

THE RISE IN THE PERSONAL SAVINGS RATE is the most important economic news of 1989. But creation of a Bush administration task force to find ways to increase savings even more is the signal to keep your hand on your billfold.

No one knows exactly why Americans are suddenly becoming savers. The personal savings rate jumped to 5.5 percent of disposable personal income in the first half of this year, up sharply from last year's figure of 4.2 percent and more than double the rate in the early part of 1987, when Americans were saving less than at any time since World War II. Economists at the Federal Reserve Board attribute the trend to high interest rates, which make saving more profitable. Private economists have been more inclined to give credit to income tax refunds, the aging of the population or individuals' desire to build up cash reserves in anticipation of a recession.Whatever the cause of the savings upturn, one thing is clear: It has nothing whatsoever to do with deliberate government policy. In their more candid moments, most economists will admit readily that they haven't the foggiest idea of how to change patterns of savings. Many believe that personal savings rates are related primarily to demographic factors that are beyond government control. Young adults tend to be heavy consumers as they raise children and furnish homes, while individuals in the later stages of their working lives are more concerned about putting money away. Hence, as the

average age of the population rises, the savings rate should go up.

The past decade has seen a series of gimmicks designed to induce greater savings. Remember the all-savers certificate, which granted you a tax break on

funds deposited in your friendly local savings and loan association? Or the individual retirement account, which let Americansput aside $2,000 annually

from pretax income - supplanting after-tax saving? Or the little box on your income tax form that offered a tax exemption for corporate dividends? All of those schemes helped enrich providers of financial services, but none of them reversed the decline in savings that began in the early 1970s.

Now, the sellers of such snake oil are peddling their wares once again. There is no more reason to believe they will be effective now than they were in the early 1980s.

And almost all such proposals have one thing in common: They would cost the U.S. Treasury money. In economic terms, it is society's total rate of savings, not personal savings, that is important. If new tax breaks cause the federal deficit to rise, any benefit from increased personal savings will be lost.

Is there nothing the federal government could do to alter the savings rate? Sure there is. It could reduce the mortgage interest deduction, so Americans would save more of their money in liquid forms rather than putting it into the bank. It could curtail the growth of Social Security and Medicare, so individuals would have greater incentives to save for their own retirement. It could increase taxes on consumption, both to reduce the federal government's own deficit and to encourage households to consume less and save more.

Even the bluest of blue-ribbon task forces is unlikely to propose such politically unattractive reforms. To the contrary, given the Bush administration's lack of courage on fiscal matters, its task force will be sorely tempted to propose new tax breaks that Congress will be hard-pressed to resist.

The spectacle of congressmen and senators outdoing one another to provide tax incentives for savers is one we could do without. With the savings rate rising quite nicely, the Bush administration would be wise to leave well enough alone.

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