Public savings is the total savings made by economic agents in the public sphere, when the amount of income they collect exceeds the amount of current expenses they face in their economic activity.
This type of savings is a macroeconomic concept that can therefore appear in the activity of any public company, government or other state-dependent organizations. At the level of economic aggregates , together with private savings form the whole national savings .
Relationship between public savings, deficit and surplus
As with the generic definition of savings , public savings are understood as the difference between income and consumption. In this case, when talking about the public sphere of the economy we would be referring to the total volume of funds that an administration or a government retains after facing its public spending commitments and taking into account previous income.
After receiving public funds through the collection of taxes through other financing methods such as the sale of public debt , the State must meet its social commitments through infrastructure, health, payment of public subsidies and benefits ,etc.
If after this expenditure work there is a positive difference between income and expenses (what is economically known as fiscal surplus ), this amount will be the one that will make up the public savings produced. The destination that this difference usually has is that of public investment and the improvement of budget items aimed at public spending in future years.
When savings do not appear and what happens is just the opposite (income is below the level of expenditure) what appears is a fiscal deficit .
Public savings as an economic indicator
The emergence of public savings does not necessarily mean the good action of a government. This is explained because it can happen that the appearance of fiscal surpluses is a consequence of very strong fiscal policies with high levels of taxes or by little significant public spending plans.
In both cases, it is society that suffers an adverse economic situation through its impact on the activities of private agents (families and businesses).