I agree consumer spending drives a good chunk of the economy, but higher savings is too much of a leap as to why the consumer spending will not happen
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So if more and more Americans are saving more and/or paying down debt, wouldn't this put a damper on the so-called economic recovery?
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Here is my 2 part theory
1) the economy requires that people borrow money to keep it moving (growing)
2) people consume based on confidence and stop spending (saving) when confidence is low
We are in this problem because banks are not lending money, which means small businesses cannot function (a great example of this is my doctor's office only had 100 H1N1 flu shots... meaning they could not buy more because they did not have the credit to do so).
These small businesses employ people (and lay off people) in volatile cycles based on their pipeline of business. Because businesses cannot borrow to spend on both salaries and other business to business commerce, any
"business to business" type industry (think housing contractors, consultants and similar) will be slow/low growth (possibly contract) and any consumer driven industry will either be OK (think grocery stores and soap and food companies) or be down (movies, restaurants, malls, clothing).
If banks start lending money again, you will see the economy start to improve.