By chance, do you have Bernie Sanders' ear? If you do, could you please pass on my idea?
I know it's asking a lot.
Sharing a stranger's idea with one of the most powerful people in American politics.
But, it's a good idea. An All American idea.
I have long thought that less government is better government. But, sometimes only the government can make things right.
My idea is for a new piece of legislation whose benefit is similar in concept and motive to other significant laws, both old and new.
The law it resembles that has been around awhile is the Minimum Wage. Here government saw that certain age and ethnic groups were being taken advantage of. Both the federal government and state governments acted to end this abuse with good success. Paychecks week after week for hundreds of thousands of fellow citizens are bigger than they would have otherwise been.
A much more recent law involves the changes to the Child Tax Credit. The tax credit has lowered the taxable income of average families for years- putting more money in their hands to take care of their household. Here the federal government saw the need to put more monthly income into the hands of families. Half of the annual credit amount is now being paid out monthly. Depending on the age of each child, the amount is either $250 or $300 a month.
These two examples show how the government saw a problem and corrected it.
There is another group of citizens that could stand having their problem corrected. Especially, because it is a problem government created.
Unlike you and me, the federal government can do two remarkable things. They can print money and they can control interest rates. Imagine how life would be with a $100 printing press in the basement!
As they print more money, prices of goods and services tend to go up. The cost of a car, for example, and the cost to change it's oil go up and up. Everyone loses when things are more expensive.
As they control interest rates, driving them lower and lower, there are clear winners and losers. Not everyone loses from low interest rates.
The winners are people who need or want to borrow money- a mortgage, a car loan, or student loans. Included here is the federal government who can issue bonds at the lowest cost. They are the biggest borrower around.
The losers are people who have saved money or want to save money.
Who doesn't remember their first bank account. The little book with your name and account number, often handwritten inside. Stamps and entries in the ledger. A balance that climbed and sometimes declined.
When I opened that first saving account with the bank on Dorr Street it took almost three months to save a $100. I earned $5 interest every year on that $100. A simple 5%.
$200 earned $10 interest. $1,000 earned $50. $10,000 earned $500. $50,000 earned $2,500 in interest every year.
Today, things are so much worse for the savers and it's the federal government who did it.
Low interest rates keep the economy humming and allow Uncle Sam to issue bonds at low cost.
A little quiz- how much money do you need in a savings account today to earn $2,500 in interest?
$100,000
$200,000
$300,000
$400,000
$500,000
It's not $100,000- that would only generate $500 a year. Which is less than $1.50 a day.
It's $500,000. A retiree need 5-times as much money in savings in 2021 to earn what $100,000 earned 50-years ago.
Average retirees are being hurt twice; higher prices on goods and services & 20% of the interest income as earlier generations.
These are retirees who worked hard all their lives. Thirty or forty-years in factories and farms. Often without the benefit of a company pension or 401(k) plan.
They paid off a mortgage. Sent their kids to college. Love their grandkids today.
And now with $15,000 or $50,000 in savings, they get no reasonable "reward" to spend.
IT'S TIME FOR A MINIMUM INTEREST RATE FOR RETIREES!
Let's let the politicians figure out the details.
But, for starters how about 5% on the first $50,000 of retirement savings?
Our slogan can be, "5 on 50!".
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