A Tip for Gov. Romney: Florida Seniors Hate the Fed’s Low Interest Rates

A new poll by Money magazine (October) asked its readers, “What’s the single biggest way Washington could improve your finances?”  The most popular answer among Democrats and second among Republicans was to “Preserve Social Security and Medicare in current form.”  That pipe dream suggests many Money readers are close to 65 or older, since the young surely know it is impossible to keep paying current benefits for much longer without imposing brutal tax hikes on the rapidly dwindling portion of younger Americans still willing to work.

What was far more intriguing about the Money poll, however, is that the second or third most popular policy was to, “Raise interest rates so savers can earn more.”  In fact, higher interest rates for savers was the single most important issue for 15% of both Democrats and Republicans, compared with only 10-11% who found “more jobs” most important.  If the poll had been confined to seniors, that 15% figure might well have doubled.

The Wall Street Journal’s “Viewer’s Guide” to the first presidential debate (September 29-30) included the Federal Reserve as one of eight topics, noting that Romney has criticized the latest experiment with quantitative easing (monetizing debt) and suggested replacing Bernanke.  But the article went on to imply that everyone, including “a top Romney adviser,” thinks of Ben Bernanke as an untouchable or even heroic figure.  As a senior with a condo in Florida I can assure you that other Florida seniors (17.3% of the state’s population in 2010 and much larger share of voters) have a quite different opinion. They feel robbed, not helped, by the Fed.

Seniors in Florida absolutely hate the Fed for forcing them to settle for a negative real return on safe, liquid savings. In this and other states with many seniors, questioning ridiculously low interest rates is a potential winning issue for any presidential candidate willing to challenge the Fed for buying too many federal IOUs with funny money.  That includes several other battleground states where seniors make up an above-average share of the population – a list that includes Maine (15.9% seniors), Pennsylvania (15.4%), Iowa (14.9%), Ohio (14.1%), Missouri (14%) and Michigan (13.8%).

Absurdly low interest rates may be good news for borrowers, but they are simply a loss of income for savers.  Personal interest income in August was 28.6 percent lower than it was in 2008.   Lower income seems an unlikely way to stimulate spending.  After all, decades of miniscule interest rates haven’t helped Japan.

Aside from mortgage payments (which are tied to housing investments), personal interest payments were running at an annual rate of just $171.7 billion in August, which is far less important than personal interest receipts ($986.6 billion).

The Bernanke Fed has been showing blatant favoritism toward large borrowers – mainly governments and banks − at the expense of small savers, particularly those dependent on lifetime savings in their senior years.  Recent Fed policy rewards profligate speculation and punishes prudent thrift.  That is why 15 percent of both Democrats and Republicans in the Money poll say that ending the Fed’s bond-buying spree is the single most important thing the next President could do to help their personal finances.

Senior savers will be closely watching the campaign and debates to see if either candidate has their very legitimate interest in mind.