Open Letter to Timothy Geitner

Dear Mr. Secretary,

The problem that Americans have always faced is what they are going to do when they retire. Congress addressed this problem during the Great Depression with the Social Security Act of 1933. When unions were strong, they were the custodians of retirement funds for their members. Today many people have Keoghs and 401 K pension plans.

The problem with social security, Mr. Secretary, is that Congress has long "borrowed" money from it to balance the budget, and there is the danger that there will be no money in it by 2020. As for union pensions, only about 7 per cent of all workers belong to unions, and with the Jimmy Hoffa scandal back in the 1960s, we found out that union pensions funds could easily be raided by union bosses so that they could live in style while the members that they were supposed to serve had nothing.

Then there was Enron: Kenneth Lay and Jeffrey Skilling were convicted of robbing their employees' 401 K plans and pouring the money back into the company to make it look to investors on Wall Street that Enron stock was profitable.

Since I lost my 401 K in a divorce, I have tried to put my money into a personal savings account, in the hope that I might be able to build it up enough so that I might be able to invest it in certificates of deposits, save up to buy a house or a car, or have something with which to retire. The problem is that the interest rate on my personal savings accounts is only about .01 per cent a month. Then, I have to pay income taxes on the interest every year.

Because of hard times, Mr. Secretary, there is a vast underground economy where people do odd jobs in order to survive. They may paint houses or do carpentry, work on their neighbors' cars, remove snow in the winter time, play in rock and roll bands on weekends, or even do waitressing and fail to report their tips as income. Many people do these odd jobs in order to supplement meager unemployment benefits, or because their benefits have run out.

We need to encourage people to put their money into savings. That way, they could save to buy a car or a house, start a business, or have something for retirement. If you and the President, Mr. Secretary, are really serious about tax cuts for the middle class and the working class, how about making all interest income in personal savings tax deductible with no penalty for withdrawal?

My proposal is quite simple:

1) The interest in all personal and business savings accounts shall be tax deductable.

2) Everybody will be able to put an unlimited of money into their Individual Retirement Accounts each year without being taxed, instead of $2,000.

3) Americans will have greater freedom to transfer money from Keoghs and 401 Ks into their personal savings (or transfer money into Keoghs and 401 Ks).

If we allow people to write off personal and business savings account interest on their taxes, people will put money into savings accounts and have money to buy things like houses, cars, and household appliances. They may even have money to start businesses and invest in the stock market.

I know that stock brokers will not like my proposal, because they still want people to invest their social security in the stock market. However, millions of Americans would have lost their social security with the recent stock market crash, if George W. Bush had successfully persuaded Congress to pass legislation allowing people to put part of their social security into the stock market.

However, banks would find it profitable to raise their interest rates on personal savings accounts, because more people would be putting their money in savings.

Let us not deceive ourselves: the stock market is not an indicator of economic vitality but a reflection of corporate values. At a time when the US automobile companies were making a profit selling sport utility vehicles, Wall Street decided to penalize Ford and GM by lowering their stocks to junk bond status because they were paying their employees high wages and high benefits, and investing lots of money to upgrade their factories in the United States.

At the time, Wall Street wanted corporations to invest in China and India, where wages are low and benefits are practically nonexistent. As the leak of poisonous gases from the Union Carbide plant in Bhopal, India, showed in 1983, environmental standards are very lax in the Third World— something that businessmen and stock brokers also like.

Wall Street also wanted corporations to form mergers like the one between Chrysler and Daimler Benz. Stocks in both companies hit the roof when that merger was successfully concluded, though Daimler Benz ended up selling their shares to Cereberus, who is trying to unload their shares onto Fiat. But we don't need to go go into great detail about Chrysler.

According to Samuel Morison in his History of the American People, the stock market didn't recover from the crash of 1929 until 1960. While there was the Great Depression and World War II during that time, there was also a postwar boom that was the greatest period of economic prosperity in world history. That was, in part, because people started putting their money in savings rather than the stock market during the Depression, and got a much higher rate of interest than they are getting now.

In the Parable of the Three Stewards, one servant invested his master's money, the second put his master's money in the bank and let it collect interest, and the third buried his master's money in a hole in the ground, where it did nothing.

These days, no wise master would want his servant to invest in the stock market, and banks have made it almost impossible to collect interest by putting money in the bank. But if you put your money in a hole in the ground or inside a mattress, at least the tax man won't get it.

Of course, that is not the kind of economy we want, Mr. Secretary. So I suggest that we make personal and business savings account interest tax deductible.